Seven benefits of technology for your advisory practice

Posted by James Capps on March 20, 2017

The right technology can make all the difference when it comes to a financial advisor’s success, especially in today’s competitive business environment. Recent innovations in financial technology have provided state-of-the-art applications to handle everything from client relationship management to investment modeling to billing and document production.

These solutions have the potential to make your practice more efficient and profitable. The challenge is making sure these different technology applications work together as a seamless whole, providing your business the support and accuracy you require.

Here are several reasons why technology is crucial for your advisory practice:

Technology can make you more efficient. As you know, the process of advising clients, investing their money, and providing necessary documentation and compliance paperwork can be a time-consuming process. In many firms, these processes may account for at least half of weekly staff hours. New technology solutions can handle back-office operations such as billing and record keeping, helping to reduce this commitment of staff time. These solutions, if fully integrated, can also reduce the risks of data-entry mistakes and miscalculations, providing higher levels of productivity, efficiency and accuracy.

Technology frees up more time to focus on clients. Because advisory firms that invest in technology spend less staff time on back-office processes, they have more time to connect with clients and prospects. This kind of personal touch is more important than ever. A study by Salesforce found that 86% of clients want their financial advisors to be personally involved in their investment management. Yet less than half of the clients in the study felt their advisor took a proactive approach to communication and service. More than half of the respondents felt their advisor wouldn’t even recognize them if they passed on the street. Advisors who don’t distinguish themselves through a high-touch approach risk losing clients to robo-advisors and other competition.

Technology improves client communication. While technology is no substitute for face-to-face client meetings and personal phone calls, the right systems can help support your client outreach and communication efforts. Customer relationship management (CRM) systems can track client contacts and data and can coordinate with email marketing solutions to improve overall client communications. This kind of systematic, proactive approach is vital to keeping clients happy. In the Salesforce study, one of the most common reasons clients cited for leaving their financial advisor was a lack of communication.         

Technology allows you to do more with less. By making your practice more efficient and client-focused, technology can help you grow your business without adding to your team. According to the 2015 Registered Investment Adviser (RIA) Industry Overview Report, RIAs that used at least two technology systems were able to achieve faster growth in assets under management (AUM) without adding staff members. Furthermore, this growth accelerated as the advisors added additional technology systems.

Technology boosts AUM and profitability. Because technology helps advisors better serve a larger client base with a smaller staff, firms that leverage technology also boosted their long-term profitability. A study of independent RIAs conducted by Aite Partners found that more technologically-integrated firms earned an additional $100,000 in annual revenues, as compared to less technologically-savvy competitors with similar staff sizes. Additionally, the average client in a more technology-integrated RIA firm had nearly twice the investable assets compared to clients working with less technologically-advanced firms.                                                                                                        

Investors are demanding more technologically-connected advisory practices. Clients themselves are also driving technology adoption in the financial services industry. In the 2016 Salesforce survey, 67% of investors reported choosing their financial advisor in part to gain access to modern investment tools such online account access, online investment capabilities, and interactive modeling. In the same survey, 76% of investors wanted the ability to review their accounts on a holistic, real time basis.

New technology solutions have leveled the playing field. While technology provides many advantages for financial advisors, for many years these benefits were reserved for professionals working for large wirehouses and broker-dealers. These larger firms had the capital to invest in what were then state-of-the-art modeling and trading applications that smaller independent practices could not hope to duplicate. Consequently, independent advisors found it harder to compete for client assets. Advisors working for these larger firms had their own challenges. Many found their firm’s technology platforms to be ill-suited to their individual business or client needs. These proprietary technology systems also acted as handcuffs, since these professionals had little hope of replicating such technology capabilities or migrating client data from internal systems if they chose to go independent.

Today’s marketplace now offers a range of state-of-the-art solutions for everything from targeted CRM platforms to investment modeling and performance reporting. These systems offer enhanced functionality and are tailored specifically to the financial advisory market. As competition and innovation have helped drive down the prices of these new applications, they have become realistic options for independent investment advisors with smaller IT budgets. In some cases, it’s now advisors working for wirehouses and broker-dealers who may feel themselves at a disadvantage, as many are forced to work with legacy systems that may not offer the latest functionality. Indeed, studies have found that 90% of the technology budgets at many firms is spent trying to update, service, and maintain legacy systems, with little money left to invest in new innovations. These systems may also lack the latest security enhancements, leaving them at risk for data breaches.

As technology offerings in the FinTech market continue to multiply, advisors have more choices than ever when it comes to solutions that might advance their businesses. Selecting the right technology can help take your business to higher and higher levels of success.




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