Clearing, Trading Most Popular Uses for Fintech by Advisors: Survey

What You Need to Know

Financial and investment tools are playing a growing role in how advisors select and manage investments.
Clearing and trading were by far the most popular uses for fintech among advisors recently surveyed by ISS Market Intelligence.
When selecting a fintech tool, ease of use is the top factor, followed by best-in-class features and level of integration.

Clearing and trading are the most popular uses for fintech by advisors, while ease of use is the top reason why they select one fintech tool over another, according to the findings of an ISS Market Intelligence study released Monday.

Among the study’s other key findings: Financial and investment tools are playing a growing role in how advisors select and manage investments.

Asked if they agreed with the statement, “I rely more on financial and investment tools over the past few years,” 25% of responding advisors said they strongly agreed, while 33% agreed, 23% somewhat agreed, 13% said neither, and just 6% disagreed.

The ISS MI Market Metrics Fintech Study, based on interviews conducted in May with 814 U.S.-based advisors, measured advisor interest in fintech provided by asset managers, home offices and third-party sources.

More than 95% of responding advisors reported using fintech for clearing and trading, portfolio rebalancing, and/or investment analytics, according to the research firm. Advisor satisfaction with those tools is high, it noted.

But clearing and trading were by far the most popular uses for fintech among surveyed advisors, with just 3.8% reporting they didn’t use the technology for those purposes.

Despite that heavy usage, there appears to be little room for third-party fintech providers to offer their services because more than 75% of advisors surveyed reported using software provided by a home office for clearing and trading, the research firm said.

In contrast, investment analytics is a more competitive area for managers and third-party firms, with 26% of reporting advisors using asset manager software and 41% using third-party software for that purpose.

Eighty percent of responding advisors reported ease of use as a top-three factor in selecting fintech tools, according to the study. Other top factors included best-in-class features and level of integration, with 43% and 44% of advisors rating them as key factors, respectively.

Software Superlatives

BlackRock is the most popular provider of investment analytics software among asset managers, the survey found, with 26% of survey participants saying they used the firm’s software, beating out second-place asset manager JPMorgan by almost 10 percentage points.

According to the study, there is high demand for asset manager software in direct indexing and portfolio construction, with 24% and 29% of responding advisors, respectively, using asset manager-provided software for those functions.

Vanguard was the most popular manager for direct indexing software, with one in five surveyed advisors ranking the firm’s platform best, though rankings did vary between specific channels, according to ISS MI.

Responding wirehouse advisors — the most enthusiastic adopters of direct indexing relative to other distribution channels — reported Morgan Stanley as their preferred platform.

Fintech’s Rosy Forecast

Despite the growing use of fintech, the study said, “advisors are most likely to use their home office for trading and clearing, third-party companies for investment analytics and asset managers for portfolio construction.”

But the vast majority of responding advisors said they believed their fintech usage will either remain consistent or increase over the next 12 months, according to the study.

Specifically, 40% of responding advisors said they expected to increase their use of fintech tools and applications provided by third-party companies, versus 59% that said they expected their use to remain consistent and only 1% said they expected to decrease their usage.

When it came to fintech provided by asset managers, 42% said they planned to increase their usage, versus 56% that said they expected it to remain the same and just 2% said they expected it to decrease.

And when it came to fintech provided by their home offices, 45% said they intended to increase their usage, versus 49% saying they expected it to remain the same and 5% expecting it to decrease.

“With only 5% of advisors considering market longevity and 2% considering peer recommendations as their number one factor, newcomers to the fintech market can be optimistic that managers will seek out the highest quality product, not the most entrenched,” Greg Bawin, head of U.S. research at ISS MI, said in a statement.