The survey data tells us what's been going on this past year, but it doesn't tell you what's going to happen next year. Here are a few modest technology predictions for 2014.
1. Continued cloud migration: A no-brainer. While many advisors continue to express reservations about cloud-based technologies, we believe the shift is inevitable. For firms with less than $1 billion in AUM, the business case is compelling: They can outsource hardware, software, maintenance, backups and - to a large extent - disaster recovery. (The case is less clear-cut for larger firms, which can justify a full-time in-house IT department, but there are still advantages.) Meanwhile, most new advisor software is cloud-based, offering advisors an ever-expanding selection of applications.
2. Better, deeper integrations: There was a time when a vendor could claim that integration meant a pair of data moves - an export to Excel, and then an import from Excel to the application - and many advisors would accept it. Those days are gone. Advisors now expect true, seamless two-way data transmission between applications. Progress is uneven and there is still a real challenge moving some types of data due to a lack of data standards. Still, we expect further gains in the coming year as more products shift to cloud-based technology, which simplifies connections between different products.
3. Heavy investments from custodians and IBDs: While the details differ by firm, just about every firm we talk to is spending heavily on advisor technology. LPL, the largest player in the independent B-D space, devoted an unprecedented amount of time to technology at its annual conference this year. It is rolling out new technologies that are significantly better than previous generations, and doing so much more rapidly than in the past. Virtually the same can be said for its major competitors. All of the major RIA custodians are set to enhance their technology offerings, as well. Improvements include deeper integration with third-party providers, improved trading platforms and more powerful and user-friendly mobile apps for both advisors and their end clients.
4. Security concerns persist: The financial services industry will continue to be attacked by shady characters. It is too big a target to ignore. Years ago, boutique RIA firms might fly under the radar of thieves, but today's search engines and databases make it easy for malicious individuals to identify likely targets in a geographic area. It's also worth noting that many of the security threats now facing firms are behavioral as well as technological: An employee may pick up a malicious USB drive in the parking lot, plug it into an office computer and unleash a virus; or an advisor might click on a link from an email that appears to be from a client. Another common problem involves wire fraud: These scams usually begin when a client's email account gets hijacked by a hacker, who then asks an advisor to complete a wire transfer to a third party.
5. Data power: There is a great deal of useful data on the servers of advisory firms, custodians and clearing firms, but historically, that data has not been available to advisors in a usable format. That will change in 2014. Pershing and Fidelity have both created new interfaces to make analytics available to advisors in an easy-to-digest format. Envestnet/Tamarac has made similar capabilities available to users, and a number of CRM firms - including Junxure, Redtail and various versions of Salesforce - either already or will soon contain analytics dashboards. This type of information will help advisors run their businesses more efficiently and improve the experience they provide to the end client. Which brings us to ...
6. Better client experience: Competition from online consumer platforms like Mint and Personal Capital means advisors cannot be complacent about the technology they use to interact with their clients. Consumers want clear, concise, interactive digital reporting; advisor websites must be engaging, easy to navigate and mobile compatible. Fortunately, B-Ds, custodians and vendors will be delivering more tools to help advisors provide a better client experience. Many planning firms will also improve their web presence and create branded mobile apps for their clients.