Three years doesn’t seem like a long time. But the wealth management industry has experienced a number of technological innovations in that period, from the development of new software tools for advisors to the rise of automated advice platforms.
The pace of change has forced all advisors to consider how best to digitize their practices. The process, as Financial Planning’s annual technology survey through the years shows, is an uneven one: some innovations garner quick traction, while advisors stubbornly refrain from adopting others.
Here are some key insights gleaned from a comparison of findings from our technology surveys. Click here to see a slideshow version. – Suleman Din
For Many, it's Either MoneyGuidePro or Nothing at All
Financial planning software should be a given for any advisor handling accounts, if not for ease, at least for modern compliance and record keeping demands. Though new software has come into the market since 2012, the brands proving most popular among all advisors this year were MoneyGuidePro (24.8%) eMoney (18.8%) and MoneyTree (7.1%), an order that has remained intact since 2012.
But just over 20% of all advisors surveyed said they weren't using any software at all -- and among advisors aged 65-74, that was the majority (35.7%). In 2012, that overall figure was 26%. So while there's been slightly more adoption of financial planning software on the whole, we recommend firms "should invest in this application sooner rather than later."
What, Me, Worry? Risk Software Stagnant…
Just 56% of advisors in this year's survey said they were utilizing risk assessment software. For most who were using such software, it wasn't a proactive choice, but rather what their B-D or custodian provided. What's the rest of the industry doing then? "From our perspective, every advisor has a duty and a regulatory responsibility to gauge a client's risk tolerance before making any investment recommendations," we said in this year's report. It’s worth noting that in 2012, it wasn't something we surveyed, and the current risk software leader Riskalyze formed only a year earlier.
…But This Software Has Grown Dramatically
Advisors have caught on to the power of rebalancing software. In 2012, 69% said they were not using any type of rebalancing software; now just over 53% said they are using some brand of rebalancing software.
Repeat After Us: Microsoft Office is NOT a CRM
Yes, we noted this fact in 2012, when 35% of survey respondents (the majority) said they were relying on e-mail to keep track of their clients. So we'll note it again, as this year's results found that among independent RIAs, Microsoft Office was still the primary application for CRM (at 19.3%), topped only by no application in use at all (22.9%). Given that there are new tools out there to glean insights from aggregated client data, it's puzzling.
Schwab Now Dominant in Portfolio Software
Demonstrating the power of an incumbent's network, Schwab's PortfolioCenter is this year's most popular portfolio management software (28.1%) among surveyed advisors. Back in 2012, it had only 11% traction with respondents compared to Morningstar Office's 19%. Morningstar's offering still accounted for 15.1% of respondents' usage this year, but closing the gap are Orion (8.3%) and Envestnet (4.7%), which has been adding to its stack of capabilities throughout this year.
Robos, robos, robos
Something we didn't ask advisors about in 2012 but has everyone talking right now: automated advice. The surprise standout is Wealth Access, founded by former Merrill Lynch executive David Benskin. However, Schwab's Institutional Intelligent Portfolios managed to dominate among independent RIAs with a 22.9% share.
Social Media: We're Still Figuring it Out
Three years ago, we asked advisors for the first time about social media use. In 2012, the majority of respondents said they were good with LinkedIn (62.0%) or Facebook (26.0%). At that time, 30% said they were using social media daily for business purposes and 36% reported using it once a month or less. Our latest survey demonstrates either the novelty has worn off, or there's real concern about compliance in social media messaging: Overall, the most popular answer was never (27.9%) followed by once per week (23.0%). We'll note the generational gap is clearest here among tech trends. For advisors aged 24 and under, 100% told us they used social media for business and over half reported using it multiple times in a day, whereas among advisors ages 55 to 64, 47.6% said they never used social media for work at all.
We're Phoning It In Now
Back in 2012, we were asking advisors about how they were using smartphones and tablets for business. Back then, 20% of advisors said they were not using a smartphone for business, and half said they owned a tablet. Advisors then considered tablets to have a lower ROI than cell phones. Now, advisors say texting clients is one of their top activities with a smartphone (53.7%) along with research (39.7%) and checking portfolio balances (29.0%).
The Question That Still Matters the Most (But Shouldn't)
Setting aside all enthusiasm for new technology is the inevitable qualifier: how much will it cost? This year's survey found that the majority of advisors still measure their technolowhat gy purchases by that factor alone. That's not the best way to find out if the thousands spent on a new system is worth what you paid. But a good sign is that 51.4% of those surveyed used time savings as a factor in their purchasing decisions.
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