With Great Technology Comes Great Responsibility

It’s not likely going to be news to financial services industry professionals that new data and communication technologies, unimagined even a decade ago, are reshaping the way people think about, pursue, and ultimately purchase financial advice.

What may be more surprising, according to new research from Cerulli Associates, is the extent to which technological advances are “pushing providers to keep up with investor expectations, and, ultimately, be the center of their clients’ financial lives.” 

“Pushing” is an important word here, Cerulli researchers note, because providers have not necessarily found it to be easy or comfortable to head down this road. They have, of course, benefitted from technology advances in recent decades, widely allowing firms of all stripes to improve their reach and the efficiency and responsiveness of the services provided. However, it appears that for many firms, the advancement of more and more powerful data technology into the financial services space is causing equal parts pain and profit.

“Wealth management providers, in particular, feel pressure from new sources of relatively inexpensive digital advice, changing financial planning expectations, and the commoditization of investment management services,” explains Shaun Quirk, senior analyst at Cerulli. Against this backdrop, the individual investor is “demanding more,” forcing firms to offer a deeper client experience than they may be used to, oftentimes at a price point lower than they would have historically been comfortable with.

As Cerulli Associates explains, these forces are coming together to drive a real re-think of the cost-value equation for financial advice. 

One strategy firms are adopting to try to communicate their willingness to first install and then fully utilize new technology is embracing the language of “holistic financial wellness.”  Firms are eager to point out to clients that they are utilizing new sources of data to better hone investment advice, Cerulli finds, for example by taking not just personal savings levels but also a variety of other financial factors into account when managing an automated portfolio.

“Many advice providers tout a ‘holistic’ planning model to bolster their perceived value,” Quirk adds. “However, this overused term in wealth management is vague and heavily focused on investment management as opposed to true financial planning.” To really keep clients happy, firms must do much more with technology than bring efficiency to portfolio management, Quirk concludes

Information on obtaining this and other Cerulli Associates reporting is here.