Our 2024 WealthStack Study, the third in this annual series, came out last week.
One of the findings that intrigued me and that I would like to investigate further is a 7% decline in respondents reporting the use of marketing and client-retention-related technology as a business area their technology supports.
This dropped from 52% reporting that they used marketing technology in 2023 to 45% this year.
It is hard for me to surmise why this might be.
Perhaps it has to do with the large number of new entrants in the automated marketing and communications technology available to advisors and some advisors/firms are between vendors. There has been a surge in these providers’ use of artificial intelligence technology, and there has also been considerable consolidation in this sector, with firms acquiring or merging with one another.
Or perhaps with an increasing number of advisory firms using marketing services that are described as platforms as a service they no longer consider it to really be part of their tech stacks at all.
It is also quite possible this is a bit of a statistical anomaly. After all, the top three business areas supported: financial planning (70%), portfolio management (70%), and compliance (54%) nonetheless dropped by between 3% (financial planning and compliance) to 5% (portfolio management) since 2023.
I should touch on the study’s methodology before continuing. As with previous years it was based on an online survey, this year completed by 416 respondents who are active users of WealthManagement.com and represent predominantly a mix of advisors (70% of respondents), C-suite executives (16% of respondents) and others across industry advisory firms.
RIA shops made up 40% of survey respondents, while dually registered/hybrids were 13%, followed by those with regional brokerages (11%), insurance firms (10%), bank/credit union/trust/thrift (6%), wirehouses (5%) and other (15%).
Surveys were completed between June 12 and July 16, 2024 (the 2023 and 2022 versions of the study were based on 371 and 409 completed responses, respectively).
The study was sponsored by SS&C Black Diamond Wealth Platform.
Happy to see
As a long-serving technology journalist, I was glad to see a continued drop in advisors/firms classifying themselves as laggards (10% in 2024), which are firms that said they did not prioritize or leverage technology effectively—12% self-classified as laggards in 2023 and 13% in 2022.
Similarly, I was glad to see an increase, if only 1% year-over-year, in those firms self-classifying as innovator firms (33% in 2024), which differentiate themselves by investing in technology to provide the best possible client experience (and that is up from 28% in 2022).
While innovators make up a third of respondents, the majority (57%) consider themselves operators, which are defined as firms that invest in technology largely to improve their operations and internal efficiency.
I was also happy to see that financial planning technology continues to be thought of in overall terms as the technology delivering the best return on investment (50% of respondents thought this), though this is a significant drop from last year (59% in 2023). This still represents great progress from the decades of financial planning either not being offered at all or as window fairly static window dressing in the form of a one-time plan. Nonetheless, the drop is another thing worth looking into.
Finally, I’m happy to see the overall satisfaction with technology continuing to rise; the percentage of all respondents saying they are very satisfied rose to 44% from 37% last year and those saying they are dissatisfied having dropped from 8% to 4%.
Curious
Beyond the drop in marketing technology usage, I found the perceptions regarding artificial intelligence curious. Over the next five years, 75% of respondents say that artificial intelligence will be the technology trend with the biggest impact on the wealth management industry, down from 82% in 2023. For me, this is a sign that advisors and firms are becoming increasingly comfortable with, if not their own actual use of AI, then at least its existence and potential application in wealth management.
In just the last year, dozens of large firms have announced rollouts of AI technology and I personally have met with dozens of providers, from startups to larger companies that have built or are building AI technology specifically for wealth management use cases.
Another 52% of respondents say the greatest impact will come from regulatory compliance and cybersecurity solutions, 25% from access to centralized data, 22% as a result of consolidation via M&A, and 19% saying it will be the blockchain. It is interesting to consider that several of these categories of technology, too, will be highly affected or transformed by the use and/or integration of AI, specifically compliance, cybersecurity, and management and analysis of centralized data.
Other points of note
When it comes to the top three business objectives for the coming year, respondents have remained consistent in their choices for all three surveys—and this is out of a total of nine choices in 2024 (two additional choices were added this year).
Those top three business objectives include adding more clients (63%), deepening relationships with existing clients (51%), and improving the client experience (44%), all three within three percentage points of the 2023 findings.
Asked to rank their top three considerations when evaluating their firm’s technology needs, not surprisingly, 40% of respondents cited revenue growth as the top consideration. The most popular second-ranked consideration was a tie, at 21%, for revenue growth and cost reduction/improved efficiency.
There is much more that advisors might like to parse within this report, especially when it comes to looking at the breakdowns of some of these categories and technologies and their usage by the three classifications of firms (innovators, operators, and laggards). Downloading the report is free, though you will have to provide an email address.
