fidelity investments

Tech-Savvy Advisors Tend to Be Bigger, Fidelity Says

Technology companies love to push how much more efficient their products can make a firm, but some independent advisors concerned with their firm’s bottom line want to be able to quantify their return on investment.

According to new data from Fidelity’s 2014 Advisor Insights Study released Thursday, advisors actively using technology had an average of 40 percent more assets under management, were attracting more next-generation investors, and were better at expanding their geographic reach. The Fidelity study defined this group, dubbed “eAdvisors,” as those who are more frequent users of technology applications when running their advisory practices.

The most successful advisors are using technology for digital client communication, a virtual work environment, automated workflows, a holistic view of client assets through account aggregation, CRM software, and electronic reporting.

Three quarters of these active users said technology has helped grow their book of business. According to the study, eAdvisors service 55 percent more clients than advisors using traditional methods.

Only 30 percent of the 1,000 advisors surveyed qualify as eAdvisors. Haskins said one challenge is inertia; many advisors have been successful for a long time and aren’t willing to adopt new technology, no matter how beneficial it may be. There is also an over-abundance of technology options for advisors these days. 

“It can be overwhelming,” said Tricia Haskins, a vice president and head of technology consulting at Fidelity. “It’s hard to decide what systems are right for you, hard to look at and evaluate which ones are best going to help your individual business.”

But is an advisor more successful because of technology, or do they simply have more capital to spend on technology because they’ve been successful? Sophie Schmitt, a senior analyst with Aite Group, said it is a bit of a "chicken or egg" problem, as larger firms have a greater need for automation and can afford it more than the solo practitioner who is counting every dollar. But it really comes down to advisors focusing on growing versus advisors content with the business they already have. 

"To acquire more clients, they need more digital tools, more digital services," Schmitt said, adding that it's especially true for reaching younger generations. "It's the 30 percent of advisors that are investing in [technology] that want to grow."

Schmitt added that while advisors may avoid the monthly fee for technology like eMoney if they are content, they should realize that clients are bombarded with other advisors offering more value through technology. 

"Your relationship better be really strong because as a client, I'm going to think about it." 

Haskins said many helpful technologies have low price points, such as social media, video conferencing and purchasing tablets, and just buying technology doesn't guarantee success. For example, an advisor has to actually use a CRM to track clients and prospects in order to see a return on that investment. 

"It's about behaviors advisors are applying and how they are embracing those technologies." 

Advisors looking to add technology need to identify day-to-day tasks, their business purposes and then determine what can be digitized. Haskins said adopting a CRM and making sure people are using it effectively can often have the biggest initial impact, but it isn’t just about adding a piece of software here or there.

“The first thing they have to do is look at it holistically; how they are leveraging technology to enhance business and really thrive in this new era of expectations,” Haskins said. 

TAGS: Technology
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