Wealth Management: Stop Just Talking And Start Social Listening. The New Digital Edge For 2021.

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April Rudin

Founder and CEO

The Rudin Group

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I was struck by a recent J.D. Power survey of wealth-management app use, which found just 35 percent of the wealth apps offered chat functionality, and only 41 percent supported secure messaging – two key communication channels embraced by Gen-Xers and millennials. During the height of the pandemic, the survey found, 31 percent of investors said they had no recent adviser contact.

While investment products are getting cheaper, and robo-advice is only growing more popular, personal advice, tailored to clients’ circumstances, is still digital’s Achilles heel.

To close the gap, digital adopters now turn to new advice channels.

Financial advice is experiencing explosive growth on Reddit, the world’s third-largest social network by active users (trailing only Facebook and Instagram). Its main ‘Personal Finance’ community alone has over fourteen million members, with thousands actively reading at every hour of the day. In addition, there are at least fifteen regional personal finance communities; the UK community (with over a hundred and seventy thousand members) has even spawned a complementary Wiki site.

In January, I commented on how 2020 would see banks and wealth managers tapping into unstructured data in all manner of relevant content. This data often holds real-time insights and early-warning signs that can help financial firms customize their offerings, identify new investment opportunities, and expose risks previously unseen.

Active digital communities are exactly this type of content. “The volume and quality of conversations in digital financial communities reveal a huge demand for financial advice.” says Vered Zimmerman, managing director for FinText, a UK fintech using AI to analyze investor conversations. “This makes online communities the most organic focus groups imaginable. Members are constantly seeking advice and debating options. They’re vocal about their views. Their unmet needs are all visible right there.”

Reddit’s ‘Investing’ community is particularly attuned to the US equities market. FinText found the number of new daily conversations tends to be highly correlated with the S&P 500 Volatility Index (the VIX).

A topic breakdown of conversations within this community, says Zimmerman, shows discussions prompted by requests for financial advice are a big chunk of the of overall conversation. (Other popular topics, she adds, include company-specific share prices, financial news, and – increasingly – questions on platforms and digital tools.)

Social Listening: A competitive advantage for wealth managers

In a recent survey of the state of wealth management, EY that found better-informed clients were less likely to switch providers. The same study also showed an increasing appetite for independent financial advisors, especially in the mass affluent and HNW segments. The study concludes that the way forward for traditional wealth managers is through building trust and demonstrating value through thought leadership and financial coaching.”

For years I’ve been speaking about the need to tailor messages to Gen-Xers and millennials. Social listening helps wealth managers get the message right. For example, younger generations, stung by the Global Financial Crisis and paying off student loans, are facing higher debt levels than Boomers had at their age. It’s no surprise, then, that a reoccurring theme in investor conversations is the generational wealth gap.

“Throughout 2019, the generational wealth gap struck a raw nerve withing the ‘Investing’ community,” says Zimmerman. “In each of last year’s quarters, at least one of the top five most active threads had to do with these concerns. When the Covid pandemic hit, this angst transformed to concerns over economic recovery and employment levels.“

Social listening is also helping wealth managers pin down trends. FinText monitors on behalf of clients a range of topics. The findings, says Zimmerman, are often surprising.  

Bitcoin, for example, is very much alive and well. “Younger investors see it as an emerging asset class, almost akin to gold. We find they consider the overall lack of interest from institutional players a value opportunity. Wealth managers that can differentiate by offering insights on portfolio management that includes bitcoin, and gain an edge within a currently underserved niche.”

Traditional wealth managers should lean hard into timely advice

Back in the summer, I wrote about a Broadbridge survey, which found 77 percent of financial advisors interviewed in the US and Canada reported losing business as a result of not having the right technology to interact with their clients. Those that lost business said they lost a fifth of their book, on average.

Digital offerings upended wealth management, but have also left the market hungry for quality advice, matching services with real-time client demands. Social listening offers a window into those demands. It helps pinpoint customer needs during transformative life events – when they’re most likely to seek financial planning – and identify topical, underserved niches.

Will wealth-tech catch up? Who knows? But right now, social listening gives wealth managers the chance to escape the cookie-cutter model and grow a unique advantage of their own.

This article was first published by Forbes here