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Adviser tech spend set to surge as reporting, and client portal needs grow

Advisers now spend a staggering amount on technology in an effort to keep up with efficiency needs and client expectations. Security is still front of mind, but integration is the buzzword for 2024.

Practices with five or less registered advisers spend a staggering $37,000 every year on tech spend according to the latest Investment Trends Adviser Technology Needs Report, with that figure set to jump even further as firms become more dependent on technology systems that keep them at the forefront of efficiency and client provision.

Advisers at small practices, on aggregate, plan to increase this spending by 6 per cent, the report reveals, taking the average annual spend up to $39,000 in FY2025.

Larger practices are even more bullish on the prospects of advice technology, with those that have more than five advisers aiming to boost their tech budget by 8 per cent to $91,000 per year.

  • A few factors are coalescing to create this demand for technology in the space, Investment Trends believes. Foremost is the need for practices to consolidate the technology systems they do have into a unit that works together to drive efficiency. In other words, firms that have amassed expensive software and hardware over the years are looking for a way to rationalise it to fully realise its benefits.

    “Advisers recognise the need for seamless integration across their technology platforms to enhance client experience and operational efficiency,” said Ludovic Sevestre, associate research director at Investment Trends. “This integration is crucial for delivering accurate financial advice, allowing advisers to focus on client relationships and planning.”

    For providers of advice technology, Sevestre believes the opportunity lies in developing forward-thinking systems that are ready to adapt to future advancements, such as artificial intelligence. Thirty-seven per cent of advisers are now using AI to improve practice efficiency, the report states, with a further 43 per cent interested in integrating AI into their advice practice, “contingent on support for implementation, security, and privacy concerns”.

    “Providers that develop AI tools to enhance client interactions and strategic decision-making will lead the way in this evolving landscape,” he said.

    While advice practices probably are still grappling with the best use cases for AI in their practice – a task made difficult by the rapid evolution in AI’s capabilities – the fact that they are using it extensively is clearly the biggest change to advice technology in the last 18 months or so. Current users, the report states, primarily use AI for editing (42 per cent), customer service (33 per cent), reporting (34 per cent), customer service (34 per cent), modelling (33 per cent), analytics (30 per cent) and practice management (29 per cent).

    “AI is transforming the financial advisory landscape by automating routine tasks and providing deeper insights through data analytics,” Sevestre said. “Advisers who embrace AI will be well-positioned to offer more efficient and personalised services to their clients, gaining a competitive edge.

    While AI has become the ubiquitous discussion point in advice technology, cyber security remains a primary concern. The most common security measures being implemented in advice firms today include multi-factor authentication, anti-malware software and stronger passwords. Despite these measures, a concerning 36 per cent of advisers rate their practice’s cyber-readiness as below 7 out of 10, Investment Trends reveals.

    Tahn Sharpe

    Tahn is managing editor across The Inside Network's three publications.

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