Corner Office Views | Q2 2023
The Challenges and Opportunities of Wealth Management Technology
Technology enables advisor productivity, but can advisors overcome adoption challenges?
- Insufficient time to learn and implement a technology is the most frequently cited challenge associated with the use of technology among advisors.
- The business objectives that moderate and heavy users of technology identify their technology as being more effective at enabling than their less tech-enabled peers include the effective and efficient delivery of financial planning services, effective and efficient management of the operational aspects of the client relationship, and providing a high-quality experience for clients.
- Operating within a team-based practice structure can increase the opportunity for personnel to share best practices regarding technology use, and the ability to spend more time investigating how to optimize a practice’s use of technology.
Michael Rose, MST
Michael is a director within Cerulli’s Wealth Management practice, where he researches key elements of the wealth management industry, with an emphasis on broker/dealers and wealth management technology. In this capacity, he regularly engages with constituents across the wealth management ecosystem, including retail investors, financial advisors, and executives within wealth management, asset management, and technology firms, in order to support Cerulli’s market research initiatives.
Prior to joining Cerulli, Michael spent eight years working as a financial advisor, providing comprehensive wealth management services to high-net-worth individuals and families. Prior to his role as a financial advisor, Michael served as a research analyst for IDC, where he was responsible for researching trends within the technology industry and advising senior business executives on product strategy.
Full biography here.
Most Cited Challenges
The ways in which technology can enable financial advisors to achieve key business objectives, and the extent which they can do so, is a key consideration any wealth management organization should make before investing in a technology, and a consideration any advisor should make before investing the time and energy necessary to learn how to use a technology tool.
In fact, insufficient time to learn and implement a technology is the most frequently cited challenge (73%) associated with the use of technology among advisors. By becoming the member of a team, either by expanding their own practice, or partnering with other advisors into a team-based operational structure, advisors can help to address the greatest challenge to effectively using technology within their practices.
Some of the other challenges with the use of technology most frequently identified by advisors include compliance restrictions that limit functionality or impose other limitations (69%), and a lack of integration between tools/applications (69%). Solo advisors more frequently identify insufficient time to learn and implement the technology available to them as a challenge than do their team-based competitors.
Impact on Business Objectives
Fortunately for advisors and wealth management firms, Cerulli data clearly demonstrates that technology is generally effective at helping advisors achieve a wide range of business objectives, with over 90% of advisors identifying as such. Furthermore, Cerulli data clearly demonstrates that, in general, those advisors that use technology more heavily identify that their technology is more effective at achieving key business objectives than those who use technology less extensively.
The business objectives that moderate and heavy users of technology identify their technology as being more effective at enabling than their less tech-enabled peers include the effective and efficient delivery of financial planning and investment management services, effective and efficient management of the operational aspects of the client relationship, and providing a high-quality experience for clients.
Narrowing in on the impact of individual types of technology on key business objectives is also highly instructive. Those technologies that are most frequently cited as positively impacting the client experience include e-Signature (77%), video conferencing (75%), and client portal (64%). This aligns with the many conversations that Cerulli has had with financial advisors who identify that e-signature technology has drastically reduced the time/effort required for clients to open accounts, create linkages between accounts, and more. Additionally, many advisors have told us that although very few clients met with advisors virtually before the pandemic, as the pandemic subsides, many clients still prefer meeting with their advisors virtually.
Impact on Productivity
Those technologies that are most frequently cited as positively impact advisor productivity include video conferencing (75%), e-signature (73%), and CRM (70%). There is a wider array of technology that advisors cite as having a positive experience on advisor productivity than there are technologies cited as having a positive experience on the client experience, which trails off significantly outside of the top four. This is likely a result of there being a broader set of tools focused on operational aspects of service delivery than there are that directly influence the client experience. The former include investment research, document management, rebalancing, and risk analytics, none of which have a very great direct impact on how clients experience the service being delivered to them.
Likewise, those technologies that are most frequently cited as improving advisor productivity also are identified as having a greater impact than those technologies that are cited as positively impacting the client experience. Only one technology (e-signature) was identified as having a high impact on client experience by more than 60% of advisors. Conversely, four of the top-five technologies most frequently cited as improving advisor productivity were cited as having a high impact by more than 60% of advisors.
Technology and Teams
Encouraging teaming among their advisors has been a top priority for many wealth management firms, particularly captive B/Ds who see teaming as a way to address advisors’ succession planning needs and to increase advisor retention. As part of this effort, there is seldom mention of the advantages that a team-based structure can have on the effectiveness with which advisors can leverage technology, but given all of the advantages that effective technology use confers on advisors and their practices, Cerulli believes it can be yet another motivating factor for advisors to embrace teaming.
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