40% of Advisor-Managed Assets Could Be Better Serviced by Technology

February 5, 2020 — Boston

Opportunity knocks for strategic partners that can solve advisor pain points and address technology gaps

Advisors fall along a spectrum of technology use; however, a plurality of practices is in the middle, according to new research from Cerulli Associates. The report, U.S. Advisor Metrics 2019: Ushering in a Digital Transformation, finds that 44,055 advisor practices, representing $8 trillion—or 40% of advisor-managed assets— are medium technology users. These practices do not use technology extensively and could be better serviced by strategic partners.

In order to measure technology use across the financial advice marketplace, Cerulli evaluated advisors’ technology stacks and categorized their practices into three segments: light users, medium users, and heavy users. 1Firms that fall in the middle category incorporate technology tools for financial planning and investment research, in addition to CRM and a client portal, but use minimal technology beyond that. Comparatively, heavy users leverage the widest range of technology, digitizing nearly all aspects of their operations through the use of document management, e-signature, and marketing/prospecting solutions.

“Technology has the power to transform a practice by elevating the client experience and increasing overall productivity,” states Marina Shtyrkov, research analyst at Cerulli. “However, many advisors are unable to unlock the full potential of their technology stack because they are plagued by a common set of challenges that impede adoption. Even heavy users—practices that currently use a breadth of tools—believe that they are not fully leveraging their technology.” According to the research, the top limiting factors on technology use include: time to learn and implement technology (68%), inadequate resource and training from their broker dealer (B/D) or custodian (52%), lack of support staff (54%), and data security risks (50%).

Independent advisors, particularly, face a double-edged sword. The universe of available technologies is nearly limitless, and advisors are free to pick the best-of-breed provider in any category. However, that means they navigate an ever- growing set of options that need to be vetted, integrated, and maintained. “For independent advisors, it is a question

of cost vs. return on investment (ROI),” explains Shtyrkov. “Independent broker/dealer (IBD) advisors and registered investment advisors (RIAs) are far more likely to consider the high associated costs of technology a major challenge, reporting a 26.6-percentage-point difference from wirehouse and national/regional B/D advisors.”

Advisors’ technology challenges present opportunities for strategic partners (e.g., B/Ds, custodians, asset managers, technology providers) to increase adoption by solving advisors’ pain points and addressing technology gaps. In order to shore up adoption, the research urges strategic partners to consider how to balance customization with simplicity, leverage next-generation advisors as early adopters and internal champions, involve the advisor’s team (not just the decision-maker) in the project vision and steps toward roll-out, and to enlist the help of third parties to overcome advisor reluctance. “Given that 41% of advisor practices are medium users, strategic partners need to consider how to engage the moveable middle,” concludes Shtyrkov.

Practices are grouped with a proprietary scoring system that calculates a composite score for each practice based on their reported use of technology across various categories (e.g., CRM, financial planning, rebalancing, account aggregation), adjusting for practices that continually upgrade their technology. This allows Cerulli to determine the impact of technology on advisor productivity and processes, identify key practice attributes of high vs. low adopters, and uncover barriers to increasing adoption.

Note to editors

These findings and more are from The Cerulli Report―U.S. Advisor Metrics 2019.

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