Technology can help wealth managers scale their firms.

If you want to know what is on technology executives’ minds in the wealth management industry, the first stop on your quest should be to attend the First Rate wealth management conference.

Held every year for the last 23 years, First Rate, a leading provider of reporting solutions for banks, trusts, broker-dealers and RIAs, gathers about 100 of the industry’s top wealth management executives to discuss market trends and opportunities, and what the future holds for the industry.

Kicking off the conference from balmy Miami Beach in late March was Marshall Smith, general manager for First Rate, who gave the audience a needed shot of good news. “There is $39 trillion in investable assets in the U.S., which represents tremendous opportunity. Additionally, there is $11 trillion in small business valuations, along with $28 trillion in less liquid personal assets that will gradually transition to becoming investable as the baby boomers retire and pass on their wealth to the next generation.”

Smith’s good news is that there is an incremental increase of approximately $30 trillion in assets about to come online – a massive growth curve heading wealth managers’ way. In order to manage this scale, Smith introduced new capabilities from First Rate, including enhanced reporting for fiduciary compliance, cloud-based hosting and goals-based performance solutions, as well as a new partnership with Wealth Access to provide account aggregation and total-balance-sheet views.

“Having a cutting-edge client portal with data aggregation integrated into the First Rate platform from Wealth Access will be a powerful solution for firms to be able to start to capture that $30 trillion coming their way,” he said.

Following Smith in the keynote role was Darren Courtney, executive advisor for research firm CEB. Courtney presented the findings of his firm’s annual research into what is top of mind for wealth management technology executives. Top of the list: declining profitability.

“Despite the tremendous growth in wealth management, there are clouds on the horizon,” Courtney noted as he showed a consistent drop in industry profitability as the space is maturing and becoming more competitive. “Compliance costs are going up and fees are going down resulting in margin compression, which is driving a majority of the technology investments firms are making to bring efficiencies, productivity and a better client experience.”

As an example, one of the top 10 technology initiatives identified by CEB is that firms are investing aggressively to simplify, automate and shorten the new account opening process. “For some firms, it can take them 60-90 days just to onboard a client, while the robos can do it in 20 minutes,” Courtney said.

Firms also have too many disparate systems competing for attention and maintenance in their back office. “It is becoming hard for firms to get the data they need out of their systems. In some cases, firms identified up to 400 different applications they were supporting, some legacy and some new from acquisitions and expanded business lines,” Courtney said.

A common concern for technology executives is to better leverage their CRM to get the support advisors need to better serve clients in a speedier manner. Workflow automation tools and data aggregation will be critical to embed into CRM systems, as in some cases, advisors can only see half of their client’s assets through their workstations, a very limiting experience.

Regtech and Robos

The other big topic areas at the conference were (of course) compliance and robo technology. The DOL fiduciary rule has had a dramatic impact on spending, as firms have moved full speed ahead on being compliant with a fiduciary mandate, despite the current uncertainties. “Compliance costs have gone up more than 25% in just the last year,” Courtney noted.

While dismissed as mere toys when robos first rolled out a few years ago, the industry has now gone all-in on digital advice, with the big online brands providing robo solutions on a massive scale. For advisor-based organizations, however, digital platforms are being rolled out not so much for their client acquisition efforts but more for back-office automation.

“The key investment area this year has been in bringing the best of what robo-advisors offer, which is needed for clients to self service, engage via mobile and provide advisor productivity tools,” Courtney said.

The other big initiatives Courtney and CEB identified ranged from investing in better goals-based reporting to better scale financial planning activities for advisors; improving client reporting with more and better transparency; as well as optimizing data management capabilities for better business analytics.

Looking out into the future, Courtney said that firms are starting to take baby steps with more advanced technologies such as artificial intelligence.

“All of these big investments firms are making are ultimately tied to enhancing the advisor-client relationship, bringing the advisor and today’s technology together,” Courtney concluded.

— Read All For One: Integration Driving Envestnet’s New Focus on ThinkAdvisor.