financial advisor technology

The Velocity of Technology Change is Increasing: What Can Advisors Do To Keep Up?

I’m still catching up from my trip to Chicago for the Morningstar Investment Conference last week.  This year’s  event highlighted their new focus on technology with a bevy of morning demo sessions reserved for startups and recent entrants into the wealth management and asset management spaces.

This session was jam-packed with industry experience and the panel let us have it with both barrels of their technology trends and industry learnings.

I’d like to apologize to the moderator, Kian Rafia from Morningstar, for leaving him out of this tweet.  I was in too much of a advisor technology

“The current velocity of technology change has never been seen before and is accelerating.”

Joel Bruckenstein, Consultant and Publisher of Technology Tools for Today (T3)

This is true not only for wealth management but across every industry.  Software has never been easier or less expensive to build than it is now.  We’re seeing the impact with a flood of both new products and features being added to existing products.

In the future, there will be two classes of people: those that control algorithms and those that are controlled by them.  The future leaders in wealth management technology are investing a king’s ransom into gathering and analyzing previously unstorable amounts of data to design new algorithms to become the Alexa for Advisors.

“Alexa, which are my most profitable clients?”

“Alexa, do any of my clients have more than a 50% probability of leaving in the next three to six months?”

“Alexa, which clients should I reach out to today and why?”

Three technology trends that should be top of mind for RIAs: 1) Consolidation, 2) Data Security, 3) Client Experience

Heather Fortner, COO, SignatureFD

According to a recent Financial Planning Association survey, seven in 10 advisors are aware of the risks associated with cybersecurity, but less than a third (29%) say they are fully prepared to manage and mitigate those risks. Less than half (44%) of the advisors fully understand the issues and risks associated with cybersecurity only about a quarter say they know what’s required from the SEC’s Office of Compliance Inspections and Examinations (OCIE).  (See #ItsOnWealthTech Ep 2: Cybersecurity Armageddon with Brian Edelman)

“The last best client experience you have becomes your new minimum standard.”financial advisor technology

Christina Townsend, Head of Platform Strategy at BNY Mellon’s Pershing Advisor Solutions

Speaking of velocity, no area has been improving faster than client experience (CX).  I’m enchanted by the new Netflix-like CX from Envestnet MoneyGuide for their Blocks widgets.  It’s clean, beautiful and intuitive because it’s familiar to 99% of the population.  Now we’re all surprised that no one else thought of this sooner.

How copying Amazon’s recommendation screens for financial products?  Based on your purchase of the Vanguard Specialized Healthcare Fund and a review of your portfolio and goals, we recommend the following…

How to get the most from your technology: 1) Start with a strategic roadmap created by an interdisciplinary team, 2) Don’t compromise on compliance, 3) Look for partners, not just vendors

— Heather Fortner, SignatureFD

At my consulting firm, we have developed an entire practice that is focused on helping wealth management firms improve the working interactions with their technology providers.  I can’t tell you how many times we have met with companies that have developed adversarial relationships with their key vendors, which makes it extremely difficult to resolve issues. We work with both sides to break through the past communication roadblocks and realize that both sides stand to benefit from the firm’s growth. So, cooperation and open lines of communication are important to maintain.  (See #ItsOnWealthtech Ep 7: Best Practices in Broker-Dealer Technology with Aaron Spradlin & Billy Oliverio from United Planners)

Most advisory firms don’t have the metrics needed to measure the success of their technology rollouts. advisor technology

— Joel Bruckenstein, Producer, T3 Tech Hub

Some of my larger broker-dealer clients report less than 30% advisor adoption rates for recommended applications.  There are multiple factors that are keeping these numbers down.

One of the biggest reasons is that firms need to do a better job at communicating their technology decisions to their advisors. Often the only messaging is an internal company email and some details on the website. This is not enough to convince hundreds or thousands of advisors that they should invest the time and effort to switch to the new software.

While there is a lot of spending on external marketing, there is nowhere need enough on internal marketing.  Firms should create a marketing plan with the goals of raising awareness of their technology options and the many benefits of the new applications for increasing efficiency, improving sales, etc. (See 19 Ideas from the T3 Advisor Conference That Your Boss Needs to Know)

Adoption of new technology is the biggest challenge for $1 billion+ AUM RIA firms.

— Christina Townsend, Pershing

Why does Envestnet’s Tamarac product have the largest market share of $1B+ AUM RIAs (40%)?  One reason is their all-in-one platform that provides everything an advisor needs from CRM to portfolio management through to Client Portal, Billing and Reporting.  They make it (relatively) easy to adopt their entire product suite because it is sold together and tightly integrated.

“Things break down when moving data between different systems, all in one solutions don’t have this problem,”  noted Bruckenstein in advisor technology

Although a large percentage of their clients still only use their portfolio rebalancing solution, which is what they started with 15 years ago.  But this group is dwindling as Envestnet’s army of inside sales people offer these clients an array of incentives to adopt additional Tamarac functionality as well as Yodlee for data aggregation and now MoneyGuidePro for financial planning.  (See The Day Envestnet Became the King of Financial Planning Software)

There are two types of technology companies in wealth management: Innovators and Annuities

— Joel Bruckenstein, organizer of the T3 Advisor Conference

This reminded me of The Innovator’s Dilemma where market leaders grow so large they can no longer justify spending to target new opportunities because they can’t justify the revenue potential.

The startups goal is to innovate faster than the distributors and build enough market share to usurp them or get acquired. The distributors are trying to milk their market dominance and access to client channels as long as possible. (See Envestnet is Transforming into The Alibaba of Wealth Management)

They’re competitors, but also coopetition partners since the distributors often own the platform that controls the clients.  Platforms pitch their open architecture until a new idea becomes successful, then they copy it and give it away for free to destroy their new competitor.

This advice can also be boiled down to, “don’t build on top of platforms, because platforms can become competitors”.

In 1999, ReplayTV and TiVo invented the Digital Video Recorder (DVR). It was an incredible innovation — allowing you to “pause” live television.  But TiVo had no value without “content” to pause. That content, by and large, was distributed via cable and satellite TV networks.

This worked for a while until Comcast and their other cable partners built their own DVRs, undercut TiVo’s prices and drove them out of the market they created.  (See Ep 9: Digital Advice Trends with Randy Bullard)

Create a map of your technology ecosystem to help new employees understand core systems, flow of data, and depth of integrations.

— Heather Fortner, SignatureFD

This is a complex task that my consulting firm gets paid to do all the time.  What surprises our clients is what they learn from the process of documenting all of their systems and how they fit together.  “I didn’t know that application was still running,” is a common response as we dig through their infrastructure.

“Why are we still moving data between these systems manually?” is another often-heard question.  “When was the last time we spoke with the vendor about why this integration doesn’t work as promised?”  And an old favorite, “How much are we paying for this software that no one is using anymore?”  (See 17 Takeaways from Envestnet’s Advisor Summit 2019)

Financial Advisor Technology

Technology isn’t viewed as a growth driver by RIAs but it is the #1 thing that keeps them up at night.

— Christina Townsend, Pershing

That is quite a disconnect.  Goldman Sachs’ recent purchase of RIA and technology outsourcer United Capital for $750mm (18X EBIDTA), about double what most RIA’s get purchased for should be a wake up call that technology can be a tremendous growth driver, if you make it part of your company strategy.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at