Technology is do-or-die for financial advisors. It is disrupting
virtually every area of traditional wealth management, from the back office to
client engagement and portfolio management. It’s no longer a choice -- advisors
will need to find the most effective ways to meet the needs of tomorrow’s
technology-enabled consumer. Otherwise, they face total extinction.
Despite the introduction of new software, apps and technology, adoption
among financial advisors simply isn’t where it should be.
Today, only two out of five financial advisors
are implementing technology throughout their businesses. Moreover, use of
technology in advisory firms has grown to 40% of firms as of 2017, an increase
of only 10% since 2014.
From family offices to wealth management firms, here are the major
trends that technology is causing in the industry -- and why advisors need to
adapt to them to ensure a secure future.
Costs are coming down.
The landscape is changing with respect to the types of clients that are
accepted by large financial advisory firms like JPMorgan, Goldman Sachs and
Blackrock. In 2016, JPMorgan upped its minimum investment limit from
$5 million to $10 million, making it difficult for even multimillionaires to
gain access to certain advisory services. However, a side effect is that
technology startups, incubators and entrepreneurs have seized on this gap in
the market. They’ve found ways using artificial intelligence (AI), big data and
robo-advisors to actually lower the costs and barriers to entry for what used
to be exclusive, expensive and highly personalized advisory services.
Robo-advisors, in particular, are addressing the cost issue as banks
like JPMorgan make their services even harder to access. Through technology
like robo-advisors, consumers are now given easy access to customized wealth
planning, portfolio allocation and even basic chat functionality with an
AI-enabled chat bot advisor. We’re currently witnessing an “Uber-ization” of
the financial advisory world, giving consumers the feeling that they’re getting
constant attention like they would from a high-priced human advisor through the
use of technology and apps. Firms need to recognize that a large segment of the
population could shun traditional advisories in lieu of these apps unless
advisories readjust their fees and technology strategy.
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