Most advisors say that they are working to incorporate advances in financial technology to try and automate their practices.
But experts caution that not all fintech advances are helpful for advisory practices — plus, some firms may not be as technologically advanced as they might think. This can be a problem, particularly in terms of growth among younger clients, who consider technological sophistication a key factor in deciding whether to sign on with an advisor.
“Our studies show that 95% of clients at some point look up a new advisor online,” says Stephen Boswell, president of the Oechsli Institute, an advisor coaching firm based in Greensboro, North Carolina. “They may hear about your firm from a friend or meet an advisor at some social event, but at some point in the selection process, they’ll look you up online and go to your website.”
For millennial prospects, a clunky website or one that is not interactive, can be a deal-breaker, Boswell says.
The same applies to having advanced planning tools.
“Having advanced technology for dealing with clients — planning tools and CRM — used to be a bonus. But especially for the younger generation of clients, it is now a baseline in deciding on whether to go with a planning firm,” Boswell says.
“We find that this industry has been and continues to be pretty slow at adopting technology,” he says.
One problem may be where firms’ automation efforts are focused.
Michael Kitces, director of wealth management at the Pinnacle Advisory Group in Columbia, Maryland, says, for example, that much of the investment and effort goes into the area of portfolio management, which he argues isn’t where the focus of a planning practice should be.
Rather, when it comes to introducing technology, advisors should focus on planning tools and customer relationship management software, he says.
Although Kitces stresses that personal relationships with clients remain the key to a successful financial advisory practice, Rick Rummage, principal of The Rummage Group, an advisory coaching firm based in Herndon, Virginia, says, “A financial planning practice can close 20% more business by staying current with all the new technology designed for the industry.”
He adds, “Fortunately, new financial planning software and CRMs are easier and easier to use.”
This story is part of a 30-30 series on how technology is changing your practice.