Q: What new technologies are advisors asking for from providers?
KENDRA THOMPSON: If you ask advisors or clients what they want, it’s about new capabilities — the bells and the whistles. What we have actually seen is diminished activity in terms of new technology for that side of the equation. Where we see a drastic uptick is in simplification and lowering costs to help RIAs remain competitive. It’s about scalability and pricing right now.
Advisors are also becoming much more embedded in social media and the digital lives of their clients. There is much more information and intelligence that can be gathered by examining social media profiles. Advisors are trying to better understand the lives that their clients are living, and they’re increasingly lived online.
Where have you seen the most change over the past few years?
Advisors are looking to differentiate the client experience and add robust digital capabilities — especially as many advisors are adapting the RIA model. We are seeing the response from tech companies to that demand from advisors. The fintechs, and even the major platforms, are building out tools to support improved reporting and insights, the digital client experience, self-service on mobile apps. There is so much more technology available that adds to the ability to serve clients around a broader set of issues and life events.
Where does customization have the most value?
Customization, for its own sake, is not that important. What we know for sure is there is no such thing as a one size fits all financial plan. Everyone expects that they will be treated differently once a person gets to know them, and certainly that expectation holds true when dealing with a trusted financial advisor. For sure, firms can’t treat clients as a genre: Quote, unquote, boomer; quote, unquote, millennial. But where we see customization going awry is where advisors adapt every single piece of advice — every suggested model. It’s a very fine line. Where customization is applied and how it is applied becomes very important.
Where is the most heated competition in advisor tech?
I see no competition between the incumbents and the fintechs. That has been very widely disparaged. It’s not the robo advisor versus the human thing.
There is a brand new ecosystem developing and there are leaders emerging that want to be active participants. Salesforce and Broadridge — and a whole host of RIAs — are prime examples. They are building ecosystems and partnerships that drive innovation. Not everyone can create a full technology platform for their firms. Instead, firms are going to figure out how to become part of a larger platform, to gain scale and drive down price. That means partnerships with vendors and greater application programming interface integration in these underlying communities.
My advice to smaller RIAs is that you need to get involved in the ecosystems rather than building out an end-to-end platform. It’s just no longer necessary to build everything yourself. Firms are plugging into the cloud with vendors that are operating in much more flexible ways. Whether through a platform or an anchor vendor, access to these tools are already available. There’s no need for advisors to come up with the time and money to build it all out themselves.
How can advisors drive new assets and revenue?
Driving down cost is what drives profitability. New asset creation comes from customizing a value proposition for certain segments of clients and a healthy understanding of what the firm brings to the table. People value the methodology. There are so many different ways that advisors are adding value. They are coming up with ways to make money, and at the same time, tapping technology to drastically improve intelligence and the certainty of outcomes. They’re improving the digital experience and driving down costs. Not every advisor will pick the same tools as a growth engine. But, all of them need to use technology to take as much cost out of delivering full-service advice.
What are the roadblocks to innovation?
Clients have digital lives across all ages, regions and asset classes. As an industry, we’ve almost acted like that digital life doesn’t exist when they come in to meet with a financial advisor. That’s not at all the truth. [Older clients] FaceTime with their grandchildren, or purchase something on Amazon, or hail an Uber. Everyone now is expecting certain tasks to be easy and in general this industry has suffered from underinvesting on the digital experience.
There is a huge amount of energy going into the catch-up. And technology firms are figuring out how to make the expensive or cumbersome easier and are providing those building blocks. Whether it’s to help RIAs build a digital experience, or for example to help with social media listening. It’s all about helping RIAs stand out from the competition.
It’s mostly good news for the independents. There is so much upside in improving the way a firm presents itself in a client’s digital life through social media, a great mobile app or using deeper analytics. There is no more debating whether technology is needed, or whether older clients or rich clients will use technology. That debate is thoroughly closed.
