3 top technology trends for financial advisors in 2023

By Spenser Segal

The pace of technological change continues to accelerate efficiencies and increase the capabilities available to advisors by the day. Advisors’ ability to effectively leverage technology to drive better results, however, remains relatively flat. This could change if advisors effectively use three key technology trends making a major impact on the lives of financial advisors and their institutional partners. These technologies could increase revenue, profits, and employee and client satisfaction.

Trend 1: increasing technological capability

The first trend, increasing technological capability, underpins other trends. It includes maturing software-as-a-service software solutions, increasing computing power, and faster bandwidth speeds.

You may have heard of Moore’s Law, which is the doubling of processing power every 18 months. We see a similar doubling of capabilities and integrations available to advisors. If this trend continues at the pace of the last five years—which we predict it will—advisors can expect robust new capabilities and options to integrate systems, workflows, and functions that enable them to serve clients and run their businesses more effectively.

By leveraging technology, firms will significantly lower the cost of nonhuman value-added activities. For example, systematizing the administrative components of client meeting preparation using technology enables advisors to spend more time on uniquely human client engagement.

Trend 2: technology integration and AI

The desire for more integration has been a trend for so long that it is hard to call it a trend. From linking stock quotes to news stories in the 1980s to today’s efforts to connect social media to client records, the financial services industry has been focused on technology integration for many years. So if integrated technology for advisors has existed for decades, what exactly is different now? In the past, advisors were not able to maximize each technology’s functionality, due to a lack of business requirements or to integration that wasn’t deep enough. Finally, we’re on the cusp of major change. Looking at the number of vendors providing solutions solely focused on customer relationship management (CRM), portfolio management, financial planning, and document management capabilities, it quickly becomes evident that most leading vendors provide functionality in more than one of these areas.

Significant investments are being made by both large financial institutions and fintech vendors to enable advisors to plug-and-play different software solutions into their technology platforms. More firms are using embedded workflows and integrated dashboards to drive an enhanced user experience for both clients and advisors.

Artificial intelligence (AI), while in the early stages of implementation, is used to predict the next best action to take to improve a business outcome, as well as client communication and marketing. There is quite a bit of hype around AI. Before deploying AI, there must be a defined business problem and consistent, quality data on which to train the AI model. As the quality of data increases and AI models can train on more data, it will result in more accurate insights. This will make it easier for advisors to take action to improve their clients’ financial lives and run their businesses more effectively.

Advisors are more empowered than ever to add, change, or integrate new business capabilities into advisor/employee portals. There are many vendor ecosystems (such as Orion, Envestnet, and SS&C) that bring together a variety of best-in-class capabilities, including AI. In addition, custodians are creating their own integrated portals through which they offer a robust set of integrations with many leading CRM, financial planning, portfolio management/trading, and document management vendors.

Many software applications come with built-in workflow capabilities enabling advisors to systematize work. Systematization ensures the client experience and operational processes are consistent, regardless of who in the firm is doing the work. This makes it much easier to add and train staff and mitigate interruptions during absences.

In addition, the efficiencies created by systematization allow advisors, especially firm owners and partners, to spend more time providing higher human value-added client activities, and they free more time for growing your business.

Often people confuse having a systematized practice that fully leverages technology integration and AI with a “cookie-cutter” approach. I disagree. Systemization clearly defines and externalizes the steps to get from Point A to Point B, keeping everyone on the same page and freeing up capacity for differentiating activities and the unique intricacies of client-specific situations.

Trend 3: big data

“Big data” is the explosion of the amount of data. It encompasses the volume of information, the velocity or speed at which it is created and collected, and the variety or scope of the data points being covered (known as the “three Vs” of big data). The key challenge is sorting and analyzing it to glean meaningful insights.

Executives and advisors tend to want to track everything because they assume that if you have the information, you will use it to make better business decisions. As we all know, there is a large gap between people having access to data and those who translate it into specific actions that create a business advantage.

My advice: Don’t get bogged down in big data. Instead, start by taking a critical look at what information you would like to have and how that information will help you make better decisions. How can you turn information into knowledge that, when acted upon, can help you achieve a specific business objective? We are seeing firms using big data to implement leading indicators that measure how engaged their advisors and clients are and what actions are being taken to drive deeper engagement and relationships.

By first knowing what you want to achieve and envisioning how your business would be different if you had the right information, you can make a better decision on what data to track and how it will be analyzed. Many fintech vendors are making it easier to leverage your data through robust reporting and insights.

Your next steps

Whenever you face a decision about investing more time and money in technology, you need to start by asking how your business will benefit. How would using big data, a tech integration, or systematizing processes help you achieve your business goals?

Remember, it is relatively easy to implement a new technology from a purely technical perspective, but gaining adoption and changing the way a firm does business is more difficult. Human behavioral changes move more slowly than the rate at which new technology is introduced, so it is important to factor that in when deciding what new technologies to adopt.

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Spenser Segal is the CEO and founder of ActiFi. He has more than 30 years of experience in the financial services industry earning his CFP^® and AIFA credentials and serving in many roles, including advisor, entrepreneur, and executive within several financial institutions.

image credit: istock.com/mbortolino