Advisers told: Make sure tech is worth it

Advisers are being cautioned to ensure that their investments in technology pay off for their businesses, not just their clients.

Thursday, June 1st 2017, 6:00AM 2 Comments

by Susan Edmunds

Many new digital offerings are becoming available, designed to help financial advisers with everything from risk profiling to customer relationship management and asset allocation.

Binu Paul, managing director of Savvy Kiwi, said advisers should take care before they spent large amounts of money on new systems for their businesses.

"Ultimately any technology adoption decision should be based on what you are trying to achieve. The truth is you may or may not need technology to achieve those goals,” he said.

"No one size is going to fit everyone. Much of your technology adoption decision should depend on who your customer base is and the experience you want to provide them. If you are an established business, then the real question is one of client retention - am I providing the best experience possible to my client?

"Can they get a better experience from elsewhere? Perhaps they appreciate the fact that you are there to sit across the table from them and press the flesh. Introducing technology to automate that engagement into the mix can actually be detrimental in this instance.”

He said cost management would also be a consideration.

"Typically ... you have a long tail of low-asset clients who may take up as much servicing as your bigger clients. In those instances, there is an argument to automate many of those associated processes, freeing you up from administration and instead spending time with your higher asset client base.

"At another level, if your objective is to grow your book and client acquisition is your goal then many new technology tools can be far superior than traditional strategies, including for client on-boarding. My view is technology should only be an enabler, not an end in itself."

John Ndege, who recently launched risk tolerance tool Pocket Risk in New Zealand, said large investments in technology often meant cheaper prices for customers but little return for advisers.

“The purpose of using technology is to increase revenue. By using technology, advisers can create better client experiences, attract new prospects and run more efficient practices. However, those investments have to be done right. Investing in technology that doesn't differentiate you from other advisers, will result in a poor return on investment. Too many advisers only think about technology in terms of the efficiency it creates for themselves. They don't think, every adviser is doing the same, so the positive effects will be cancelled out. If you think about it, most technology results in lower fees for clients, not increased profits for advisers.”

He said New Zealand advisers seemed to be becoming increasingly savvy.

"They know the value of their work and main differentiator is the client relationship. Tools that solidify that bond are worth the investment. A focus on financial products rarely works because these products have been commoditised. Clients can buy any fund from any adviser, but they can't buy a great experience from every adviser. An investment in the client relationship, is the best way to invest for future growth.”

Comments from our readers

On 1 June 2017 at 10:19 am Brent Sheather said:

Historically not many advisers spend much on technology. Those financial advisers who use platforms effectively get their clients to pay directly for the required investment in technology and they then frequently charge their clients high annual fees on top of that. My CPD tells me that informed regulators are concerned about platforms. For example the FCA in the UK is investigating the use of platforms and is on the record as saying that platforms are good for advisers but not so good for clients. One ray of hope for retail investors is the fact that Vanguard is presently disrupting the platform scene in the UK.

On 1 June 2017 at 10:47 am Barry Read said:

Based on my experience NZ advisers have on average 17 IT items composing of software systems and hardware items in their practices. Most have been accumulated over time rather than via a coordinated strategy to deliver efficient business processes or customer experiences.

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