21 January 2020

Financial Advisors Will Embrace Tech Or Face Extinction

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Technology is do-or-die for financial advisors. It is disrupting virtually every area of traditional wealth management, from the back office to client engagement and portfolio management. It’s no longer a choice -- advisors will need to find the most effective ways to meet the needs of tomorrow’s technology-enabled consumer. Otherwise, they face total extinction.

Despite the introduction of new software, apps and technology, adoption among financial advisors simply isn’t where it should be. Today, only two out of five financial advisors are implementing technology throughout their businesses. Moreover, use of technology in advisory firms has grown to 40% of firms as of 2017, an increase of only 10% since 2014.

From family offices to wealth management firms, here are the major trends that technology is causing in the industry -- and why advisors need to adapt to them to ensure a secure future.

Costs are coming down. 

The landscape is changing with respect to the types of clients that are accepted by large financial advisory firms like JPMorgan, Goldman Sachs and Blackrock. In 2016, JPMorgan upped its minimum investment limit from $5 million to $10 million, making it difficult for even multimillionaires to gain access to certain advisory services. However, a side effect is that technology startups, incubators and entrepreneurs have seized on this gap in the market. They’ve found ways using artificial intelligence (AI), big data and robo-advisors to actually lower the costs and barriers to entry for what used to be exclusive, expensive and highly personalized advisory services.

Robo-advisors, in particular, are addressing the cost issue as banks like JPMorgan make their services even harder to access. Through technology like robo-advisors, consumers are now given easy access to customized wealth planning, portfolio allocation and even basic chat functionality with an AI-enabled chat bot advisor. We’re currently witnessing an “Uber-ization” of the financial advisory world, giving consumers the feeling that they’re getting constant attention like they would from a high-priced human advisor through the use of technology and apps. Firms need to recognize that a large segment of the population could shun traditional advisories in lieu of these apps unless advisories readjust their fees and technology strategy.

Click here for the original article from Forbes.

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