Early adoption of technology is essential
In a previous blog, I discussed why advisory firms’ technology offerings must evolve, especially because of the disruption of robo-technology and the speed at which technology is changing and being developed.
In 1962 Everett Rogers, a professor of communication studies, published his book “Diffusion Innovations” in which he described how participants in a social system communicate about innovations.
Adoption of technology progresses according to distinct groups.
Innovators are the first group to adopt, representing 2.5% of the market share. Next come the early adopters at 13.5%, then the early majority at 34%.
Finally, the late majority is 34% and then the laggards at 16%.
When it comes to upgrading advisory firms’ technology, 84% fall into the last three groups. The last two alone represent 50%.
But your firm can’t rise to the top by being in one of the majority groups or laggards. It must be an innovator or early adopter.
Your firm must plan ahead and analyze which new offerings will offer the highest return on investment. Plan the evolution to the point of feeling uncomfortable because being comfortable means playing it safe.
Stay on top of new developments, commit to being a frontrunner, and learn how to thrive among innovators and early adopters.
ACT WITH URGENCY
Think about what happened to your firm’s daily operations after the financial crisis in 2008 and how much turmoil could have been eliminated if specific tech solutions and workflow automations had been in place.
Because another bear market is inevitable, your firm should create a sense of urgency for getting the next tech upgrade in place.
REINVENT THE FIRM
Our firm is making changes, and best-in-class technology is a huge part of our plan.
For instance, because robo-tech’s transparency and low cost of investment management are causing assets under management fees to spiral toward zero, next year, we will change from charging a combination of relatively low AUM fees plus an annual retainer to 100% annual retainers with an inflation factor built in over time.
In addition, we will use robo-technology to create multiple service tiers. We will use it to help automate more of the investment process and are also adding a Tier 2 service level for the children and grandchildren (and NextGen referrals) of clients.
This tier will also serve clients who don’t meet Tier 1 service criteria. Service will also be offered on a flat-fee basis.
Over the next couple of months, we will decide whether to adopt an existing digital investment platform or build our own architecture by integrating some of the industry’s best-in-class options.
Finally,our workflow system shielded us during the last bear market. Our focus now is to use new capabilities within workflow engines to automate even more workflow steps.
HOW ABOUT YOU?
Multiple industry studies have come to the same conclusion: The highest-performing firms are tech-centric. It is imperative that your firm steps outside its comfort zone to become an innovator or early adopter.
Deborah Fox is chief executive and founder of Fox Financial Planning Network.
This story is part of a 30-day series on leading tech trends for advisors.