The future is now for wealth firms

“Make no mistake about it, digital is here to stay,” said Atkinson in a presentation earlier this week for the Institute of Advanced Financial Planners’ (IAFP) 2021 virtual symposium. “You either adopt a digital strategy for your practice, or you won’t have a practice in the future.” 

In his presentation, Atkinson highlighted a CFA Institute study that revealed two thirds (66%) of investors trusted their investment firm more because of increased technology use. Further, he said a Roubini Thoughtlab survey found that 82% of investors said it was important for their investment advisor to stay at the forefront of technology. 

However, according to the Next-Gen Technology Adoption Survey 2021, innovation in wealth management was among the least-advanced in financial services. 

There are several challenges for both advisors and wealth management firms when it comes to incorporating a digital strategy, Atkinson said. For example, many are still using fragmented or legacy technology, plus time-consuming, paper-based processes and poor data entry practices.

Atkinson also discussed the increase of competition outside of traditional financial services. “Not only is the competition getting more sophisticated, but now there are new competitors,” he said, pointing to how Amazon launched a wealth management program in India this year.

For the wealth firms that have started investing more in technology, there are significant gains to be made. However, Atkinson said they must first understand the difference between a digital tool and strategy.

While a digital tool is a single application that often performs one function, including e-signature or video conferencing for example, a digital strategy takes into account the entirety of an advisor’s practice. 

“[A digital strategy] includes both the advisor and the client experience,” said Atkinson. “It’s transforming the way we interact with one another.”

According to Atkinson, clients who are leaving advisors aren’t doing so because of portfolio performance; they are leaving advisors because they aren’t getting the experiences they require. At the same time, there are advisors leaving firms because they don’t have the technology necessary for success. 

While we are still in the “early innings” of the digital transformation in wealth management, he forecast that it’s a trend that will continue through the coming decade. And the good news is “having a digital strategy can help you respond faster to the change that is happening in our society,” Atkinson said.