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Mayank Goradia: I'm Mayank Goradia, head of Integrated Portfolio Construction at Fidelity Investments. And I'm on a quest. A quest to help advisors profitably grow their book through the art and science of portfolio construction. With expert insights and groundbreaking research, we'll embark on a journey where wisdom meets innovation and every choice counts. So join me on The Search for the Next Great Portfolio.
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In this episode, we'll be discussing powerful new ways to help future-proof your practice. As technology continues to evolve at a rapid pace, it is crucial for financial advisors to stay ahead of the curve and adapt to the changing landscape of the industry. We will be exploring the latest portfolio construction tools, evolving technology platform capabilities, and the power of financial planning that is revolutionizing the way advisors manage their clients’ investments.
Additionally, we will discuss the role of generative AI in enhancing the decision-making process and how alternatives and ETFs are shaping the future of investment portfolios. Get ready for an exciting and informative episode ahead.
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[Art Card: Help future-proof your practice]
Marissa Herr: Advisors are leaning into a lot of different AI-driven components to really automate their business. So think about the day-to-day operational processes: moving money on behalf of clients, opening up accounts, servicing those accounts. There's a lot of different chatbot and assistance, which is really driven off of AI to help the advisors and their staff basically get out of the way.
It automates these things and think of it as a task-orchestration tool, and that's really saving these firms a lot of time because they want to make sure the folks that are client facing, that are front-office facing, are spending time with clients. Fidelity is invested in a number of capabilities that advisors should really be looking at, whether it's our Portfolio Quick Check tool, whether it's our fixed income trading platform Bond Beacon, whether it's our lead optimization tools, our compliance-driven oversight tools.
There's a number of components here that Fidelity can offer that goes beyond that clearing and custody core functionality. We've invested in a number of tools that helps them with optimizing their portfolios as well as really gaining insights on their clients. And we're bringing those to market in just a really exciting time to be here to be able to showcase those components for advisors.
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[Art Card: How can portfolio construction tools be helpful for advisors?]
Bobby Barnes: Portfolio Quick Check is actually one of the tools that we've created that helps advisors to analyze their portfolio because when you look historically, the vernacular that we used to describe portfolios in the past were very simple. We would describe a portfolio as either value or growth, or we would say it's large-cap or small-cap. And those were the only dimensions that we really looked at.
And so with these other characteristics that we have better understandings for now, it's oftentimes useful to have tools that incorporate these characteristics. So an advisor can assess to what degree are they overweight or underweight these particular metrics.
Mayank Goradia: Let's talk about planning a little bit. Are you seeing advisors actually go to financial planning tools, like eMoney, MoneyGuidePro, and bringing that in as part of their practice to understand the asset allocation or do you still feel that that's not happening or happening in certain places at certain times?
Krista Scalzo: Some of it is organically happening. An RIA firm realizes they have to do more of that. So they look for software and third parties that will help them do that and carry them through that next layer of their business. But you've got financial advisors who are associated with broker-dealers who provide some of that for them.
So some of the big broker-dealers out there will provide that financial planning software and try to make it part of what that advisor does every day. And then you have other parties like Imani, is certainly under the Fidelity umbrella, that is trying to help the smaller broker-dealers. And RIA firms have a financial planning perspective that then ties into asset allocation and portfolio management.
We focus now more on differentiating ourselves by bringing in concept of practice management, providing tools and resources, portfolio construction is one of them. Our strategist team, which provides very specific expertise in certain asset classes or certain platforms and products. We also deliver, I think, our capital markets and investment ideas in a different way, more holistically in terms of how do they fit again into portfolios.
How can you deliver this to your clients and help them understand in a very uncertain world, in a very complicated investment portfolio, how it all fits, and what we are looking forward to rather than looking back. It's interesting because it has become more of a consultative role as it relates to an advisor's entire practice or an RIA firm's entire practice, as opposed to just being solely focused on the investment piece of their business in the past.
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[Art Card: How should we balance tech and a human approach?]
Bobby Barnes: So on the one hand, I would acknowledge that with the advent of technologies like artificial intelligence, one might assume that a one-size-fits-all approach could work for managing client portfolios. However, I would submit that, in practice, the opposite is actually true, where you might be able to use these technologies as an initial starting point. For example, the amount of equities that a 20-year-old should own is easy to answer using these tools and it's a good starting point.
But then once you get into the specifics of the individual and look more deeply in terms of what are their investment objectives, what other considerations do they have like taxes or estate planning, et cetera, that's really the power of the human part of it. And the human is really what adds the personalization to how you would construct a portfolio.
Mayank Goradia: Can you tell how advisors are basically using artificial intelligence to help them grow the business?
Anand Sekhar: And I think there's a few things that I think we have the opportunity to take advantage of. First is, for sure, how will artificial intelligence help with a lot of the back-office operational needs? So think about, you take all the planning input assumptions, how will our technology improve such that that planning becomes so much more automated than it is.
I mean, if you think about taxes, for instance, it's really facts and figures and legal IRS tax code. Yes, there's that part of it that can be automated significantly. Now, what cannot be automated is what are the client's wishes. And that has to be combined now because a client may not want to do something that's the most tax efficient.
So while this artificial intelligence can be able to manipulate the data and do analysis really quickly, present scenarios, so on and so forth, then they have to be combined with the advisor facing off with the client. So that's one use case. Another use case, client meetings. How can I perhaps take notes from a client meeting, compile it, synthesize it, and put it back to a client?
Now, both of those use cases, as well as many others, have privacy concerns, things that we have to be navigating as we think about artificial intelligence. Another use case is a wonderful solution from Fidelity Labs called Catchlight.
And this solution helps, in essence, take all of your prospects in essence that you've ever talked to ever, that you're aware of, in essence, synthesize and understand what's the propensity to buy based off of a big data set of information, of public data information that we have compiled into this massive database and this algorithm. So that's one. Catchlight is a great example.
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[Art Card: How can advisors use data to free up time?]
[Please note that the actual art card in the video has "advisor", but I think it should be updated to "advisors".]
Marissa Herr: I think step 1 is making sure their data is in one place. So we like to call it in our team the single source of truth. And so if firms are really struggling, how can I use my data? We always say, well, start with getting all your data in one place so that you can really capitalize on the insights there.
By looking at their data in different ways and getting it into a single place, it allows them to basically know more about the clients they're serving. Think about how their book is trending. So where are the advisors assets flowing into and from? What are different trends about the clients they're serving, their age, their wealth, their location?
What opportunities and products they're looking for? How should I engage clients and when? How can I optimize the way that my business is structured? And again, it goes back to that initial use case of, how do I make sure that the time I'm spending is most valuable? They may serve 50 households, a hundred households, we want to make sure that the households they're serving are getting what they need from that advisor that they're growing, and that they're nurturing those relationships in the right way.
Mayank Goradia: You have seen a lot in the last three decades in your career, you have seen a lot of changes, a lot of evolution. If you had a crystal ball, where do you think the puck is heading in the next 10 years?
Krista Scalzo: We continue to try to understand what's the future going to look like, not only as it relates to how we work with our advisors, but how the advisors work with their clients. That piece will probably be a really important decision, a factor, in who an advisor chooses to partner with from an asset management perspective, because no longer can you treat every client the same, every generation the same.
And we really have to help people become much more customized and personalized in the work that they do with their clients, and that's only going to exacerbate. AI is going to have a role in that as well where the financial advisor feels a bit disintermediated perhaps, because there's so much available via AI and via technology that wasn't available before.
And so advisors will have to continue to be able to demonstrate their value each and every day with clients and help them understand that sure you can go to a digital experience with another firm or you can have someone here that's going to literally holistically take care of the entire way you view your needs moving forward in your lives.
Mayank Goradia: Thank you for tuning in to today's episode on what you can do to help future-proof your practice. We discussed how you can industrialize your portfolio construction process through an institutional-quality Portfolio Quick Check tool, allowing you to incorporate emerging investment products. How artificial intelligence is a resource that advisors can tap into to help save time.
Use them as an à la carte option or bring them together to create a durable planning through execution framework. Until next time, keep evolving and stay ahead.
Next time on The Search for the Next Great Portfolio.
[Art Card: Next time on The Search for the Next Great Portfolio]
Interviewee 1: And so now we're looking at factors that are outside of traditional financial analysis, things like managing your climate risk, things like cybersecurity, data privacy, culture of a workforce.
Interviewee 2: What we're noticing is that younger folks are choosing to live on their own more often. So there's this very, very profound shift in how younger people are making choices about what and with whom they live and work.
Interviewee 3: When you go into a next-generation conversation, treat it like you're doing a brand-new prospect meeting. Get to know them in all of the unique ways that drive their lives.
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