Digital technology is a critical tool for registered investment advisors to meet current client demands, recruit top talent and capture business from younger clients, a new study suggests.
And it seems clear that technology will play a greater role in financial advisory practices in the years ahead, according to the study, “Fintech for RIAs: Elevating Client Experience,” by Franklin Templeton and AdvisorEngine.
According to the study, RIAs are most interested in client-facing technology. For example, client onboarding usually takes about seven days but, with updated technology, can be cut down to two, playing a major role in advisor-client relations, the study explains. In fact, more than 80% of survey respondents see a “critical or moderate need” for automation support for four processes:
- technology that supports onboarding of new clients (71%);
- data analysis across the client lifecycle (69%);
- day-to-day client support and communication (66%); and
- marketing and business development outreach (63%).
Moreover, the survey found that two-thirds or more of survey respondents say they would see the greatest value in a unified view of client holdings across accounts and asset classes (69%) and the ability to provide interactive reports to clients (66%).
“As new fintech tools abound, RIAs are examining which solutions will be most useful in creating a high-quality digital experience for their clients,” says Jonathan Kingery, Head of Private Wealth at Franklin Templeton. “We’re in the midst of the fourth industrial revolution, and the accelerated pace of technological advances is rapidly refreshing how financial solutions are delivered.”
Conducted in partnership with Institutional Investor’s Custom Research Lab, the study is comprised of a survey and interviews among RIAs in the U.S. The survey, fielded in September 2021, included responses from 152 independent RIAs to assess the utilization and outlook for investment in financial technology focused on acquiring, serving and supporting investment advisory clients.
Younger Clients and Incoming Employees
Not surprisingly, younger clients and incoming employees expect a high-quality digital experience. Sixty percent of respondents strongly agree that Gen X and Millennial clients are likely to expect investment advisors to provide digital technology for communicating and making investment decisions with their RIAs.
“Having the ability to share information with clients in real time, securely, and use it to provide the level of service they expect is essential,” according to a west coast advisor interviewed for the study. In her view, Millennial clients are more fluent in technology, rely less on paper documents and “have no patience with a firm without technology.”
And this trend is seen not only on the client side but on the hiring side as well, which is especially important amid a tight labor market. According to the findings, 41% of survey respondents strongly agree that “an RIA firm’s digital infrastructure is increasingly important in hiring and retaining first-rate professional talent.”
Against that backdrop is the finding that sustaining and expanding relationships across generations is top of mind among RIAs, as more than 70% of respondents see retaining the next generation of clients from their firm’s current clientele as their primary or secondary business development target.
Opportunity or Threat?
As for whether these views on technology mean that investment advice and wealth management will become primarily a technological business, the findings suggest that’s not the case—RIAs are more than three times as likely to view the next generation of investment management technology as complementary to their current way of serving clients rather than as a disruptive threat to their professional practice.
The survey also found, however, that data security is a concern. Here, 66% of respondents cite data security as a formidable barrier to adoption of new technology, regardless of the actual risk of a material data breach. In addition, nearly half of respondents cite the cost and disruption of complex IT projects as a barrier, and 41% are especially concerned about regulatory and compliance matters in the wake of new technology systems.
“RIAs’ interest in technology stems more from their desire to service clients more completely and responsively than from eagerness to avoid or offload administrative work,” says George Tamer, head of sales at AdvisorEngine. “It’s no secret that tech will continue to play a pivotal role in wealth management. But the question now is, ‘What are the most useful ways to plug them into a financial advisor’s daily work?’”
