Practice Management

Assessing the Impact of Major Investment in Advisory Tech

The financial services and retirement advisory industry has collectively invested tens, if not hundreds of millions of dollars in the last decade to boost the use of big data technology; one researcher asks how it’s all paid off. 

By John Manganaro editors@strategic-i.com | September 12, 2017
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A new Celent report, “The Financial Planning Technology Landscape,” penned by senior analyst William Trout, offers a highly detailed description of the advisory marketplace from the client service technology perspective, with a particular focus on the expectations of the emerging Millennial generation.

As an overview, Trout suggests the “needs of next-generation investors are driving substantial investment in digital tech.” The reason for this is as simple as it is enduring: “Technology empowers clients and allows advisers to focus on higher value activities.”

Crucially, Trout says, “differentiation in the vendor market today centers on ease of use as much as functionality.” New modules and features are designed today to support intuitive workflow. At the same time, the analysis finds guaranteed income and shortfall analysis tools have become the pillar of most planning modules, as have tools focused on compliance management.

“The changes noted here take place amidst a shifting industry value proposition,” Trout notes. “In the new world of financial planning, value is derived from the ongoing dialogue as much as from the end product or plan.”

Celent’s analysis shows investors’ embrace of mobile channels and client portals has “made this dialogue a 24/7 proposition.”

“Indeed, it speaks to a virtuous cycle: as efforts to humanize financial planning drive technology investment, new technology fosters increasing levels of engagement,” Trout says. “Such a pattern augurs well for the human adviser confident enough to put aside low value activities, and use digital tools to maximize the use of his time.”

As laid out in the analysis, there are many examples of activities that advisers used to consider the staples of their offering—tasks such as fielding participant phone calls regarding enrollment or investment decisions; monitoring and rebalancing client portfolios; reporting on stock performance and general market trends—which today can be largely automated by practice-support technology and through partnerships with recordkeepers. In fact, many Millennial investors prefer these tasks to be automated or addressed through self-service digital portals, preferring to work with an in-person adviser only when they have gained significant assets, more to set long-term goals or address highly personal issues, such as minimizing lifetime taxes or setting a sustainable budget.

NEXT: Friction in serving Millennial clients?