Industry Trends to Automation

September 9, 2019


Ron Fiske

Recently, I was with a senior person at a major FinTech firm and I watched as she showed me the stack of paper that confronted her while opening brokerage accounts at a large Wealth Management firm. She was incredulous when she compared the experiences of clients of FinTech applications with her current onboarding experience, which left her unimpressed. While there may not be the impetus to start the hard work of radically reengineering core brokerage processes, industry trends are pointing in the direction of the need for a much more automated and efficient approach to pretty much everything we do in the Wealth Management industry.

These trends include:
–  Fee Compression
–  The Coming Retirement Funding Crisis
–  A Stagnant to Declining Number of Advisors
–  New Service and Pricing Models
–  The Continuing Emergence of Custodian Agnostic Technology

… and many others which will result in advisors needing to handle more clients more efficiently. The areas that need to be examined within both a broker/dealer and RIA context are:

  1. Account Opening – Typical FinTech applications can successfully open accounts in around 4 minutes total time, the vast majority of time spent on data entry. Also, there is typically no paper involved at all.
  2. Account Funding – FinTech firms have moved to an environment where cash is much more fungible and can be sourced from several places, including other apps. Many firms use systematic investing through ACH as a primary funding mechanism, with the source of cash outside of the brokerage account.
  3. Account Transfer – The old ACAT cycle was built many years ago and takes way too long and is prone to errors, which can greatly elongate the process. Rather than transform industry utilities, can technology transform the process to make it more efficient and less prone to rejections?
  4. Financial Planning – Our industry is working to embed financial planning as a core activity within an advisor’s life, with topics like Goals Based Investing and Financial Wellness becoming key themes. Yet it is discouraging how few people still have a plan and, fewer still, actually follow it. Technology should be enabled to allow a closer linkage between end clients and their plan.

Other topics like cryptocurrencies and Blockchain may seem like far off concepts, but the next generation of investor stands a high likelihood of either demanding access to currencies like Bitcoin or observing significant benefits from distributed ledger technology in other industries and asking why Wealth Management has not followed suit.

As an industry, I believe it is risky to wait and not take the opportunity to engage on these topics now. Throughout history, industries always felt that had more time to innovate than they actually did. What could happen to disrupt the Wealth Management industry? Is it already happening?