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What the tech-averse advisor is missing out on

Advisors who immerse their practices with technology continue to increase their competitive edge against non-tech savvy colleagues — but they are still the minority in the business, according to Fidelity.

The custodian performs regular studies of advisor practices and reports that since it last checked in 2014, the percentage of advisors thoroughly using tech has gone up to 40%.

This group that Fidelity calls "eAdvisors" are reaping real benefits: a greater number of high value clients, younger clients and higher compensation than their less tech-savvy peers.

These advisors also report 42% higher AUM than other advisors and 35% more AUM per client, Fidelity says; the latter is up from a 14% gap in 2014.

"We're happy to see overall growth in technology adoption, but what I find surprising are the 60% that aren't embracing their full potential," said Tricia Haskins, vice president, practice management and consulting, Fidelity clearing and custody solutions.

fidelity-investments-iag-2016
Pedestrians pass a Fidelity Investments office in Boston, Massachusetts Tuesday, May 8, 2007. Until recently, LBO dealmakers led by Henry Kravis, David Bonderman and Leon Black paid scant attention to the interests of shareholders as they gorged on a record $864 billion of publicly traded companies in the past three years. Even Boston- based Fidelity, the largest U.S. mutual-fund company, with $1.4 trillion of assets, and Baltimore's T. Rowe Price Group Inc., which manages $350 billion for clients, were told to take it or leave it when presented with takeover offers. Now, the balance of power is beginning to shift as investors, tired of watching LBO firms make as much as eight times their money buying and selling public companies, are demanding more. Photographer: JB Reed/ Bloomberg News

Haskins chalks up a lag in technology adoption among advisors to wariness about what to buy and where to plug it into a practice. "There's a lack of understanding on how to get started," she says.

'START AT THE END'
She advises that the less technologically inclined advisor to think about the big picture first before wading into the details of upgrading their practice.

"When we talk to advisors, we tell them to start at the end; what do you want the client experience to be? Imagine what that end state is. Once you understand that, you can better understand what you currently have, and can create a roadmap to that point."

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There are quick steps advisors can take to upgrade their practices, she says, such as replacing paper statements with electronic delivery or video conferencing.

One notable finding, Haskins adds, is that data aggregation on a priority list jumped from tenth among the group in 2014 to now third overall. "Things are always changing. Things are moving quickly."

Of course, there's the cost factor that is part of any advisor's decision to adopt technological tools.

Fidelity's RIA Benchmarking Study for 2016 found that the median technology expense for RIAs was 3% of revenue, a cost including software, hardware, and IT-related consulting or outsourcing, but not tech support staff.

While the eAdvisor study surveyed a mix of planners across industry segments, Haskins acknowledged that for many, tech is a big demand on resources. But the eAdvisor has found it delivers results, she adds.

"Overall eAdvisors approach technology as a strategic imperative, that will help grow and enhance the business," Haskins says. "There is a correlation between using technology and better business results."

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