Updated: Mar 18
By Don Schreiber, Jr. – Chief Visionary Officer of Cy
The time is now! For your business to survive and thrive, you must embrace technology. I believe the combination of a top-notch tech stack paired with your human abilities (i.e. value-added advice) will be required to compete for and keep clients. The advisors who blend man and machine to become a “cyborg advisor” will be those that continue to experience dynamic growth in the years ahead.
Recent industry studies and trends indicate that investors still value human advice. So much so, that most of the “low cost” ETF providers and robo advisors have begun adding human advice to their offerings. To compete effectively, we feel advisors will need to create a compelling experience for clients centered on the “human” relationship.
Providing initial advice and a financial plan is the easy part. However, engaging consistently with clients to deliver value-added advice and service is hard. Valued advice goes beyond the standard quarterly investment review. I find that far too many advisors focus on quarterly investment reviews as the catalyst for client interaction. Advisors should focus their efforts on being proactive in client communication instead of reactive. These touchpoints can be driven by using technology to prompt the timing of impactful conversations throughout the year.
Large institutions are launching integrated digital wealth management “robo” platforms offering customers ease of use and direct consumer engagement with a menu of standardized “low cost” and, in my opinion, “low value” investment offerings. Typically, they feature do-it-yourself (DIY) calculators to ballpark funding needs for retirement, college, and other goals like saving for a second home purchase.
In my experience, this type of DIY toolkit does not begin to address the serious concerns people have as they approach financial inflection points. Clients routinely have questions about major and minor financial decisions.
Should I lease, finance, or buy a car?
Is now a good time to refinance my mortgage?
How should I go about funding my children’s college education?
How should I think about funding my retirement?
Do I have enough money to retire?
In most cases, clients don’t have the time, knowledge, or expertise to develop a comprehensive plan and make critical decisions necessary to source the best solutions. This is where the advisor can compete successfully for their business and how they can add value to the client’s financial situation that far exceeds the cost of services.
As the industry attempts to digitize and automate the client experience, advisors should seek to compete by humanizing their advisory offering. Affluent and wealthy clients are looking for advisors who can provide advice and service that is personalized to their needs. They are looking for an advisor who has the knowledge and expertise who can deliver real value. To stay ahead, I believe advisors need to build a tech stack that helps to institutionalize their operations and processes to gain efficiencies, scale, and profit potential, but without losing the bespoke focus of providing advice and service that meets each client’s needs. At the end of the day, I feel the only way to thrive in this business will be to have a tangible value proposition that clients will appreciate more than focusing on reducing fees by trying to do it themselves.
I believe investment planning, portfolio design, and management are areas in dire need of an upgrade. Conventional investment approaches using Modern Portfolio Theory and buy and hold with passive style box asset allocation have not met the acid test of helping clients succeed through full market cycles. The Dot.Com bear market and Financial Crisis damaged investor capital severely, and recent bull market returns have not sufficiently allowed many people to recover or retire comfortably.
It seems that the industry and media have developed a myopic focus on returns relative to indexes and low-cost, passive index products over the past ten years. People have forgotten about risk and the potential for significant losses as markets are overvalued. The Federal Reserve continues to support the economy in an effort to keep the bull market alive so that the asset bubble they created stays intact and consumers keep spending. It seems like everyday headlines pump new highs and the longest bull market on record, and yet they fail to point out that the S&P 500 Index has only produced about a 5% compounded annual rate of return over the past 20 years. According to industry studies, the average investor who tried to buy and hold fared far worse, securing only a 2% average annualized rate of return. Instead of buying and holding, they bailed and failed when faced with bear market losses of 50% or more twice during the prior 20-year period.
I strongly feel that it is time we as an industry acknowledge and address the failure of conventional approaches. We must move beyond recommending to investors that they continue to try to buy and hold passive portfolios when they clearly don’t have the tolerance to take full market losses and stay invested. In my opinion, the missing value proposition in investing is to use advanced portfolio concepts to create custom-tailored portfolios designed to meet each client’s benchmarks for loss and return. I believe the single most important question you can ask a client is how much of their investable wealth they are willing to lose before bailing on their investment plan to achieve the rate of return needed to retire comfortably. Once the advisor and client determine the client’s loss tolerance, it becomes the anchor of the portfolio design and construction process. The second benchmark is determined by finding the required rate of return the client needs to achieve their retirement goals.
To build advanced, outcome-based optimized portfolios, WBI Technologies created Cy, a revolutionary advisor-assisted digital wealth “robo” platform that uses advanced quantitative mathematics and algorithms to design bespoke portfolios for clients based on their benchmarks for loss and return. Cy is short for Cy-Borg, a more advanced and powerful concept than other robo offerings. We feel Cy is an ideal partner for human advisors who want to compete effectively in today’s digital financial services landscape. It’s time to embrace WBI’s Cy-Borg investing technology that may help advisors take a strong step forward in providing value-added investment advice.
Don Schreiber, Jr. is the Chief Visionary Officer of Cy (investwithcy.com) and Founder & CEO of WBI. A leading expert in the wealth management industry, Don is the author of two books Building a World Class Financial Services Business and All About Dividend Investing. He is a frequent contributor to industry publications and has made many appearances on CNBC and Fox Business. His latest effort is to re-shape the way people invest through the use of technology. Cy is a game-changing, advisor-assisted platform which combines the financial planning principles of loss identification and required rate of return into custom-tailored portfolios utilizing quantitative analytics and advanced mathematics.
Past performance does not guarantee future results. Indices are unmanaged and may not be invested in directly.
The views presented are those of Don Schreiber, and should not be construed as investment advice. Don Schreiber, or clients of WBI may own stock discussed in this article. All economic and performance information is historical and not indicative of future results. This is not an offer to buy or sell any security. No security or strategy, including those referred to directly or indirectly in this document, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from WBI or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, please consult with WBI or the professional advisor of your choosing. This information is compiled from sources believed to be reliable, accuracy cannot be guaranteed. Information pertaining to WBI’s advisory operations, services, and fees is set forth in WBI’s disclosure statement in Part 2A of Form ADV, a copy of which is available upon request.
Cy is a proprietary wealth management platform developed by WBI Investments, Inc. (“WBI”) in conjunction with WBI Technologies LLC. It should not be assumed that the future results of any specific investment strategies analyzed by Cy will be profitable or suitable for all investors. Moreover, the analysis provided by the Cy optimization platform analysis may vary with use and time.
Although a company may pay a dividend, prices of equity securities – including those that pay dividends – fluctuate. Investing on the basis of dividends alone may cause an investor to buy or sell certain securities when circumstances may or may not be favorable.
Returns for average equity and fixed-income investors calculated by DALBAR. DALBAR uses data from the Investment Company Institute (ICI), Standard & Poor’s, Bloomberg Barclays Indices and proprietary sources to compare mutual fund investor returns to an appropriate set of benchmarks. The study utilizes mutual fund sales, redemptions and exchanges each month as the measure of investor behavior. These behaviors reflect the “average investor.” Based on this behavior, the analysis calculates the “average investor return” for various periods. These results are then compared to the returns of respective indexes. Ending values for the indexes and hypothetical equity and fixed-income investor investments are based on average annual total returns.
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