Advisors say lousy tech is costing them clients and prospects

November 15, 2022 8:09 PM

With the wealth management landscape increasingly competitive, advisors say that having the right technology tools in their stack makes the difference between leading the way and getting left in the dust.

A report released Tuesday by Weston, Massachusetts-based fintech firm Advisor360° found that most financial advisors believe their tech choices have gotten in the way of their growth. For example, 65% of the 300 advisors polled in the firm's inaugural Connected Wealth Report said they had lost business from clients or prospects due to outdated wealth management software.

Many of the findings echoed those gleaned in a pair of studies conducted earlier this year by Financial Planning parent company Arizent. In an analysis that explores the state of digital transformation across various industries to identify the factors critical to developing a future-ready technology strategy, wealth management's progress lags behind the banking, mortgage and insurance industries.

About 62% of wealth managers who took part in the Arizent research said they are still just getting started. Wealth management was also the only industry with more than half of all respondents reporting either nascent or developing digital transformation maturity.

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Financial Planning's 2022 Tech Survey revealed that advisors aren't confident about the technology they have chosen to support them. Just 38% of those surveyed say their firm has "definitely" focused on the right tools to remain competitive in the market. The rest either have some doubts (49% answered yes, probably), disagree with their company's decisions (5%) or aren't sure (8%).

So what does it all mean for advisors? For Richard N. Hart, the senior vice president of corporate development at Advisor360°, it underscores how organizations with the right tech "improve their advisors' ability to offer robust financial guidance and form deeper client connections, which ultimately translates into strong, healthy businesses."

"Technology can be a game changer for advisors who want to grow their business," Hart said in a statement. "Firms that can't innovate to today's standards or don't stack up to peers are leaving money on the table."

The survey, led by Coleman Parkes Research on behalf of Advisor360°, was conducted in September 2022 among financial advisors and other executives at firms with more than $5 billion in assets under management and more than 1,000 employees on average.

Here's a quick look at the key findings of the Advisor360° Connected Wealth Report.

Keeping up, but not setting the pace

Fifty-eight of the respondents surveyed classified their technology as "modern," but only 3% called it "integrated and innovative." Meanwhile, the remaining 39% said they needed an upgrade.

"Respondents who say they have modern technology are 50% more likely to report growth in new client assets and 33% more likely to get client referrals, compared to those who say their technology needs an upgrade," according to a statement from Advisor360°.

The modern client demands more from the modern advisor

More than half of the advisors who reported losing business because their wealth management technology did not meet expectations said the biggest toll has been on prospects. Fifty-two percent of respondents said their tech led to potential clients going in another direction, and 25% said it cost them an existing client.

Wealth management's technology gaps

Those behind the study said the findings suggest that firms need to think long and hard about whether or not their tech offerings make the lives of advisors easier or harder when it comes to working with clients.

About 53% of respondents consider their technology to be an extension of their practice, but nearly 30% of advisors believe that their current systems hold them back when it comes to new business.

However, most advisors give their existing wealth management platforms high marks for enabling them to focus on their most important clients (67%) and deliver robust financial planning advice (63%).

Using tech where it matters most

Advisors said digital onboarding could have the biggest impact on their practices and the way they work with clients. A quarter of those surveyed categorized their current onboarding process as a "constraint" in terms of getting new client relationships off the ground.

Advisors' primary concerns about their existing platforms revolved around the lack of automation and functionality. The survey found that 41% of advisors spend two hours on average scheduling, running and reconciling reports before each client meeting. Another 26% spent more than two hours.

In addition, 58% of advisors said their account aggregation capabilities needed improvement.

The desire to remain connected

Advisors who took part in the survey believed that the most important aspect of a client's digital wealth experience is their ability to see a "complete picture of their financial lives," according to Advisor360°. But 43% of respondents said their technology was primarily advisor facing and not client facing, meaning that clients may be in need of something new.

Advisors also saw their clients as product-savvy, wanting technology that gives them access to tools that are specific to their clients' financial goals. Client demand is highest for structured investments, followed by annuities and long-term care insurance.

Fintech for all ages

Advisors also believed tech-savviness has shattered all age barriers. While 73% of advisors say millennials and Gen Z require a different type of engagement than do baby boomers and Gen X clients, more than three-quarters (76%) of advisors noted that the ability to securely text or direct message clients of all ages has transformed client relations.

And despite Twitter's current issues, 82% of advisors say integrating social media platforms into client-facing tools is a must.