Tech Sur­vey: Too Much, Too Many

Ad­vi­sors are over­whelmed by op­tions. Wary of ex­pen­sive so­lu­tions that don’t do what’s promised, firms risk fall­ing be­hind.

Financial Planning - - Contents - BY HARRY TER­RIS

Ad­vi­sors are over­whelmed by op­tions. Wary of ex­pen­sive so­lu­tions that don’t do what’s promised, they risk fall­ing be­hind.

Mo­bile is No. 1. The fer­vor for robo ad­vice is cool­ing. Cost con­cerns abound. And FOMO paral­y­sis is hold­ing firms back from big pur­chases.

Those are just some of the ma­jor find­ings of this year’s Fi­nan­cial Plan­ning Tech Sur­vey.

Sev­eral sur­prises emerged when we asked a con­trolled au­di­ence of hun­dreds of in­de­pen­dent RIAS, plan­ners af­fil­i­ated with bro­ker-deal­ers and other ad­vi­sors to tell us which tech­nolo­gies they pre­fer, what will markedly al­ter the wealth man­age­ment in­dus­try, what prod­ucts they are buy­ing and avoid­ing — and why.

To be sure, there’s less un­ease about the dis­rup­tive na­ture of robo ad­vice. Au­to­mated in­vest­ing has prompted much hand­wring­ing about its po­ten­tial to dis­place tra­di­tional prac­tices.

But as on­line plat­forms have added fi­nan­cial plan­ners to of­fer hy­brid ser­vices, up­start chal­lengers have been ab­sorbed by larger firms, or shut down, and in­cum­bents have raked in bil­lions of dol­lars of as­sets through their dig­i­tal plat­forms, ad­vi­sors see less rea­son to be con­cerned.

In­deed, our sur­vey found that many ad­vi­sors ex­pect tech­nol­ogy to lead to more hir­ing — not less — at their firms.

Ad­vi­sors say they look to tech to strengthen their roles as trusted fi­nan­cial coaches who guide clients through chal­leng­ing life shifts and com­plex de­ci­sions. They are se­lect­ing from an ever ex­pand­ing set of tools, from file shar­ing to video con­fer­enc­ing.

We found that even tech-savvy ad­vi­sors can get lost in the dizzy­ing ar­ray of choices, com­pet­ing plat­forms and new ideas. As some press­ing is­sues are clar­i­fied, new un­cer­tain­ties emerge.

“It’s a lit­tle bit of the Wild West in fintech. There are lots of cool ideas out there,” says Paul Strid, a found­ing prin­ci­pal at Con­cen­tus Wealth Ad­vi­sors. “It’s a lit­tle over­whelm­ing be­cause there are so many op­tions.”

Be­cause pur­chase de­ci­sions can de­ter­mine how well ad­vi­sors serve clients and meet chal­lenges from com­peti­tors, firms are of­ten re­view­ing the tech they use. Sub­scrip­tion and li­cens­ing fees for a full tech suite can be among a firm’s biggest ex­penses.

This year’s Tech Sur­vey sheds light on how ad­vi­sors are mak­ing these de­ci­sions, where they are hav­ing suc­cess and com­ing up short, and which tools they are pick­ing and why.

Robo Re­think

When we asked sur­vey par­tic­i­pants which tech­nol­ogy is most likely to change the wealth man­age­ment in­dus­try over the next one to three years, skep­ti­cism of the prob­a­ble im­pact of robo ad­vice came through clearly in com­par­i­son to last year.

The per­cent­age of ad­vi­sors nam­ing it fell markedly this year, more than for any other tech­nol­ogy cat­e­gory. Robo ad­vice dropped to fourth place from sec­ond in the rank­ing of trans­for­ma­tive tech­nolo­gies.

De­ploy­ment re­mains low as well. Only 16% of ad­vi­sors say they have a robo of­fer­ing.

Cer­tainly, robo tools are still widely viewed as ideal so­lu­tions for many self-di­rected clients. They are also

con­sid­ered a good way to sign up younger clients who may later em­brace valu­able, full-ser­vice re­la­tion­ships as they ac­cu­mu­late wealth.

“Clients were able to sign up com­pletely on their own with­out even step­ping foot in our of­fice,” says an ad­vi­sor at an in­de­pen­dent RIA with more than $500 mil­lion AUM, in re­gards to her firm’s im­ple­men­ta­tion of Sch­wab’s robo plat­form. She added that the tool en­abled the firm to bring in many new clients who did not meet its cus­tom­ary as­set min­i­mum. “It’s easy and sim­ple and cheap. We re­cently launched an ad cam­paign for it and we’ll see if that’s able to draw in more clients.”

That ap­proach might be im­prac­ti­cal for smaller prac­tices with­out the scale to ad­min­is­ter rel­a­tively small port­fo­lios of rel­a­tively low-bal­ance ac­counts. Ad­vi­sors must still man­age billing, make pri­vacy dis­clo­sures, re­view client pro­files and meet reg­u­la­tory re­quire­ments.

Some wealth man­age­ment firms are choos­ing an ap­proach some­where be­tween robo and tra­di­tional re­la­tion­ships, such as us­ing model mar­ket port­fo­lios as a way to of­fer more af­ford­able pric­ing to clients with smaller ac­counts. “I would have turned these over to a robot be­fore,” says an ad­vi­sor at an in­de­pen­dent RIA. “The client pays a bit more here but gets per­son­al­ized ac­cess the robot can­not pro­vide.”

The Hu­man Equa­tion

Re­sponses on how new tech­nol­ogy will af­fect hir­ing fur­ther sup­ported the no­tion that ro­bos com­ple­ment wealth man­agers. About 26% of ad­vi­sors say that ad­vanced tech­nol­ogy will lead their firms to hire more peo­ple — twice as many as those who ex­pect ad­di­tional tech­nol­ogy to cause less hir­ing. (Most re­spon­dents an­tic­i­pate a neu­tral im­pact on hir­ing.)

“Our abil­ity to work with a myr­iad of tech­nol­ogy so­lu­tions gives us an ad­van­tage in bring­ing in ad­vi­sors from all walks of life,” an ad­vi­sor at a bro­ker-dealer says.

Mo­bile First

Ad­vi­sors still say that mo­bile apps, more than any other tech cat­e­gory, are poised to change the wealth man­age­ment in­dus­try in the next one to three years, the same re­sult as last year. For many plan­ners, adding mo­bile tech­nol­ogy is es­sen­tial for keep­ing pace with broader cul­tural changes brought about by tele­com ad­vances, es­pe­cially among younger clients.

“The biggest chal­lenge and suc­cess I have had are try­ing to deal with my clients’ kids,” says an ad­vi­sor at a large, du­ally reg­is­tered RIA firm. “The younger kids want mo­bile apps, which my firm does not sup­port. My suc­cess has been the kids us­ing their phones to ac­cess the on­line por­tal to keep track of their ac­counts.”

But us­ing mo­bile for se­cure, archived com­mu­ni­ca­tions that meet reg­u­la­tory stan­dards adds another hur­dle. “So much client ac­tiv­ity is mov­ing to text and email. Email is no is­sue, but with tex­ting it has been nearly im­pos­si­ble to con­trol client be­hav­ior,” says another ad­vi­sor at a du­ally reg­is­tered RIA firm. The mo­bile com­mu­ni­ca­tions plat­form Cell­trust has re­lieved him of the fear of be­ing fired, he says, should he “in­ad­ver­tently text a client on an un­ap­proved ser­vice” by en­abling him to move con­ver­sa­tions into a safe en­vi­ron­ment.

Cost Con­straints

Many clients need per­sonal re­la­tion­ships with ex­pe­ri­enced ad­vi­sors to get through the del­i­cate and tax­ing process of eval­u­at­ing their fi­nan­cial sit­u­a­tions and plan­ning for the fu­ture. A hu­man voice or a face-to-face meet­ing can be re­as­sur­ing and help im­pose struc­ture on a some­times daunt­ing un­der­tak­ing.

But ad­vi­sors con­tinue to look to tech­nol­ogy for more — to en­hance the depth of in­sight they can pro­vide and for tools that can help them keep clients from mak­ing com­mon and pre­dictable er­rors when, for in­stance, stock prices sink abruptly.

Re­spon­dents name be­hav­ioral fi­nance soft­ware as the No. 2 cat­e­gory that will change the wealth man­age­ment busi­ness. Many sur­vey par­tic­i­pants re­port that clients have re­sponded pos­i­tively to ad­vanced risk-pro­fil­ing soft­ware, which helps align their in­vest­ment port­fo­lio with their in­di­vid­ual tol­er­ances for risk.

For more ex­clu­sive Tech Sur­vey anal­y­sis and re­sults, please see

Yet the cost of such tools is a ma­jor con­sid­er­a­tion. One ad­vi­sor at a small prac­tice gave a pos­i­tive re­view of her spe­cial­ized risk-pro­fil­ing ap­pli­ca­tion, but says she is giv­ing it up be­cause of the ex­pense in fa­vor of a com­po­nent em­bed­ded in the fi­nan­cial plan­ning plat­form she uses.

Other cost con­cerns came up, too. “They’ve made a lot of strides to strengthen their prod­uct,” an ad­vi­sor at an RIA firm says, de­scrib­ing the port­fo­lio man­age­ment plat­form he

uses. “Un­for­tu­nately, we don’t need most of those up­grades, ei­ther due to al­ready hav­ing a dif­fer­ent so­lu­tion or be­cause our ap­proach doesn’t merit the up­grades. The ac­com­pa­ny­ing cost in­crease for all the up­grades is there­fore harder to swal­low.”

For ex­pen­sive tech­nol­ogy to jus­tify its cost, fun­da­men­tal ar­chi­tec­ture must be in place to sup­port its func­tion­al­ity. One area of fric­tion is the re­li­a­bil­ity of feeds of fi­nan­cial data from ma­jor fi­nan­cial in­sti­tu­tions into por­tals and fi­nan­cial plan­ning plat­forms with ac­count ag­gre­ga­tion fea­tures.

Ad­vi­sors need com­pre­hen­sive vis­i­bil­ity into their clients’ fi­nances to pro­vide sound ad­vice, and ac­count ag­gre­ga­tion can help make the process ef­fi­cient. Yet, de­scrib­ing the por­tal so­lu­tion he uses, an ad­vi­sor at an RIA firm says, “like many other ag­gre­ga­tion tools, we run into is­sues when links break with­out a lot of ex­pla­na­tion.”

There’s no doubt that tech is trans­form­ing wealth man­age­ment, and that fi­nan­cial plan­ners will need new tools to com­pete. But with bud­gets stretched, ad­vi­sors will con­tinue to closely mon­i­tor their tech ROI. Watch for plat­forms that break through and de­liver the biggest bang for the buck.

Harry Ter­ris is a Fi­nan­cial Plan­ning con­tribut­ing writer in New York. He is also a con­tribut­ing writer and for­mer data edi­tor of Amer­i­can Banker. Fol­low him on Twit­ter at @har­ry­ter­ris.

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