Financial advisers need to step up their technology game or face losing some current clients, as well as the opportunity to serve entire new customer segments, fintech experts said.
“As an industry we are late adopters of technology because there has been no such thing as a late-adopter penalty,” said Joel Bruckenstein, a tech consultant for advisers and co-founder of the Technology Tools for Today conference. “That's changing.”
Outside influences such as firms that deliver financial advice digitally, as well as the popularity of companies like Amazon and Netflix, have impacted client expectations. Human advisers need to respond by offering more digital interactions to their clients.
Today less than 20% of all advisers interact with customers in a digital way other than through email, according to a PwC report released this month on how fintech is shaping the wealth management industry.
“The wealth management sector is being left behind in a world that is increasingly digital and increasingly about providing a world-class client experience,” said Michael Spellacy, PwC Global Wealth Management Leader.
The future for financial advisers has to balance great personal interaction and technology, he said.
Above all, advisers need to commit to mobile engagement with clients. Advisers should be able to push information out to a client's iPad or phone and together see the same screen with the client, Mr. Spellacy said.
“It's not just about an annual check-in with clients,” he said. “It's how can you have a better interaction as frequently as you want so clients feel like you are part of their lives.”
Eric Clarke, chief executive of Orion Advisor Services, said advisory firms historically have been slow to adopt cutting-edge technologies because clients, typically near or in retirement, haven't demanded them.
But even the gray-haireds are demanding them today.
“Even older clients are asking for apps now to access their portfolio, and they want to be able to get an update at any time,” Mr. Clarke said. “Advisers have to get their tech up to par and provide those services for their clients.”
In addition to losing touch with their "core clients," wealth managers' complacency about fintech may cause them to miss the opportunity to attract the mass-affluent market, a segment digital advice providers already are attracting, the PwC report said.
Mr. Spellacy points out that the wealth management industry doesn't even appear especially worried about technology disrupting their business. Among the issues, as identified in the PwC survey:
- Wealth management firms are more likely than any other financial services sector to say fintechs “pose no risk whatsoever.”
- Only 31% of wealth management firms have developed mobile apps, compared to 81% of banks.
- A “staggering” 34% of wealth management firms do not deal with financial technology companies at all.
Part of the wealth management industry's problem is where advisers focus their technology spending, Mr. Bruckenstein said.
The average firm spends 50% to 90% of its technology budget on investment-management-related tasks, he said.
Advisers need a technology plan that “invests more on things that add value to the client,” such as account aggregation tools, portals and mobile applications, Mr. Bruckenstein said.