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Ian McKenna: The four foundations of a solid adviser tech strategy

The winners of the advice world will be those who make more use of the right technology.

There is no doubt technology is playing an increasingly important role in advice businesses. We now have systems able to significantly reduce the amount of time taken to carry out a wide range of tasks, from identifying and agreeing client objectives, performing risk profiling and suitability assessments, researching and selecting products and executing transactions.

So what are the key components an adviser looking to take full advantage of technology should deploy?

1: Practice management system

The practice management system has been the administrative hub of an adviser firm for many years. This should provide your central store of client data, enable workflows and facilitate accounting, regulatory reporting training and competence logs, as well as document management among a plethora of other tasks. Any advice firm not employing a practice management system will be spending far more time than they need to on administration.

2: Risk profiling system

My next priority would be a risk profiling system. Given the FCA focus on assessing suitability, having a manual process for these crucial tasks brings far too much risk of inconsistency. This should also address a client’s capacity for loss and, in many instances, will link to a financial planning system.

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With planning rather than fund selection and investment management being increasingly recognised as the main way advisers add value, it really makes sense to use tools to automate this process.

File image of graph showing stocks and share prices rise and fallAn increasing number of firms are also using cash flow planning tools. These have a valuable role to play in identifying the risk clients need to take in achieving investment objectives; another key part of assessing suitability.

This will inevitably link through to a firm’s portfolio reporting and rebalancing systems. This may come as part of your risk profiling system or be an independent component. Equally, it could be part of your product research system, which ideally should give you the ability to impartially select investment solutions, product wrappers and platforms.

3: Client portal

The next important part of an adviser’s technology proposition should be the software that provides clients online access: the client portal. A website simply will not cut it in the modern world.

Do not be tempted to take whatever client facing technology platforms offer and deliver that as your experience. I can think of few platforms that deliver a really good customer experience and, besides, an advice firm’s digital presence should be about so much more than just a window to their platform holdings.

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A crucial element of this should be a mechanism for secure communications and document exchange. Far too few advisers realise how risky it is to exchange unencrypted e-mails with clients. The risk of exposing them to identity fraud is huge.

File image of Modern Laptop with Broken Brick ScreenNext month marks a decade since the FSA warned that web mail was not sufficiently secure for client communications. Based on my experience, around one in five advice firms are still using such risky systems. Given FCA suggestions at the Association of British Insurers conference last week that a thematic review may well be on the way, this issue should be addressed urgently by those who need to.

Your client portal will represent your business 24 hours a day. In most instances, it will be the first view prospective clients gain of your firm, so you want it to be a really good one.

4: Automated advice

My next suggestion is going to be controversial one; a step many advisers will be reluctant to take. That is, deploying an automated advice service.

Ideally, this should offer both accumulation and decumulation options and give clients the choice of an advised or non-advised service. Do not forget automated advice for both protection and mortgages, too.

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Each element of an adviser’s technology proposition should significantly reduce costs, improve efficiency or enhance customer experience – ideally all three. Technology will not replace advisers in the near future, but it will increasingly make those who do not embrace it uncompetitive.

In the US, there is substantial evidence that advisers who make more use of technology have higher assets under advice, make higher profits and are happier. While I am working on a study to validate this view in the UK, the logic is fairly compelling. Hopefully, this guide will help readers identify the next system to help them work smarter.

Ian McKenna is director of the Finance & Technology Research Centre



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Although in theory ordinary email is unsecure due to its distributed data format, in practice it’s actually a lot more secure than the postal system – which manages to lose 200,000 items a year.

  2. Ian, are there any companies that provide all four of these components to advice practices?

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