The Next Big Advisor Trend: Democratizing Premier Tech

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I’ve spent over 20 years in leadership roles in the wealth management industry, including coordinating the integration of Morgan Stanley and Smith Barney as Chief Operating Officer of Morgan Stanley’s U.S. Wealth Management Group. For much of my career, consultants and industry pundits have wrongly predicted based on various trends that we were on the cusp of radical change in our industry, even as the basic model for advice remained remarkably stable. Like the boy who cried wolf, they were proven wrong year after year as advisory firms from RIAs to wirehouses successfully grew their businesses.

Today, however, the landscape has finally — and emphatically — shifted. From my vantage point at a leading fintech company, there is compelling evidence of a “wolf” on the horizon in the form of a significant gap in firms’ level of adoption of modern technology to serve clients. Advanced technology once reserved only for advisors serving ultra-high net worth (UHNW) clients is being adopted by some forward-looking advisors across a broader range of advisory models. These advisors are achieving outsized gains in an increasingly “winner take all” market for advice. According to Think Advisor, this year will be the first time in history when there will be more independent advisors than employee-based advisors, creating a substantial threat to advisors and firms who are slower to adapt their technology platforms.

Technology now allows advisors to more effectively aggregate, analyze and report on client portfolios. It allows advisors to track and measure performance across any currency and asset class, including historically opaque alternatives. It allows advisors to create tailored goal-based performance reports in minutes that drive personalized communications with each of their clients. This access to multi-custodian, multi-asset class, multi-currency data across multiple generations of an advisor’s client base provides a significant competitive advantage for some of the most successful teams in wealth management. In fact, according to a joint study by Addepar and RIA Database, these advisors achieved growth rates in excess of 25% higher than their peers over the past year.

With market forces and client expectations compressing fees for advisors, it’s more important than ever for advisors to deliver offerings to clients that are differentiated and truly go beyond what they would get from a robo-advisor or an off-the-shelf option.

“Future-proofing” seems like an obvious choice. So what’s the biggest challenge to making this happen?

I often hear that advisors are not technical. I take issue with this. It’s not that advisors are technically challenged; in fact, they have mastered highly technical subject matter along with employing the high emotional intelligence necessary to guide their clients. They frequently display a combined level of IQ + EQ rarely demanded from other careers. In addition, advisors know tech is a priority; according to a TDA Institutional Survey, RIAs had their biggest increase in spending on tech in 2019 and 43% of RIAs said performance reporting will be a top tech investment in 2020.

Rather, the onus is on providers to make the ROI of technology investment explicit and the path to meeting advisors’ goals clear. Here is how the right solutions can unlock improved client service and stronger growth potential for wealth management firms:

Present a Differentiated Client Experience: It’s no secret that the generational shift in clients has meant investors expect more from their advisors. A Coldwell Banker study showed that millennials will hold five times as much wealth as they have today, as they inherit over $68 trillion from their baby boomer parents by the year 2030. These clients are used to having access to everything they need at a click of a button, and their financial information should be no different. Advisors can leverage advanced analytics and reporting to offer easy-to-use client portals and mobile apps. These tools create a modern tech experience and support more meaningful relationships with clients.

Streamline Internal Operations: As firms grow, multiple layers of administrative personnel and sales staff can complicate critical workflows. Scaling suddenly plateaus. The right tech can help advisors and RIA firms move away from manual processes while simplifying the time-intensive and error-prone process of managing reporting controls. With advanced capabilities like role-based permissions, firm administrators can easily grant or revoke permissions as needed, ensuring that firm employees have access to everything they need when they need it. This frees up time for activities with greater ROI and helps firms scale.

Access Historical Data: Data is a key component of any firm’s technology stack. Many wealth management firms fall into two categories when it comes to their data and modernizing:

(1) They have challenges consolidating bespoke technology solutions, such as getting them to work together, getting data flowing through them consistently and reducing manual fixes.

(2) They want to move from legacy tech and need to migrate to a new, modern system that will allow them to scale as a firm.

With the right tech, advisors have the opportunity to leave behind their legacy platform but not their valuable historical data.

In short, after decades of relatively slow change in the basic structure of delivering advice to clients, a significant technology shift is now underway in the industry. To succeed, it’s critical that wealth management firms and their advisors have the technology tools to remain competitive. Making the right decisions now will position advisors serving all types of clients for strong future growth. My challenge to you for 2020 is to consider the cost of the status quo and identify one technology investment to move your firm forward. Armed with what to look for and why it matters, make the choice to join forward-looking advisors defining the new client standard of care in wealth management.

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