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4 Challenges Hindering Technology Adoption by Financial Advisors

Post on: December 8, 2017 | Ryan Gunn | 0

Double exposure of business man hand working on blank screen laptop computer on wooden desk as concept.jpegResearch shows that technology adoption can significantly boost AUM growth. And yet, most firms aren’t even using basic technology solutions such as digital portfolio management or financial planning software.

 

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1. Lack of Urgency

Baby Boomers don’t often demand tech solutions and younger generations haven’t gotten to the point where they heavily influence the industry. However, this will soon change. By 2019, millennials are expected to take control of $7 trillion in liquid assets as a result of the largest generational wealth transfer in modern history. Not only are Millennials partial to technology, they also demonstrate different investing preferences, with interests in impact investments and tech companies—which are starting to remain private longer. Advisors will have to adapt or risk losing relevance to a large group of potential clients.


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2. Widening Generation Gap

Even as the client base gets younger, the workforce remains older. The average age of a financial advisor, according to a 2016 Ernst & Young Report, is 50 years old. According to another report from Alvarez & Marsal, the average CEO in finance is 57, tied for the oldest in any industry measured. Leadership of this age may be less willing to push for a risky technological change that could completely alter the way they have been doing business for decades.

 

3. Legacy Technology

Before the advent of cloud computing, IT systems were far more difficult to upgrade. As a result, many companies still use out-of-date systems that are incompatible with emerging technologies. Upgrading to a newer system would require a complete overhaul, which is time consuming and very expensive. However, this type of upgrade is necessary and can save money in the future. Cloud computing systems can be upgraded remotely, without an expensive overhaul.

 

4. Speed of Innovation

If it seems like technology is changing faster than it used to, that’s because it is. The oft-quoted “Moore’s Law” suggests that computing power doubles every 2 years, leading to exponential growth. It is completely reasonable to fear adopting a new technology, only to have it become obsolete by the time it is implemented. However, waiting for the industry to settle on a longer-term solution can be detrimental to growing your client base. Even conservative estimates predict that Moore’s law—which has mostly held true since it was published in 1965—will persist for another decade. In other words, you can’t afford to wait.

 

DRIVING COMPETITIVE ADVANTAGE: 
Alternative Investments and Technology Adoption for RIAs

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Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice. Private securities offerings may have a long holding period, be illiquid, and contain a high degree of risk. Investors must be able to afford the loss of all of their principal. Illustrative proforma results may significantly differ from actual outcomes. Past performance does not indicate future results. 

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About author

Ryan Gunn

Ryan is the Digital Marketing Manager at WealthForge. He brings a unique combination of creative and analytic skills that he has cultivated over years of developing compelling content that drives organic search traffic. He earned his bachelors from Virginia Tech and MBA from the College of William & Mary. Outside of work Ryan enjoys cooking spicy food, taking his dog Giles on hikes, and watching entirely too many movies.
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