Navigating the Technological Landscape for Smaller Advisory Practices
As a data-driven broker who specialises in the wealth industry, we have been able to observe the changing landscape of financial advice in recent years in great detail. One recurring theme that stands out is the profound impact of technology on the industry. This has only been amplified with the rush to AI and the solutions being produced at a rate that is truly unprecedented.
For many small advisory practices, particularly those with ten or fewer advisers and independent advisers, the technological challenges can be both daunting and transformative.
Those close to the industry will be familiar with the notable shift from advisers belonging to larger dealer groups, moving to an independent or self-licensed structures.
The argument for the shift is strong, however there are also various challenges for smaller independent advisers who are seeking a balance between autonomy and support, particularly when it comes to developing your tech stack.
We spoke to Anthony Lyon, Managing Director of Insight Investment Partners, a boutique licensee with 13 smaller advice practices.
“For advice practices wanting a more intimate dealer group where they can be heard, there can be trade offs. Many of these licensees have had challenges keeping up with technology, we have made significant investments building technology that really sets up a practice for success”.
Smaller licensees require different tech solutions
Building on this theme of support and making a choice as a smaller practice, the challenges for practices teaming up with small, independent licensees can be many:
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- Lack of Support: While advisers enjoyed lower licensee fees, they found that requests for support and compliance assistance were often unmet due to the limited resources of small licensees.
- Insufficient Systems and Processes: Without robust infrastructure, these licensees struggled to provide the necessary tools and support for advisers to thrive.
As an experienced operator of a small advice licensee, Anthony believes that the industry requires a balanced solution which offers both autonomy and support for practices. The challenge lies in providing advisers with the tools they need to act as true professionals without unnecessary constraints.
Building your tech partner portfolio
Given smaller licensees’ unique requirements for a tech partner, there are unique considerations when building your tech stack.
Asset selection for your tech portfolio
When it comes to selecting the right partners for a small licensee, compliance and pre-vetting are major sticking points. Compliance, monitoring and supervision are essential functions of any licensee, but they must be delivered efficiently and cost-effectively. Advisers want the ability to make informed decisions without being micromanaged or hindered by one-size-fits-all compliance measures.
An example of a tool that helps to bridge the gap between what is available and what is required, is Insight Investment Partners’ Statement of Advice review Assistant (SARA).
SARA is an AI powered compliance assistant designed to revolutionize the pre-vetting process by providing cost and compliance efficiency, comprehensive reporting and professional empowerment.
“Tools like this have a tangible impact on reducing risk, especially at an operational level. It’s dry, but the reality is that complaints and errors often don’t originate from exotic or complex matters – simple errors amplified by antiquated systems lacking data unification can be an issue that can be minimised, if not completely avoided with solutions like SARA” says MD of Numerisk, Richard Silberman.
The primary challenge in setting up your tech stack, is deciding which vendors, platforms and systems are best suited to your business operations. As any adviser will be aware, the technology platform and service market is heavily saturated and there are various options to choose from for each business area. It is incredibly important to do your due diligence when it comes to selecting your technology partners in order to avoid a situation where your expectations are constantly not being met.
Set-up, configuration and ongoing maintenance
The most significant challenge for developing your tech stack is the cost of expenses related to setting up your new systems, configuring them and the unavoidable and frequent maintenance which can become a real thorn in your side. The direct costs associated with this set up are substantial. This requires specialist work and contains high risk of going over budget.
Aside from the tangible cost, advisers are also faced with the opportunity cost of time being lost from focusing on client-centric, revenue-generating activities. Advisers are required to be heavily involved in the set up and configuration of their tech systems to ensure that the system is appropriate for their operations, data management and service delivery. Thus, creating this balancing act of enhancing your operative systems, whilst continuing to generate revenue for cash flow.
A recurring issue seen in the industry is technology systems that are built out of the box without gauging the advisers’ requirements, resulting in these systems being misused or neglected entirely. This is why it is imperative that advisers be closely involved in this process.
Cyber risk
With increased reliance on technology, comes increased risk of cyber attacks. The risk of attacks such as data breaches looms large in the financial advice industry. For a service driven business, the gravity of a cyber attack can be significant. This could pose a threat to the trust and confidentiality cornerstones of the adviser-client relationship and have a severely adverse impact on your business.
As technology becomes more sophisticated, so too do cyber criminals. This is why it is important to seek appropriate advice around your cyber security measures to protect your business from exposure to cyber threats. At Numerisk, we’re able to provide relevant advice and access to data, information and insurance solutions which will help you feel confident that your cyber risk is appropriately managed.
Don’t blow your tech stack. Speak to an expert.
Our team of specialists in the wealth industry are experts in this area and are ready to start having a conversation about protecting your business. Get in touch by calling 1300 001 283 or emailing enquiry@numerisk.com.au