Financial advisors have a dilemma. They try to make clients aware of every detail affecting their financial health and must provide full disclosure to those people because of pressure to increase transparency. At the same time, investors are inundated with data and struggle to understand what they’re getting. They get account statements by mail and don’t open the envelope, choosing to file the stuff away until tax season. That’s why they hire professionals for advice. But investors know they should maintain some understanding and control over their money.

Many financial advisors turn to technology as a solution to automate communication, but the choice of which tools to use and for which clients is daunting.

Enter the Web as the ultimate customer-service medium — for financial advisors to strengthen their client relationships and for financial institutions to serve customers. But the Web is a tool, and not a substitute for the trust that can be built through direct contact.

Although the goal of investment professionals is to assume the role of trusted advisor, this trust comes only with time and a proven track record with the client. Technology can help, but no customer relationship management system will magically foster this trusting relationship.

Financial advisors know they should serve all their clients with regularity, but the 80/20 rule forces them to concentrate on large clients at the risk of neglecting smaller ones. One of the advantages of the Internet and technology in general is that it lets advisors manage client relationships (through tools such as e-mail, financial dashboards, financial planning software, e-newsletters, Web sites, online financial tools and online seminars/Webinars) with both large and small clients efficiently. But advisors must still prioritize their activities and the clients they serve.

Advisors are under pressure to increase client contact. Financial institutions encourage advisors to increase their communications with clients, regulators instruct firms to disclose every last detail to investors, financial organizations expand their compliance departments to ensure investors are getting all the required information. But all that communication with the client does not necessarily strengthen the relationship when human interaction is sacrificed in favour of technology. Thus, the two forms of interaction must be balanced.

The onus is on financial advisors and the financial institutions they represent to communicate better with investors and keep them informed about their financial health. Scandals such as Enron Corp. and the recent high-closing and insider-trading cases have raised concerns of investors and regulators about transparency and compliance.

With so much information available today, advisors have become the conduit for the financial products, the regulations and reports. They are the ones who often do the research, sift through the details and look out for their clients’ best interests. It’s incumbent upon them to filter this information and translate it into layman’s terms and quick snapshots for their clients. As mutual funds and other financial products warrant selling through human contact, the “download research” button on a firm’s Web site is a poor substitute for its advisors’ telephones.

So, here’s some heresy from an Internet evangelist long caught up in the promise of the Web: although financial institutions leverage the Web to increase communication touchpoints and provide profitable customer service to advisors and investors, the Web should be used more to increase transparency in the client relationship and earn trust and credibility with investors.

Let’s temper our enthusiasm for the enormous potential of the Web. According to Tim Berners-Lee, head of the World Wide Web Consortium and the inventor of the World Wide Web in 1989, the Web was meant to be “a portal to a world of information, everything from how to remove clothing stains to tips on investing money.”

But let’s not throw everything at our clients; having too many financial planning tools will only complicate matters.

Some organizations inundate advisors with technology tools designed to help build their businesses. But many tools are abandoned; only the most intuitive ones get adopted by advisors and their clients. Advisors don’t have time to fill in all the fields of the latest portfolio planning tool — and their clients are even less apt to do so.

I may be an Internet evangelist who advocates doing things online, but I’m also a philosophy major who knows human behaviour. Fifty-eight percent of adults who access the Internet from home do their banking online, according to recent Statistics Canada research (August 2006). That may be, but three-quarters of Canadians remain concerned about privacy and security breaches. This means we haven’t yet earned their trust. So, any effort to increase the use of the Web for client/advisor interactions should be done with caution. IE

Anthony Boright is president of VAULT Solutions, a technology firm focused on providing secure, Web-based solutions to the financial services industry. He can be reached at aboright@vaultsolutions.com.