​​Advisor and client experience, data top the list of 2023 technology spending priorities

As wealth management firms gear up to spend big on technology in 2023, wealthtech solutions focused on a smooth experience and deep insights are poised to get a significant piece of the pie. 

According to a new survey released this week by California-based wealthtech management consulting company F2 Strategy, firms are placing the digital client and advisor experience at the top of next year’s tech spend priority list.

F2 officials said the focus on digital client experience was not a surprise. But coming in second on the top five list was data architecture, an issue making substantial gains in importance in the minds of technology decision-makers tasked with building the backbone that supports a bespoke client experience.

Rounding out F2’s list of top tech focus areas were CRM, reporting and portfolio construction. The survey was conducted by F2 Strategy in November and includes responses from 39 leading RIA, wealth management and asset management firms representing $6 trillion in assets.

The focus of the research was to provide a clear picture of where industry firms have placed their technology priorities and what initiatives they plan to invest in throughout the coming year.

According to the survey, digital client and advisor experience tops the list because wealth management firms feel increasing pressure to have a great digital experience. As a result, organizations say their biggest tech investments in 2023 will be client and advisor digital portals, trust platforms, new CRM enhancements, portfolio management and performance reporting.

The most critical capabilities for client experience include having an integrated mobile-friendly client experience; real time data values; transparency of investment information; personalization and self-service; and document sharing with support for texting.

“The primary use case we see on digital experience is a defensible, unique, centralized digital portal for clients, and hopefully prospects. We’re big proponents of a prospect portal that helps to sell that concept of digital client engagement before they’re your clients,” said Doug Fritz, co-founder and CEO of F2 Strategy. “Without it, it’s like ‘trust me this house is great. But you can’t see the house until you buy it and move in.’ That’s kind of how we treat prospects right now.”

The study finds that less than 33% of respondents have usage metrics in place, presenting an opportunity for firms to implement data point tracking to measure the success of investments in new capabilities.

Fritz added that firms of all sizes need to work on creating a digital experience that amplifies the human value proposition of the wealth management organization without redirecting clients to a dozen different organizations whenever they log on to handle business. 

“Amplification of that experience is a very rare thing. Merrill has got it. Wells has got it. The big firms got it. Morgan Stanley has got it,” he said. “But if you skip down a bit to your $50 billion, $25 billion firms and below … it’s really rare to have a specific client experience. Vendor or build-it-yourself doesn’t matter how you got to that end. But your own digital experience. A unified one that doesn’t make me go to Schwab for information. Doesn’t make me go to eMoney for the planning stuff. Doesn’t make me go over to Addepar for performance.”

In terms of data architecture, Fritz says it is increasing in importance as its ROI becomes more evident to firms. About 54% of wealth management firms polled say they will focus on data architecture in 2023 better client insights require better data.

According to the study, organizations are looking to leverage their investment in data in order to build great experiences. F2 officials add that the wealth management industry is maturing in the right direction with the amount of money and energy being invested in this effort, indicating data is no longer viewed as a side show.

With that, F2 recommends that firms define their data strategy and goals, as well as the practices and processes around data usage to ensure firms get the most out of improved data architecture.

“What I’m stoked about is that, finally, we as an industry recognize that we really need to do something about our data. We need to work on our data as a firm and own our data. Organize, centralize, make it all consistent so that we can get insights, and our clients can get consistent answers,” Fritz said. “Do I have enough assets in my portfolio? What type of assets do I need to achieve my cash flow needs when I retire? That type of data typically comes from two or three different sources, and in most firms, has not been organized and centralized. Firms are now finally getting around to actually making it make sense and combining their information together to provide client insights, and maybe more importantly, to drive business insights. 

“How many of my clients are at risk of leaving me over the next six months? Well if you don’t have your data together, good luck finding that information out,” he continued. “But it’s a sign that the industry is healthy, and they’re making really good decisions. And I could not be happier about that one.”

Fritz also remains surprised that firms continue to allocate spending toward tech amid market difficulty. The phenomenon is also consistent with the results of the latest Financial Planning Tech Survey that finds that technology has become the top spending priority for wealth managers, outpacing continuing education, hiring, compensation and client acquisition.

But just because the excitement is there doesn’t mean wealth managers always get it right. The Financial Planning study found that advisors aren’t always confident about the technology they have chosen, and an Advisor360° study released in early November revealed that a majority of advisors believe their lousy tech choices have cost them clients.

“There’s an unbelievable acceleration into volatility … I cannot believe it. We are seeing this much commitment of capital and resources to build. And not to ignore the downturn, but take this as an opportunity to skip even further ahead from competition,” Fritz said. “So tech is kind of a new battleground, right? It’s like we’re going to  compete, we’re going to win, we’re going to get advisors and clients to pay attention to us, and we’re going to do it with technology.”