Advisers still have a long way to go on the digital learning curve, according to a new industry report.

"Wealth managers are not anywhere near where they need to be" when it comes to digital innovation, according to Brent Beardsley, senior partner at Boston Consulting Group, which issued its annual Global Wealth Report on Tuesday. "Nobody I see is really doing it well yet. We're still in the top of the first inning."

Advisers have no time to lose: The North American wealth management market saw a marked slowdown last year in private financial wealth, defined by Boston Consulting Group as household assets including life insurance and pensions. Wealth grew only 1.8% in 2105 to $60.4 trillion, the firm stated, compared to 6.4% growth from 2103 to 2014.

What's more, average revenue and profit margins declined for wealth managers worldwide from 2012 to 2015, according to the report, "Global Wealth 2016: Navigating the New Client Landscape."

"Wealth managers are not anywhere near where they need to be."

The report attributed the slowdown to a sagging stock market, noting the Dow and the S&P 500 closed the year with negative returns for the first time since 2008. "The slowdown was driven by portfolios," says Bruce Holley, senior partner for Boston Consulting Group. "Equities and fixed income haven't delivered."

But help may be on the way.

Firms that have better digital engagement with clients and smart analytics have the potential to "lift revenues significantly," according to the report.

Big data and predictive analytics are likely to help advisers prospect for new clients, customize services for existing clients and make their business more efficient, Beardsley said at a press briefing.

"Data is not just a tool," Holley added. "It has to be integrated into your operational model."

Accordingly, the report urged wealth management firms to take immediate digital action, estimating that the number of fintech companies focusing on asset and wealth management has more than doubled in three years to 700, attracting nearly $5 billion in funding.

Wealth managers will be able to "increase their share of wallet through highly-tailored services," if they "seamlessly inject analytics-based insight into client interactions," the report states. Among the benefits: being able to predict client product preferences, accurately gauge compliance levels and fraud prevention.

But financial advisers need "an entirely new perspective" on digital capabilities if they hope to tap its full potential, the report warns.

Planners need to understand that digital technology should not be just another silo next to their traditional business model, according to the report, "but rather a change in their DNA, requiring systematic process redesign and integration with legacy elements."

Digital prototypes "must be quickly produced, tested and improved," the report states, while digital innovations "should be managed as a portfolio, not unlike a venture capital fund."

Advisory firms and financial institutions who can afford it should consider partnering with — or even acquiring — a fintech firm, the report recommends, to obtain "relevant capabilities at the speed required in today's rapidly changing environment."

Indeed, a highlight of Envestnet's annual conference last month was the rollout to advisers of Yodlee, the Silicon Valley predictive analytics data crunching firm that the giant back office outsourcer bought for $550 million last year.

Charles Paikert

Charles Paikert

Charles Paikert is a senior editor with Financial Planning, a SourceMedia publication.