Too Much Choice May Hinder Advisor Technology Adoption

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Too Much Choice May Hinder Advisor Technology Adoption

Fintech providers must determine how to balance breadth and depth of offerings with simplicity

October 2020, BOSTON—Moderate levels of choice may encourage greater advisor fintech adoption, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.

As technological capabilities expanded prior to the COVID-19 pandemic, a sizable portion of the advisor population remained either reluctant to integrate these new features into their day-to-day operations or lukewarm toward full adoption. “Most advisors did not use technology extensively, concentrating on several core tools with moderate outcomes,” states Marina Shtyrkov, senior analyst. “Time-constrained, tenured advisors were reluctant to embrace change and deficiencies in technology offerings only reinforced their hesitations,” she adds. The pandemic accelerated technology adoption across the industry, forcing most practices to adapt their workflows and processes to a digital format. Given this momentum, providers have a unique opportunity to prove their value and enhance usability.

Cerulli estimates that, as of 2019, 40% of advisor-managed assets were in the hands of “medium” technology adopters—practices that incorporate technology tools for financial planning and investment research, in addition to a client portal and customer relationship management (CRM), but use minimal technology beyond that. In contrast, 36% of advisor practices heavily embraced technology and controlled 46% of asset marketshare.

Average practice productivity increases as technology use expands, suggesting that investment in technology pays off. On average, heavy users manage $239 million per practice, whereas medium users manage $183 million and light technology users manage $106 million. Heavy technology users tend to be larger and better-resourced practices whose scale affords them the ability to better take advantage of technology solutions. Technology may also make them more efficient, therefore allowing them to achieve scale. “It’s a virtuous circle—technology begets growth and growth begets increased adoption,” remarks Shtyrkov.

To overcome lingering resistance, Cerulli recommends that third-party technology providers present moderate levels of choice to advisors, leverage next generation advisors as early adopters, and involve the entire team, among other strategies. “Technology has the power to transform a practice by elevating the client experience and increasing overall productivity. Providers have an opportunity to capitalize on the current digital environment and deepen adoption by addressing roadblocks and offering support so that advisors can fully embrace the benefits of the functionality,” she concludes.

 

NOTES TO EDITORS:

These findings and more are from The Cerulli Edge—U.S. Asset and Wealth Management Edition, October 2020 Issue

 

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