Do financial advisers need mandatory technology adoption?

Fintech can't work if it's not used, but not everyone agrees whether to use carrots or sticks

Nov 4, 2017 @ 6:00 am

By Evan Cooper

Financial advisers, custodians and broker-dealers joined InvestmentNews for a Technology Think Tank Sept. 13 - 14 to discuss the latest in emerging technologies.
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Financial advisers, custodians and broker-dealers joined InvestmentNews for a Technology Think Tank Sept. 13 - 14 to discuss the latest in emerging technologies.

Technology can work many wonders — as long as it is used. One persistent problem in the advice business, however, is the relatively low rate at which advisers adopt new technology. Could adoption be mandatory? Participants in the Technology Think Tank Sept. 13 - 14 wrestled with the issue.

"We roll out an end-to-end technology that works, and we go back to clients in six or 12 months and find 35% adoption. We find the constant communication very hard to do," said Tom McCarthy, head of platform technology at Fidelity Institutional. "The second piece is that some advisers want us to give them more tools so they can do straight-through processing, and others tell us they want us to do the work."

Schwab Advisor Services is equally frustrated. "Most custodians would like to apply the carrot-and-stick approach to adoption, although I certainly see why the stick side of things is appealing," said Ed Obuchowski, senior vice president for technology solutions at Schwab Advisor Services.

His firm uses a carrot: offering lower commissions if firms go paperless.

(More: Broker-dealers debate big data and other technology promises)

David Ballard, chief operating officer at Cetera Financial Group, said tech firms and custodians need to keep in mind that their tools are not the only ones broker-dealers deploy for advisers and ultimately, investors.

"We've been working really closely with a lot of partners in the room, and we appreciate their help. But you have to remember that your solution is a piece of the puzzle, not the whole thing," he said.

Firms need to create user experiences that are consistent, which requires that vendors provide "parts that allow us to embed their solutions into that experience," Mr. Ballard said.

Participants suggested possible carrots. One is to make adoption a competition.

"If you show advisers adoption scorecards, it helps," Mr. Obuchowski said. "We used scorecards to increase adoption for our eAuthorization for wire transfers. Explaining how it eliminates fraud and then really communicating that to advisers helps, but getting to them early and being transparent with the metrics of adoption is critical."

(More: America's digital financial habits disappoint)

Raef Lee, managing director and head of new services and strategic partnerships at SEI Advisor Network, said SEI has found success with WalkMe, a digital adoption platform that "gives you the information you need as you need it, to do whatever the next task is."

It also helps with adoption when experts thoroughly explain SEI's workflow programs to advisers so they are able to build best practices into what they're doing, Mr. Lee said.

Gabe Muller, chief operating officer at Glassman Wealth Services, said getting advisory firms to boost the use of technologies isn't complicated. "To increase the adoption rate, you have to create a culture of adoption," he said.

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