Smaller advisory firms are still leading the charge with technology adoption, but that doesn’t necessarily indicate that technology is less important to larger firms.
A quarter of nearly 2,000 firms surveyed by RIA in a Box, a technology firm focused on compliance solutions, said they don’t use any investment advisor technology systems. These firms also had significantly larger average account sizes, indicating they are likely more institutional in nature or serve more affluent clients with a more labor-intensive approach.
These firms were also the only ones to experience negative annual AUM growth, and they trailed technology-enabled firms in terms of attracting new clients.
“In other words, aggressive technology adoption may be just as important to this type of RIA firm than previously assumed,” said a post on RIA in a Box’s website. The company indicated it wanted to explore this idea in future studies.
The study also indicated that firms utilizing two or more technology systems were more likely to grow their AUM than firms using only one or none at all. AUM growth also correlated with the number of technology systems, with the highest rate of AUM growth coming from firms using four wealthtech products.
Looking at individual types of technology, RIA in a Box found that CRM (customer relationship management), portfolio management and reporting tools are the first adopted by RIAs. Firms using financial planning technology tended to have a smaller average account size, but also experienced the highest average annual AUM growth and a positive net client change in line with other groups.
According to RIA in a Box, this indicates that firms using financial planning software were better able to increase assets from existing clients, validating the claim often made by wealthtech vendors that a more “holistic experience” can build “deeper client relationships.”