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Ian McKenna: The future of adviser technology

Ian McKennaFrom emotion recognition systems to AI compliance functions, the T3 conference points the way forward

Adviser technology that appears in the US is often a sign of things to come here and gives a chance to learn from early adopters.

One of the most valuable conferences I visit around the world is Technology Tools for Today, also known as T3. In many ways it kicks off the adviser technology year each January by providing great insight on what to expect in the coming months.

Having been a regular delegate at global events for nearly a decade, I consistently find what happens in the US will appear in the UK within a few years. This provides a valuable perspective on what we need to be preparing for in the future and to learn lessons from early adopters.

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The key themes which resonated with me at this year’s event included a risk-profiling tool unlike anything currently used in the UK, a completely fresh approach to inter-generational wealth transfer, seamless account opening and the use of artificial intelligence to support advice. Here are my personal highlights.

In terms of transformational technology, Swiss risk-profiling software specialists Nviso stole the show with its emotion recognition system. I have written about this product previously in this column but it’s great to see it partner with Cetera Financial, a major US advice firm which has now put the technology at the core of its Decipher proposition.

Intergenerational asset transfer is increasingly being recognised as one of the major challenges in the wealth management industry.

Although too few firms choose to acknowledge it, 90 per cent of people inheriting money sack their parents’ advisers and over two-thirds of wives do the same when their partners die.

Advisers missing out on intergenerational wealth transfer

A new estate and trust-based solution presented by eMoney Advisor founder Edmond Walters through his new firm Apprise Labs, demonstrated functionality far in advance of anything else I have seen.

Walters is partnering with Envestnet, best known in the UK for owning the aggregation service Yodlee which powers many personal financial managements and MoneyGuidePro, one of the leading US financial planning tools providers.

The service is built so that all family members become part of the advice process. Limiting the relationship to the primary investor is frequently seen as a significant factor in the assets moving on death, so I see this as a real step forward and something UK cash flow planning services could really learn from.

With Practifi from Australia also launching its software, designed to offer private office serviced to mass affluent consumers, I expect this sector to grow substantially in the UK in the coming months.

Genuine seamless account opening is another big trend with the annual benchmarking study from T3 organiser Joel Bruckenstein and US advice tech luminary Bob Veres identifying that while only 20 per cent of advisers currently have such capability there are 21 per cent who want to make it part of the proposition this year.

Translated into UK terms, this means platforms should enable seamless account opening and two-way exchange of data from within practice management or financial planning systems. Increasingly advisers I am talking to see this as a Nirvana which would hugely improve their own efficiency, reducing the inevitable human errors that take place when advisers or paraplanners have to manually key transactions they have agreed with clients.

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I’m convinced that whichever platform moves first to deliver such functionality will win a huge commercial advantage. Ironically, in many cases it seems to be platform providers’ insecurity about their own brand that is constraining such innovation.

Another major trend I am seeing both in the US and the UK is the emergence of artificial intelligence, particularly to support compliance functions. This was a recurring theme throughout T3 and is an issue I expect to positively impact the UK advice community this year, particularly capabilities to automate the paraplanning process. I know that many firms will find this welcome, as while paraplanners perform very valuable tasks, they are becoming an increasing economic burden on advice businesses.

Based on systems I am seeing now, these should start being available at scale in the UK during the second half of the year. This will not remove the need for all paraplanners, but firms will need far fewer of them; perhaps two or three being able to oversee AI producing the work previously produced by 20 people in large firms.

This should create opportunities for paraplanners to evolve. There will continue to be a great need for those who can engage with clients and genuinely be part of the customer proposition. There will, however, be far less need for those who simply want to be in the back office. I hear many advisers bemoaning the fact administrators frequently think major pay rises can be earned just by changing their job title – this trend will probably reverse quite rapidly.

This is a classic case of technology creating better roles for people. Although headcount will fall for some, doubtless new opportunities will arise for these skilled people to contribute in different ways.

Ian McKenna is director of the Finance & Technology Research Centre


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