The transition to a digital work environment, as COVID-19 locked down much of the country, has certainly been a boon for digital-savvy advisers and the technology companies that provide tools to help them reach clients.
Charles Schwab Corp. said it expanded third-party tech integrations company-wide to 140 partnerships, in part, to accommodate independent advisers working remotely with clients on its OpenView Gateway platform. Over the past year, Schwab has seen a 100% increase in calls about API integrations from providers and currently has more than 40 active projects in development with outside vendors.
The most-used tool for advisers is likely the videoconferencing provider Zoom, which topped more than 200 million daily users in March — up from an average of just 10 million per day last year.
As advisory firms become more comfortable with using digital tools, however, the uptick in adoption could have the unforeseen consequence of permanently replacing some wealth management jobs traditionally filled by in-house employees.
“Advisers have made quite a dramatic shift in the past six to eight weeks,” said Lauren Wilkinson, vice president of digital adviser solutions at Charles Schwab during a media call Tuesday. “Certainly this crisis … raised the urgency for many businesses to begin working in a fully digital environment.”
Even before the worst of the pandemic hit, some of the biggest banks had plans in place to invest in technology and trim staff. Earlier this year, Wells Fargo CFO John Shrewsberry said his firm spent $166 million on “the strategic reassessment of technology projects in wealth and investment management,” during a three-year journey to slash headcount by up to 10% through 2021.
As the economic fallout from COVID-19 sweeps the nation, will firms employ adviser tech to help cut cost, pare back staff and prop up sagging bottom lines?
“The monotonous, boring and lame processes — like scanning paper, sorting things into different buckets, flowing data into storage systems and labeling it properly — all of that entry and retrieval stuff will be the first to go,” said Daniel Faggella, head of research at Emerj Artificial Intelligence Research.
The largest financial services firms may have the most to gain. Since many wirehouses have already adopted back-office technology, they are expected to be the most likely to slim down on staffers, he said.
Those companies may choose to hire only enough employees to scale up the tech solutions that are already in place. Tools that use robotic process automation — which can easily be applied to back-end operations — are likely candidates for future investments, he said.
“In this panicky, cost-cutting mode, RPA is going to find itself a home,” Faggella said. “It’s likely to be adopted urgently during this crisis.”
For smaller firms, the outlook may not be quite as stark. Companies that have yet to fully adopt technology — like smaller independent advisory shops, for example — will still heavily rely on in-office employees, according to Joel Bruckenstein, president of Technology Tools for Today and co-founder of the T3 wealthtech conference.
“I do think there are still inefficiencies that tend to get exposed when market volatility rises to extremes,” Bruckenstein said in an email, adding that he expects tech spending to increase coming out of the coronavirus lockdown.
Still, wealth managers are pledging to not cut jobs during the pandemic and some have even offered a guarantee to calm nervous staffers. RBC Wealth Management, which operates a U.S. business with approximately 2,000 financial advisors, promised no layoffs in 2020. Similarly, Creative Planning chief executive Peter Mallouk pledged no layoffs or pay cuts resulting from the coronavirus pandemic for its 700 employees.
“It depends on how bad things get,” Faggella said. “If companies are looking to cut the fat, expect tech to come in and fill some of those positions.”
An Aite Group survey fielded in April found that of all the positions that have recently switched from in-office to remote work at financial institutions, less than eight out of 10 of them are expected to be returned to the office environment post-COVID-19.
Brad Armstrong, partner at the private equity firm Lovell Minnick Partners — the former holding company of wealth management giants like Mercer Advisors and HD Vest — said he has not heard much in the way of potential workforce reductions.
“There will be some acute short-term pressure,” Armstrong said. “Demand may have been postponed for a couple months because of the pandemic, but that comes back in a major way.”
Instead, Armstrong sees the downturn as rife with opportunity for advisory firms.
"Over cycles, these kinds of market gyrations consistently increase the demand for financial advice and that has real staying power,” he said.
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