Is Tech Friend Or Foe?

January 22, 2015 Cliff Campeau

What would the New Year be without the litany of lists from experts about what will happen in the coming 12 months? Financial services is no different.

One item that seems to have enjoyed almost universal coverage is the emerging role of technology in financial advisory practices, specifically the role of robo-advisors and the potential disintermediation of the traditional wealth manager.

Theres a dichotomy in technology: Its seen as both a solution and a threat. Advisors must make a choice about embracing it or ignoring it — even if it offers advantages in their operations and business development. That means they will have to make some decisions in 2015. Those decisions will be different for each firm, but the clock is ticking and marketplace dynamics will likely force advisors hands sooner rather than later.

We suspect that firms doing little with technology are either nurturing books of business and have made conscious decisions not to invest further in their practices, or else they simply dont believe an investment in tech will yield results.

But todays array of tools and resources allow advisors to more cost-effectively service their current clientele, expand their product offerings and provide technology-based alternatives to traditional FA services. Below is a sampling of some of the financial tech tools available to advisors in 2015:

Algorithmic solutions for performance analysis, the execution of trades and back office technology and database capabilities. These things are necessary for an expanding set of investment products.

Client account access portals with personal financial management tools that allow real-time interaction between advisors and clients.

Financial planning software with automated portfolio rebalancing capabilities that allow advisors to collaborate.

Custom branded mobile applications that run full wealth-management platforms including research, trading, rebalancing and client service.

Paperless planning and reporting.

Programs that better use customer data and analytics.

The venture capital market believes the new financial services technology has less to do with making planners obsolete and more to do with assisting them. Why? Largely because the publicity surrounding robo-advisors has outstripped their actual market impact. According to research firm Corporate Insight, robo-advisors manage just shy of $20 billion in assets, while the financial advice market as a whole was estimated by Cerulli Associates to be $36.8 trillion at the close of 2013.

Thats one of the real reasons Silicon Valley capital fund-raising efforts in this area garnered more than $1.0 billion in October of 2014: By focusing on tech-enabling traditional advisors, venture capitalists could see a much greater upside than they could by simply betting on newly launched robo-advisor firms designed to displace traditional advisors.

Tech-savvy advisors may have a leg up on their old school counterparts largely because they can demonstrate their use of advanced technology tools to communicate with and support their more connected client base. And that base isnt necessarily just millennials. The adoption rate of everything from mobile technology to wearable computing and social media is growing across a broad cross-section of consumers.

Still, advisors might want to hone their skills with the younger generation. Millennials, who have grown up with technology, now outnumber baby boomers, representing 24% of the U.S. population. They also stand to inherit approximately $40 trillion in wealth from their parents between now and 2050. This would account for the largest intergenerational transfer of wealth ever.

So perhaps it is with good reason that so many financial industry experts are referring to 2015 as the Year of FinTech. The question is, will this be the year your firm embraces the growth-enabling power of financial technology?

Cliff Campeau is a partner with Evolutionize LLC and a regular blogger on financial services marketing best practices. Evolutionize specializes in providing independent financial services firms with a suite of proven practice development solutions, including website development, inbound and outbound marketing tools and compliant social media marketing program support. Campeau can be reached at [email protected] .