Fewer choices, more adoption? Moderate levels of choice may encourage greater advisor fintech adoption, according to Cerulli Associates.
As technology expanded prior to the COVID-19 pandemic, a sizable portion of the advisor population remained either reluctant to integrate 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,” Marina Shtyrkov, Cerulli senior analyst, said in a statement. “Time-constrained, tenured advisors were reluctant to embrace change and deficiencies in technology offerings only reinforced their hesitations.”
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 market share.
Tech advantage
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,” Shtyrkov added.
To overcome lingering resistance, Cerulli recommended 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,” she concluded. “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.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
