From a technological standpoint, 2015 was an exciting year in the financial advisory business. Robo-advisors—those online, automated portfolio managers—made their first big appearance, and many large firms announced plans to acquire or launch their own such service to stay competitive.
But 2016 may be remembered as the year in which many of these new technologies permeating the advisor marketplace converged with each other to create seamless, comprehensive and automated marketing, contact and trading platforms that instantly relay pertinent data to advisors and clients and keep all accounts in compliance.
Here's a primer of what tech advances financial advisors can expect to see this year. (For related reading, see: Tech Trends Financial Advisors Must Stay Ahead of.)
Trends on the Horizon
One of the ways that technology may assert itself more with advisors is with video conferencing. In the past, this medium was only available to corporations or the wealthy. But programs like Skype have made video conferencing accessible to everyone, and it is likely that this and programs like it will be used much more extensively.
Video conferencing eliminates the need for clients to travel in order to meet with their advisors face-to-face. It also provides almost all of the benefits that come from sit-down meetings, as advisors can still read clients’ emotions and get a much better feel for where they are with them than they can via phone. This type of virtual meeting will most likely be in demand from Millennial clients who want quick access to their advisors and also from older clients who are comfortable with using technology. This medium may also ultimately afford an advisor the chance to spend more time with clients who would otherwise be inaccessible. A study done in 2015 by Investment News showed that only a handful of advisors were using videoconferencing, but almost a third of those polled expect to be using it within the next 5 years.
Another key trend that advisors need to leverage is small data—client data, like demographics. These bits of information can now be harnessed and then analyzed to better match a client’s life circumstances, investment objectives and risk tolerance with their portfolios in the form of publishable reports that can be accessed via tablet or even smartphone. (For related reading, see: 7 Cybersecurity Tips for Advisors.)
Advisors may also start using digital storage to capture the big picture of all their accounts so that clients can see it at a glance. This service may also be able to hold all of account statements, investment policy statements and estate planning documents. As digital copies of documents become widely available, the need for physical safekeeping of such documents may diminish over time. Other data, such as Morningstar (MORN) reports, may also be added, and advisors may soon have the ability to shape and alter their clients’ financial plans and investment policy statements remotely and in real time.
Technology may also substantially accelerate the speed at which advisors can see results from their marketing efforts, as clients are able to respond instantly using a computer, tablet or smartphone. This will also enable advisors to see what is working and what isn’t and quickly judge the effectiveness of a particular web page or advertisement by the number of hits that it generates. Mobile communication via smartphones and tablets will also allow advisors to stay in constant touch with their clients via group texts and announcements regarding up-to-the-minute market action. (For related reading, see: Advisors: Avoid These Common Mistakes.)
The big story in 2015 for advisor technology was the advent of robo-advisors, which perform basic money management tasks without the need for human intervention. But the train of thought on these platforms is that they will become technological models instead of complete business models in and of themselves, a tool that will integrate into advisors' practices in one way or another. As these programs become more sophisticated, they can be applied to a greater number of strategies and used for a larger pool of clients. Soon they may be able to accomplish very complex trading strategies for high-net worth clients who will relish the ability to watch every move that is made in their accounts as they happen.
The Bottom Line
The technological trends that hit the scene in 2015 are likely to start maturing this year, especially in the robo-advisor arena, where advisors are still grappling with how they can harness this technology in the most efficient manner. Flexibility, availability and mobility will be three trends that forward-thinking advisors will embrace. And the seamless integration of many if not all of these technologies will soon combine to provide both advisors and clients with round-the-clock access to their assets and each other without the need to meet in person. (For more, see: Which Robo-Advisor Is Best for Financial Advisors?)