HOLLYWOOD, FLA. - How is that online wealth management trend going?

Financial advisors who work in the traditional model (that is, face to-face meetings with some phone calls in between) would probably answer with one of two responses. They’re losing more customers to it than they’re stealing away; but it’s not as bad as they had anticipated.

Those were two do the overriding themes in the Bank Insurance & Securities Association’s conference session entitled “Impact and Importance of the Self-Directed Service Channel.”

One of the panelists, Alois Pirker, research director at Aite Group, presented research showing that 21% of financial advisors lose a majority of their clients to online competitors; but the flip side was not a counter-balance as they gained just 7% of new clients from the online segment.

Over the past few years—since the crisis—there have been a lot of assets and advisors in play, Pirker noted. And the big winners in gaining on both fronts have been the independent channel and online platforms.

For bank advisors, the good news came from the fact that their respective banks’ online efforts have had a less dire effect on them than they had expected. Almost one-third (28%) expected those efforts to cannibalize their books, while 21% thought it would help (47% expected no impact.) What really happened? Only 22% reported that their books had been cannibalized and 34% said the online effort had helped them (44% reported no impact.)

Jim Goodwin, president of Riperian, also participated in the panel discussion. He noted the general conversation has changed in the past six to nine months. The service that all advisors provide has always been some combination of investments, accounts and advice, he said. And the online world has begun to detach the advice component. So now the big question has centered on the idea of how financial firms can inject an advisory role into a self-directed account and get paid for it.

It will be a difficult accomplishment because the two customer groups are very different, he said.

Self- directed customers are not likely to want a traditional advisory relationship, and vice versa. (He noted that beginning in the late 1990s, advisors started worrying that customers would use their investment ideas to build portfolios online; but it never really happened because the behaviors of those two customer groups are just too different)

Still, within the next year, he says he would expect a couple of companies to figure this out and have a new strategy in place that successfully combined these two ideas.

For more:

Competitive Threat Grows--But Banks Hold Some Advantages

Advisors Lose Ground to Direct Providers 

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