8 wealth management takeaways from Arizent’s latest technology research

April 27, 2022 12:47 PM

As technology continues to transform the financial services industry at breakneck speed, wealth managers are working to not only keep pace, but to move to the front of the pack.

Future-proofing your business requires a concerted effort and a sound tech strategy crafted with an eye on what’s next. Experts say it’s about acknowledging the kind of technology your firm needs and leveraging those tools to craft a digital transformation plan that won’t need to be torn up or redrafted six months later.

“Having a plan is critical. Technology has this way of sneaking up on you in the sense that it's not a problem until you're like, ‘Oh my gosh. I have a problem,’” said Kyle Wiggs, founder of UX Wealth Partners, an AI-driven turnkey asset management platform for financial advisors. He added that his company recently polled independent advisors to ask if they felt having a chief investment officer or a chief technology officer was more critical in today’s climate.

“Overwhelmingly and by a landslide it was having a chief technology officer, which tells us a lot of things,” Wiggs said. “One, it tells us that (advisors) are less confident in technology than in investments. And I think it also speaks to the importance of technology’s place at the same time … the world is moving so fast. How do you keep up unless you just have endless resources?”

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But just having the desire to improve isn’t enough to achieve success, as there are a number of challenges to consider when adding new tools to your stack. Chief among them are integration issues and knowledge limitations among clients or staff.

“There are some legacy firms out there that we work with that still do things like billing by hand and aren't maximizing the efficiency of their firm, so it is vitally important now, more than ever, to be able to get yourself in a situation where you're being proactive about your tech stack,” said Brad Roth, co-founder and chief investment officer of THOR Financial Technologies, an AI-driven model portfolio provider with $1.2 billion in assets under advisement. “We've seen this emergence in the fintech space, and there are so many options. So being able to kind of create yourself a network of all these different products and truly understand how they work together and how they're going to work for you is a challenge.

“There is a lot of really great new tech that is a lot leaner, a lot faster, a lot more open source to allow more integration. But if you're not being proactive with some of this stuff and really vetting it, it can be difficult to keep up.”

The formula for developing a technology strategy that both meets your business needs today and stands up to the uncertainties of tomorrow is a tricky one to come up with, and far from one size fits all. Getting it right means advancing innovation, driving business growth and keeping your organization from being left behind.

But what do you stand to lose if you get it wrong?

New research conducted by Arizent, Financial Planning’s parent company, explores the state of digital transformation across various industries in an effort to identify the factors that are critical to developing a future-ready technology strategy. Insight from management level professionals and decision-makers provides a framework to help organizations understand if they are putting the right practices in place and using technology effectively to achieve the best outcomes.

Here are eight takeaways from the research’s findings. The entire report can be found here.

Wealth management has more organizations in the early stages of their digital transformation strategy

About 62% of the 103 wealth management respondents said they are still just getting started. It is also the only industry with more than half of all respondents reporting either nascent or developing digital transformation maturity. Insurance was the strongest sector, followed by mortgage and banking.

Technology is viewed as a key enabler to the top three digital transformation priorities

For most organizations, serving the client is at the core of their digital transformation mission. Improving customer experience was the No. 1 goal of digital transformation, followed closely by driving business growth and delivering operational efficiencies. The top three goals were listed as focus points for 69%, 62% and 55% of respondents, respectively. When asked how they believe technology can most significantly impact their industry or business, the top three goals largely remained the same. Customer experience again came out top with 70%, while operating with more environmental sustainability remained at the bottom with 20%.

Just three out of 10 organizations lead in leveraging technology to advance digital transformation

Professionals in the mortgage industry view effectively leveraging technology to advance digital transformation with the most confidence, while wealth management professionals see this as a bigger challenge than respondents in other sectors. About 43% of mortgage respondents believe themselves to be leading, compared to just 17% in wealth management.

Strengths and weaknesses vary by industry

Wealth management is strongest on customer-facing technology orientations and security/privacy practices. The biggest weaknesses are practices related to strategy, data unification and data access.

For Roth, the idea that advisors are at their best when serving clients makes sense. For many across the industry, being a planner is one part money management and one part life management.

He adds that keeping the value of the advisor front-and-center and being mindful of how some fintech can go straight to their customer should be priorities.

“Especially as the younger generation comes through, they may just want that ease,” Roth said. “It's also understanding what our clients are going to need from us going forward. I think the advisors that focus really heavily on planning and being a mentor to their client and leveraging a lot of the technology out there to help support their investment decisions … that's going to be more of what the advisor’s role is going to be going forward. Because there are going to be so many options here in the next handful of years that if someone's just looking for money management and that's all you do, you're going to be replaced pretty quickly.”

Integration, customer limitations and reliance on vendors are top roadblocks

When asked to rate the barriers to advancing technology initiatives at their organizations on a 10-point scale, respondents rate challenges integrating new solutions into existing workflows the highest at 70%.

Wiggs said integration remains a problem in wealth management, noting that industries like transportation, medicine and communication have embraced technology in ways that push the status quo and cut down on the need to jam the old and new together.

“Take some of the big players. What do they do? They're building on technology created in the ’90s while acquiring modern technology, and trying to jam a square peg into a round hole. So your integration doesn’t work like it should,” Wiggs said. “The analogy I use is that if you've ever gone to an old hotel that has gone through a renovation, when you walk into that hotel from day one, you still know that it's an old hotel. I don't care what they've done to renovate.”

Tech tools that support remote work are seeing the widest implementation

The pandemic comes into play when looking at tools already being implemented across industries. Collaboration tools like Zoom, Microsoft Teams and Slack are the most prominent, with 69% of respondents saying such applications are being used for all possible use cases. The only other types of tech to see such wide implementation are enhanced security and fraud mitigation , mobile apps and cloud-based architectures.

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Spending is on the rise

The nearly 400 management-level respondents surveyed see value in a long-term commitment to technology and say their organizations are willing to back up that commitment with cash. Approximately 77% of respondents expect technology spending to increase in 2022. More than half (59%) say they will increase spending somewhat, while nearly one in five (18%) say they will increase spending significantly. Just 1% plan to scale back.