Why Financial Advisors Must Embrace Technology Now
In the third of our series of Critical Issues Facing Financial Advisors Right Now, we turn to the challenge facing advisors in adopting the technologies that will drive business growth for the foreseeable future. Financial advisors have seen the future, and it is now. Those who learn to embrace it will have a distinct advantage over those who continue to run from it.
We can complain all we want about the rise of robo-advisors but, the fact is, they only control a minute portion of the trillions of dollars held by wealth managers, advisors, and asset managers. Still, robo-advisors are on the cutting edge of technological innovations, and venture capital is flooding the financial technology sector with billions of dollars.
Our industry has reached a critical juncture where advisors must now choose to embrace technological change to get ahead of their competition and provide the level of service their clients have come to expect or risk obsolescence.
Clients are leading the change.
All indications are that clients want more tech-driven experiences in everything they do, including managing their finances. Consider how quickly the public is adapting to robo-advisors. Within just ten years of their founding, Betterment and Wealthfront, the two leading firms, grew assets under management to more than $29 billion and $25 billion, respectively. While robo-advisors have tended to attract younger investors, they have recently been developing a more significant following among older adults.
While this trend has yet to impact advisors in their relationships with high-net-worth clients fully, they should be preparing now for the impact of the more than $40 trillion that will be transferring to younger clients over the next two decades. Advisors who hope to capture their portion of that great wealth transfer need to recognize the technological expectations of millennials and Gen Z and prepare accordingly.
In addition to adopting digital technologies for marketing to and communicating with the next generations, some advisors are now offering digital advice platforms that provide automated advice similar to robo-advisors while offering themselves as facilitators in the process. Robo-advisors will never replace the human interaction that is essential for more complex financial planning. But advisors who can create an omnichannel solution, giving clients the option of do-it-yourself, advisor-assisted, or advisor-driven planning, will stand out.
Use technology to build scale.
The challenge for many advisors is their success depends on their ability to optimize their time and skills in the critical areas of client management and business development, without which they have no chance for growth. Instead, they often find themselves bogged down in back-office work.
Whether you’re a one-person firm, a small boutique, or a growing advisory firm trying to get to the next level, financial technology can help your business scale up to increase efficiencies and improve back-office and client-facing processes. Processes such as onboarding, compliance, client communications, and email marketing can be streamlined or automated, leaving advisors more time to build client relationships.
Advisors who work with some of the larger asset management platforms may have access to some of this technology, but it’s also available standalone to any advisor who wants to level the playing field.
And finally, make the quantum leap through data analytics.
Perhaps the technology with the greatest potential to catapult advisors to the next level is data analytics. We’ve often posted about the how’s and why’s of implementing a digital marketing strategy. However, it’s the data that the strategy produces that’s the real gold mine.
Through data analytics tools, advisors have the power to harness all available information, analyze it, and refine it into intelligence they can use. It can be used for more targeted and efficient prospecting, customizing content and communications, identifying potential niches, scoring prospect engagement, and creating client personas.
Yes, it can be complicated to set up, and it’s not inexpensive. But the ROI you can expect to generate on each dollar invested in these technologies will far exceed any other investment you make in your business by an exponential amount. If you have serious ambitions about being successful in this business, it’s time to immerse yourself into the promise of what technology can bring. If you’re already on the technology path, it’s time to accelerate your journey so that you can catch up with the rest of the world.
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