As few as 10% of advisory firms have all the technology they need to serve clients and operate as a business, according to a recent survey.
When a group of over 200 advisors were asked if their firms have all the technology they need, just one in 10 answered in the affirmative, according to research released this week by Orion Advisor Solutions.
But 60% said they have access to “most” of the technology they need, while 29% said they only had “some” of the tech they need.
A slight majority of firms in the survey, 53%, do not plan to increase their technology investment in 2023, with respondents indicating expectations of flat or lower tech investment this year. The 47% of firms planning to increase their tech spend will do so by an average of 14%, and the industry’s tech investment is expected to grow by 7% on average across the board
Some of the top wealth technology trends stealing headlines today include artificial intelligence, with the rise of ChatGPT, and big-data analytics, with the growth of several data-driven advisor tools in recent years, but according to Orion, that’s not where firms are putting their money.
Respondents were most likely to say that their firms are investing in personalized and customized client experience (67%), to meet today’s higher client expectations around technology (46%) or to deliver personalized and customized asset management (44%). Investments in AI (18%), big data and analytics (10%), robo-advice (9%) and alternative and digital investments (7%) took a back seat.
Still, when asked, advisors saw AI as the most disruptive technology trend facing the wealth management industry, with 23% of respondents naming AI versus 18% naming personalization and customization in the client experience, 18% naming higher client expectations, and 16% naming robo-advice and digital investment platforms.
Big data, alternative and digital investments, and personalized and customized asset management barely registered as potential disruptors, each being named by fewer than 10% of respondents.
Respondents said that technology could save their businesses most time and money when implemented around operational improvements, rather than client engagement and new business development By contrast, the same pool of respondents said that client-facing and customer-service technologies were likely to be the most helpful to the industry as a whole.
When asked what areas their firms will actually invest in with their tech spend, the respondents’ top answer was client-facing technology, named by 36% of the survey, followed by financial planning tech (30%), client-engagement (29%), digital communication (24%) and customer-service tech (21%). Portfolio rebalancing (19%), compliance (18%), tax efficiency (15%) and automated marketing (15%) emerged as significant but secondary areas for investment.
Drilling down into the client experience, what the respondents most wanted from their technology stack was the ability to communicate with clients, named by 23% of the survey, followed by more informed conversations (22%) and more personalized investing experiences (19%).
On average, an advisory firm is using 70% of its technology stack, according to Orion’s respondents.
Advisors overwhelmingly agree that increasing their technology utilization will help their firms: 89% of respondents said that greater use of technology would improve operational efficiency, 76% said it would help them deliver greater value to clients, and 50% said it would help them increase growth through new client acquisition.
The respondents’ biggest barriers to technology stack utilization are lack of time (cited by 60%), training (46%) and people (39%), however, they also cited their staff’s lack of skills (28%), lack of internal tech leadership (20%) and lack of money (15%) as obstacles. A small but significant portion of respondents, 13%, said that they didn’t see the value of implementing additional functionality within their tech stack relative to the cost it would incur.
Yet the biggest technology utilization pain points for advisors are portfolio management—named by 26% of respondents, integration (22%) and workflow (17%). Fewer respondents named as pain points client care and services (16%) data aggregation and management (14%) improved technology and technical support (14%) and improved knowledge and training (7%)
The vast majority of advisor firms, 90%, expect to grow this year by an average of 17%, according to Orion’s research. At the same time, three-fifths of the firms surveyed, 60%, expect their operational expenses to increase.
Orion employed Logica Research to survey a sample of 202 advisors recruited from the Orion and Redtail internal databases in January 2023. The firm says its sample represents a “broad cross-section” of the industry.