Ageing technology, stubborn culture and a lack of data literacy are all preventing advice firms from growing their businesses in the modern day.
This is according to AdviceBridge, whose chief commercial officer Bruce Ely-Johnston said he sees “many firms” using technology believing they have a good system, only for his firm to show them how antiquated it really is.
The company, which helps financial planners automate their services, found that firms prioritise updating or changing their existing systems, client onboarding, improving the digital services on top of their tech stack, client suitability and streamlining compliance.
Not only will firms be challenged by their peers, but they could also wake up to firms like Amazon or Apple assaulting their business.Bruce Ely-Johnston, AdviceBridgeBut Ely-Johnston said many of these priorities fall short of their potential due to three overriding “significant” barriers.
These are legacy technology, the need for culture change, and a lack of skill sets - particularly around data - in advice firms.
“One of the big issues for firms is the small number of large providers dominating the space, which is compounded by advisers’ lack of engagement with smaller providers which can provide much needed improvements,” he said.
Larger providers such as Dynamic Planner have now taken their offerings abroad, while established platforms among advisers like 7IM have been investing in retirement services which bleed into financial planning automation.
“As firms have grown over the first 20 years of this century, they have acquired different systems for various different functions,” said Ely-Johnston.
“These have predominantly been based on ‘old’ technology and hence most of the firms’ tech stacks are clunky, leading to a multitude of issues.”
One issue which the commercial boss said is well documented is having various systems that are not well integrated, making the process of using each system very long-winded.
“Although most will have adopted tech that, at the time, improved how quickly a task or process was completed - over a purely manual process, for example - these solutions aren’t nearly as effective as more modern pieces of technology,” he said.
With the process of onboarding a new client typically taking between 25 and 35 hours, Ely-Johnston reckons the underlying systems and processes used by the majority of firms are making it more time-consuming for them to complete their work, making them less profitable and curtailing their business growth.
A stubborn culture
Last month, Jamie Jenkins, director of policy at Royal London, told FTAdviser the incoming consumer duty is more than a box ticking exercise and should be viewed by firms as a complete culture shift.
He said it should move the industry from a mandate to treat customers fairly, to one that focuses on treating customers well, and demonstrating that they are doing so.
The Covid-19 pandemic went some way to driving significant change in the adviser profession.
“Simple things like being able to offer remote financial advice via video conferencing, for example, became a necessity extremely quickly,” said Ely-Johnston.
“But firms really had little choice. Some firms have continued to stay abreast of the cultural changes required to keep up with shifting client demands, but not all.”
The AdviceBridge executive said firms which resist the tides that are steering many towards a more digital approach could find themselves lagging behind in terms of profitability.
“Not only will firms be challenged by their peers, but they could also wake up to firms like Amazon or Apple assaulting their business,” Ely-Johnston added.
“It’s worth contemplating what has happened before: Blockbuster versus Netflix for example, and the cautionary tales of firms like Kodak and Nokia.”
Data needs to be a core skill set
A big focus for the Financial Conduct Authority of late has been data.
Advice firms have increasingly been asked to fill out surveys since the pandemic so the regulator can build up data on businesses.
Data also makes up a large part of the incoming consumer duty, with firms now tasked with the need to categorise clients into different demographics.
But some fear the advice industry is not prepared for the rising importance of data.
Ely-Johnston pointed to a Censuswide survey in 2022, which suggested just a quarter (24 per cent) of 7,300 business decision makers considered themselves to be data literate.
It also found 78 per cent would be willing to learn how to become more data literate.
“Firms often struggle or hold themselves back, purely through lack of understanding,” said Ely-Johnston.
“By investing in data literacy and educating themselves, they can bring more diverse and creative thinking to their conversations about technology.
“This can aid problem solving and also help identify inefficiencies and opportunities…Making it a conversation piece and empowering people to speak up, encourages them to discuss it more openly, which leads to making improvements and generating new business ideas.”
ruby.hinchliffe@ft.com
