The four pillars of advice tech transformation

04 May 2022

Aron Satchell

Aron is the Joint Managing Director of Finura Group.

Aron Satchell explores the four technology challenges facing advice businesses, and explains how they can be solved.

In 2022, financial planners face a uniquely complex landscape in making technology decisions. Driving complexity are the macro factors from the Hayne Royal Commission, FASEA, WEXIT (banks swift departure from wealth), the work from home transformation following COVID19, and now a tidal wave of capital flooding technology companies (including platforms) to bring new solutions to our sector.

By and large, financial advice processes remain essentially unchanged over the past 10 years, as are the leading technology solutions used by financial planners. What has changed is that firms are laser-focused on the cost to serve. The trend to self-licensing is dispersing technology decision-making, and consumers’ expectations of digital services are higher than ever.

Finura works with many firms that now have waiting lists of clients looking for advice. Firms are corporatising and are increasingly multidisciplinary, placing additional pressure to maintain a consistent service standard and experience across the client base.

Our industry has seen an influx of software solutions tackling specific aspects of the advice process. Fact-finding is perhaps the best example. In a recent market snapshot, Finura found at least seven stand-alone fact-finding solutions. On top of this, we have seen various regtech, modelling, workflow, and document management solutions. Many have struggled to achieve product-market fit.

Financial planners consistently tell Finura they want software that integrates, is flexible, drives business efficiency, and client experience. This is a tall order for any single software vendor to deliver.

Finura estimates the TAM (total addressable market) for financial advice software to be $180 million annually. In its recent full-year results, Iress (the clear leader with approximately 70 per cent market share) reported revenue of $124 million in 2021.

This is dwarfed by other verticals, such as accounting software, where market leader Xero is forecast to achieve Australian revenue of $225 million and, unlike financial advice, has a compound annual growth rate of 20 per cent. Software companies directing their efforts at the Australian advice market are also challenged by the drastic reduction in financial planner numbers.

Why is all this important? Put simply, it is unrealistic to expect a single software solution (current or new) to provide a one-stop panacea for all our advice technology wishes. The market is too small, too fragmented, highly regulated, and financial planners require significant support in adoption and support.

When Finura conducts technology reviews, the challenges typically land in four buckets – Advice Process, CRM Functionality, Data Management, and Internal Capability/Resourcing. We will now step through each of these issues and discuss how these challenges are likely to be solved.

1. Advice Process

Without question, Advice Process the most difficult of the four to solve. In general, most firms follow a similar advice process. However, when we break this down, we see infinite variations between how firms, licensees, and paraplanners tackle the construction and delivery of advice. Typically, firms that have invested significantly in configuring their software, digital fact-finds, and highly trained paraplanners, are well ahead of the game. Yet, by and large, our average industry SOA time has not changed for over a decade.

In a recent Finura customer survey, we recorded average SOA production times of 10 hours, with the range being two hours, right through to 40 hours. Finura is aware of many providers doing their creative best to solve these issues using technology. This is a human and technology problem.

2. CRM Functionality

For a corporatised firm (especially multidisciplinary), it is unlikely that an industry-specific CRM will meet all your long-term requirements.

Many corporate firms have already moved or are considering migrating to the world’s largest CRMs, notably – Salesforce and Microsoft Dynamics. We expect this trend to continue, and for good reason; they offer a depth of capability, customisation and integrations that cannot be matched.

However, be warned, you cannot simply expect to let go of the tools you use to generate advice. In most cases, you will need to use a version of your financial planning software to do the core ‘jobs-to-be-done’ in producing advice and client reporting.

The other major caveat is cost. Do not move CRMs expecting to save money. Major CRMs will require significant spending on configuration and support. Usually, this will be done by a third-party, unless you are uniquely placed to have internal resources at your disposal. Off the shelf or highly configured versions of these are available to purchase through re-sellers, but we encourage a thorough due diligence process before deciding.

It is not our intent to scare you off. These CRMs by the world’s largest software companies will provide significant benefits to the customers best placed to use them. If the pundits are correct and advice firms merge into ‘super-firms’, this trend will gather pace.

3. Data Management

Firms have ongoing technology challenges due to poorly managed data. This can range from client-specific information to how data is structured within CRMs. Understandably, firms that have proliferated through M&A are typically more exposed to unstructured data problems. Our 2022 Tech Predictions report proposed that technology that improves data aggregation and cleansing were likely future winners.

However, no technology will solve an indifferent attitude to data capture and management. In its recent Future Ready IX Report, Business Health found that only 4 per cent of firms capture more than 20 individual pieces of information on each key client. Nine per cent of firms are now using dual CRMs.

Is putting in a new piece of technology just a band-aid solution to not treating client data as the lifeblood of your business?

4. Internal Capability/Resourcing

The talent squeeze in our industry left by FASEA and WEXIT is not just specific to financial planner numbers. Record low unemployment means firms are struggling to attract the right talent to fulfil the future roles required in their business. If technology is going to transform our industry, we need the right people to implement it and use it.

We predict that paraplanners will likely fulfil these functions, as they have the technical prowess and software mindset to implement process improvement. However, these roles won’t come cheap, due to supply and demand.

Many firms are now appointing Advisory Board members with technology experience to help lead them through this transformation. This is wise.

Quick wins to implement in 2022

  1. System audit: Following the pandemic, firms have increased usage of productivity software. We often observe firms using multiple solutions to perform the same job. Do a full system audit with your team to understand the breadth of solutions being used, the costs and then rationalise.
  2. Technology roadmap: Complete a technology roadmap as part of your business planning cycle. The Finura team have a variety of resources to support this process. The roadmap must address the critical issue of what technology you will implement to deliver your services into the future.
  3. Cybersecurity: Increasingly, financial advice firms are being targeted by cyberattacks. We highly recommend engaging a cybersecurity specialist to test your systems and staff for weaknesses semi-regularly.
  4. Establish a technology working group: Firms that excel in technology typically have an internal process for assessing technology decisions and performance. Ensure you have a broad group of stakeholders across your practice.
  5. Broad strategy around tech spend/capability: Ensure your board has a framework around technology decision-making and how you plan to budget for technology expenditure. Think about your firm’s M&A strategy, client value proposition, and staff operating model. If possible, engage the services of an external adviser who can bring a broader perspective.

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