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3 ways to improve adviser technology

Advisers must evaluate what technology they need to stay profitable, as well as the value of technology investments to their clients.

Apr 16, 2019 @ 2:09 pm

By David Lyon

While technology helps with practice efficiency and profitability, advisers acknowledge that clients are the prime beneficiaries of technology improvements. In Oranj's 2018 research report, Digital DNA 2.0, advisers say improved client-facing services and interactions, as well as more efficient and impactful reporting, are the top benefits they seek when evaluating technology.

In Oranj's 2017 report, An Advisor's Guide to Understanding Investors' Digital DNA, account aggregation ranked highest among investors asked to rate online account features in terms of "making saving easier and improving overall experience." Account aggregation also ranked highest among advisers asked which features "improve their overall experience with their clients."

Sometimes there's a disconnect between the perspectives of advisers and clients. In the 2019 adviser technology survey from T3 and Inside Information, advisers placed little value on front-office tools, such as account aggregation, risk tolerance and document management, focusing more on customer relationship management as the most valuable business software. Account aggregation was not even a choice on that survey.

Advisers at the forefront of technology investment — known as tech accelerators — cite "improved outcome for clients" as their top consideration. They invest more in technology and are growing faster than those who don't.

An examination of the technology stacks of accelerators compared with those of other advisers shows a greater use of client portals (77% versus 56%, according to the Digital DNA 2.0 report). Accelerators are leveraging more client-facing tools to provide improved services and advice delivery to their clients.

Advisers must evaluate what technology they need to stay profitable, as well as the value of technology investments to their clients. Forcing software to fit how they currently do things is a holdover mindset that views technology investments according to a cost/benefit analysis of productivity versus efficiency.

Adoption is critical, but many advisers report underutilization of the capabilities available in expensive technology investments. Margin compression is an additional complication, with changing consumer demands and price sensitivity coupled with increased compliance costs. Every dollar spent on unused technology adds to the negative equation. Advisers paying for expensive, cumbersome legacy systems may struggle to weather the storm of another significant market correction — especially those who work under an AUM model.

(More: Top performing advice firms have a distinctive focus on technology)

What you can do

1. Close the digital divide with clients. Most individuals responding to the 2017 Digital DNA survey said they need some form of professional financial advice. Thus significant opportunities exist for advisers who make access to advice easier.

While 93% of individuals indicate weekly engagement with social media, only 25% of advisers report using it for client interactions — 14% via webinars or recorded videos, and 12% with blog posts. Many mistakenly think their 55- to 64-year-old clients are not using the internet for financial things (or anything at all), but research in the initial Digital DNA report shows people in that age group average more than five hours a day online.

Advisers should consolidate, communicate and customize. Creating the optimal digital client experience involves aggregating client data, communicating the value and usefulness of that information to the client, and making sure the delivery method suits the client's needs and preferences.

2. Revisit your business processes and client experience. Financial advice is a process-driven business, and many advisers build their tech stacks based on the processes they use to scale their practices. When the workflow is based exclusively on how the adviser wants the business to run, technology is selected to facilitate scalability, client segmentation and other efficiency drivers.

Starting with the clients and their journeys would help shift the focus from good service to a truly meaningful experience.

Investors work with advisers based on one or more of the following:

Personal relationship, to help bridge the gap between money-related emotions and just a check-off on the standard quarterly calendar.

High level of service, higher than they get from big box providers or robo advisers.

Customization of both their investment portfolio and financial plan instead of cookie cutter solutions.

Given clients' online activity and their Amazon- and Uber-driven expectations, it's time to re-evaluate your client journey, business processes and technology. Instead of meeting clients' expectations, you may be annoying them with clunky, cookie-cutter solutions.

3. Think tech stack "flexibility." Do you know where your business will be in five to seven years, or where consumer technology will be? Does anybody?

Change is constant, and its pace is accelerating. Flexibility, especially regarding technology, helps you be nimble and able to respond to changing client needs and demands. Don't get locked into long-term contracts which can keep you at the mercy of the providers' future plans.

Do you have the right tech stack (think "stack of pancakes") for today and tomorrow? Is it easy enough to use that your team benefits from all the functionality? Do you need all the features? Can you lift up and pull out that "middle pancake" without creating a big mess? Are there free or low-cost solutions that provide what you need — and can you pull those solutions in as part of your unique client experience, potentially creating a shorter and healthier stack?

Being a savvy consumer of financial technology is not about much you spend, but how well you leverage it to better serve your clients (and thus your business.) Frankly, the old adage "You get what you pay for" is no longer true.

Digital tools are ubiquitous, and the advisory business must keep pace. Simple steps such as aggregating account data and customizing client communication can provide a more relevant and seamless client experience. Advisory firms that adopt and promote user-friendly technology and services will be the ones that gain market share and prosper in the years ahead.

David Lyon is founder and CEO of Oranj, a wealth management platform.

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