How top advisers use tech to grow assets: Michael Kitces, Ram Nagappan

Technology once viewed by advisers as a threat is now the key to business growth, and the advisers with a competitive advantage are the ones focused on technology that frees up their time to prioritize financial planning and client interaction, according to panelists at the BNY Mellon Pershing Insite annual conference.

Industry luminary Michael Kitces and Pershing chief information officer Ram Nagappan outlined key areas where advisers should leverage technology to grow their businesses with a focus on client experiences and time efficiency.

“I’m very focused these days on technology that’s actually making the advice process better, not necessarily the product world,” Kitces said. “Areas like automatically and digitally scanning a client’s tax return to summarize all the data for you and identifying the planning conversation.”

Another key to growing business is embracing tech-driven changes the industry is facing to expand an adviser’s addressable market, Nagappan said. “Where can you bring technology and cater to the tech-savvy next-gen investors?”

Recommendation engines commonly used by the retail industry can also be applicable to wealth management via technology, he said. “You could use recommendations to actually provide the right advisory model. The other area is cost -- everyone looks at the cost, and they want to control the cost. So have end-to-end automation and cost control using technology.”

While Covid-19 accelerated technology investment last year, the pace of investing in new technology is slowing, according to Schwab Advisor Services Independent Advisor Outlook Study. In fact, 57% of advisers said they were investing in new technology in 2021 versus 71% in 2020.

Yet technology is the catalyst to freeing up advisers’ time to deliver value in new ways and transform their customers’ experience through financial planning.

“What we found from our adviser research is that when you look at time use and efficiency, the difference between the top 25% of advisers and the bottom 25% of advisers is a 10% difference in client-facing time,” Kitces said. “So the difference between the top advisers and bottom advisers is literally less than an hour a day of how they spend their time.”

Top advisers spend more time on client-facing activities while bottom advisers spend more time on internal administration, back-office and middle office tasks, Kitces said.

“So if you approach [tech] not as: ‘I need the magic technology that's gonna save me hours and transform my world,’ but just those pieces of technology that can give me back five minutes a day, that starts adding up to half an hour a week and a couple hours a year,” he said.

Once advisers can find a few more pieces of technology that benefit their time efficiency in that way, they could start taking on a large amount of additional client meetings. “Now, you’re drastically moving the needle on the business impact,” Kitces said.

Pershing is rolling out technology that addresses these key areas. For example, the company announced Wednesday that during the fourth quarter, it plans to launch Managed Accounts Central, a multicustodial managed accounts tool that is designed to allow wealth managers to oversee their advisory business across custodians through a single platform.

Pershing's managed accounts technology is used by more than 11,000 advisers and houses 1.6 million accounts with over $730 billion in assets, according to the announcement.

Firms can choose to outsource their managed accounts technology as well as their investment advisory solutions, or a combination of both, depending on their needs, according to the announcement.

Advisers can manage accounts through Pershing’s dashboard, which displays information on portfolio performance, account holdings and asset allocation across custodians. In addition to trading and reporting tools, Managed Accounts Central will feature investment research and model management.

The increasing need for advice and changes in the regulatory environment are fueling the growth in managed accounts, which are projected to hold $11.6 trillion in 2023, up from $7.4 trillion at the end of 2019, according to Cerulli Associates.