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Astute advisors are well aware that over the past decade or so, the business has become increasingly driven by technology. More recently, artificial intelligence (AI) has become part of that equation. Importantly, the importance of AI and technology in the advisory business is still in its early innings, indicating there’s still a long runway to adoption and practices setting themselves apart from rivals.
Plus, notions of robots displacing advisors have been debunked. Clients love advisors that show tech agility and proficiency, but at the end of the day, most clients want the human touch. That’s particularly true when it comes to the nitty gritty of the advisory business. Think estate planning, portfolio management, tax issues and the like.
Then there’s the emotional component of the advisor/client relationship. Emotion and soft skills explain a lot when it comes to clients’ decisions to hire and fire advisors. Point is humanity is pivotal in the advisory industry, but so is adoption of tech. Finding the appropriate balancing act for long-term practice growth.
Tech Essential to Growth
Schwab’s 2024 Independent Advisor Outlook Study paints the picture of tech’s importance in the advisory business.
“Advisors continue to view technology as a critical enabler of their businesses. A majority (68%) of survey respondents agreed that technology is important for creating internal efficiencies, and 87% agreed that it actually allows them to run their firms more efficiently,” notes Schwab. “Advisors also feel that technology continues to play a role in how they engage with investors, with 82% saying it is important to how they work with existing clients, and 57% saying innovative technology has become more important for attracting new clients. In addition, nearly two in five advisors (37%) said they plan to invest in technology to enhance the client experience in the year ahead.”
As the study notes, the wider embrace of tech isn’t just about added efficiencies and being futuristic, it’s also driven by the need to bolster security while improving the overall experience for both clients and employees. Data is one of the epicenters of practices’ rising digitization.
“The chief area we see this optimization playing out is in data integration. Advisors are keen to improve how they use client data, with more than half (54%) saying integrating data across platforms is an area where they could use more support, followed by creating actionable insights from data, cited by another 54%. One-third (32%) would also like more help managing their data internally,” adds Schwab. “Firms with AUM exceeding $500 million are more likely to seek help in all three areas – suggesting that as firms grow, their data needs grow more complex, as well.”
AI Making Inroads, More Work to Be Done
AI is on advisors’ radars, but broadly speaking, adoption is a different story. The Scwhab study indicates many advisors are in wait-and-see mode when it comes to AI implementation.
Good news: advisors are open to AI and they view it as an avenue for adding efficiencies. They simply want to see the technology evolve prior to devoting money and time to it.
“Slightly over half (54%) of RIAs expect the implementation of AI to have the greatest impact on industry growth over the next three years, yet just 23% have begun implementing it in some way at their own firm. Almost one-third (30%) said they don’t know their firm’s plans for AI implementation,” observes Schwab.