While there are no crystal balls out there, current industry trends point to a number of significant developments that will play out in the advisor technology sector this year.
In order to determine those, we put on our prognosticating virtual reality headset and came up with the following bold predictions.
Client-Experience Technology Acquisitions
As the independent wealth management industry expands, a corresponding increase in direct investments to acquire the systems, technologies and software platforms that advisors use to deliver advice will continue to occur in order to join in on that growth story.
The past couple of years saw an aggressive spend from firms adding robo-capabilities through acquisition or outside investments.
2017 is shaping up to become the “year of the client experience,” so look for a similar consolidation in client management and experience technologies, such as CRM, personal financial management and client portals. This M&A activity will be driven by custodians, asset managers and portfolio management platforms looking to strategically arm advisors with these critical tools to compete in today’s digital world.
SS&C Advent kicked off this trend with their acquisition of Salentica’s CRM late last year; look for it to continue with a couple of high-profile deals in the first half of the year.
First Consumer Robo Bankruptcy
Robo capabilities are in the hands of the industry’s largest and most powerful brands, such as Fidelity, Schwab, Vanguard and BlackRock, and pricing is heading to zero. Now, the sustainability of the early consumer robos is in serious doubt.
Morningstar notes that robos’ cost of client acquisition can be as much as $1,000 per client. Yet with the average account size for consumer robos in the $30,000 range, a 25 basis point fee yields only $75 annually in revenue. With this upside-down P&L, you can’t make up for it in volume.
Adding to the alarm bells is the declining growth rate among consumer-focused robos and a similar decline in the average account size. VC investors that bet on those early robo platforms will lose patience after nine years of this death spiral and will demand an exit, putting these platforms on the block, selling them off for parts or grinding them down into bankruptcy. Look for the Securities Investor Protection Corporation to step in this year and force fire sales to deep-pocketed firms to protect customer assets.
E-Signatures Finally Go Mainstream
While the first e-signature platforms debuted in the late 1980s, the promise of time savings, efficiencies and a delightful client experience will finally become widespread in wealth management this year. As a leading indicator, TD Ameritrade’s latest advisor survey just released notes that e-signatures are a top interest for advisors when it comes to advanced technology.
For many years, the industry has been slow to adopt digital signatures due to industry regulatory and legal fears. However, the promise to speed up business will convince custodians, clearing firms and broker-dealers that have been dabbling with one-off integrations and compliance protocols to finally go all in on accepting digital signatures.