A prominent private equity fintech player is betting big that the next big development in digital financial advice will happen in the back office.
This will be a shift from the past decade, where the most impactful changes to advisor technology have been front-office oriented, said Robert Anderson, partner at FTV Capital, a growth private equity firm whose portfolio includes companies like Riskalyze and Docupace.
“Digitization has gone from a consideration to a must have,” Anderson said. “Now it’s become table stakes for advisors to have advanced solutions and automation across CRM, planning and reporting—all of their competitors are doing these things. But today, you also need to be able to support and grow advisory enterprises, so the focus is growing on moving automation into back-office operations.”
FTV Capital’s other portfolio financial companies of note include ETF Securities, True Potential, Swan Global Investments and Derivative Path. Former holdings include Financial Engines, IndexIQ, PowerShares, VelocityShares and Aspire Financial Services.
Anderson describes advisors’ back office as still dominated by a significant amount of manual, paper-based workflows that risk becoming more onerous amid growing demand from clients and increasing regulatory pressures.
“In many cases, only 30% to 40% of advisors are digitizing their back office and are embracing software to automate their workflows. In other use cases, like CRM, there’s an 80% to 90% adoption of digitization and automation,” he said.
Anderson believes that digitizing the back office may become a necessity for the financial industry. Currently, the total advisor workforce is in the midst of a prolonged decline in headcount, while the number of consumers seeking and expecting professional financial advice continues to increase.
In such an environment, advisors will need to find and implement efficiency-building technology to meet the growing demand for advice and also to provide outstanding client experiences, said Anderson.
“There’s an inherent pressure, a great tailwind for software that helps advisors run their practice more like an enterprise so that they can better serve clients, be more productive and handle more complex situations,” he said.
The need for better front-office technology gave birth to a flurry of innovative fintech start-ups aimed specifically at improving the client experience—like better CRM to keep track of clients and avoid potential problems when data is re-entered, client portals to enable a more hands-on approach and co-planning, and more robust proposal generation and portfolio reporting tools to deliver the right ideas to clients in the best possible way and demonstrate results.