Financial advisers increase technology spending in pursuit of operational efficiency and client engagement

New data from FE fundinfo, a leading financial data company connecting the asset management industry to distribution networks in the UK, Europe and Asia Pacific, reveals a significant uptake in technology among financial advisers, with 55% confirming they had increased spending on technology over the past year.

Looking ahead, amongst the financial advisers surveyed as part of FE fundinfo’s 2024 Financial Adviser survey, 40% aimed to increase their tech expenditure over the next 12 months and 56% intended to maintain their current level of technology expenditure.

However, there are signs that the COVID-19 era mass investments in technology has put a limit on how much firms can invest. In last year’s survey, the percentage of respondents who had increased investment in the previous 12 months and planned to grow investment in the next 12 months were both higher than this year’s report (72% and 50% respectively). Momentum behind tech investment is clearly there - but it is not what it once was.

Operational efficiency is a key priority for advisers. Most pointed to technologies such as automation and AI as key in this effort, with 52% describing the integration of different software in their financial planning process as “extremely important”.

Financial advisers cited the top use cases for technology in each area of their work as:

·   Cashflow: forecasting software (92%)

·   Profiling: attitude to risk questionnaire (92%)

·   Mainstream investment research: investment selection and analysis tools (79%)

·   Back office and compliance: back office record keeping (75%)

·   Client Engagement: digital anti-money laundering & ID checks (69%)

Amid rapid technological change, artificial intelligence (AI) is slowly being considered by advisers as part of their day-to-day processes. While only 15% of respondents are currently using AI in their operations, 67% of those not using AI are either open to its future use or are actively considering AI solutions.

Financial advisers stated the key use cases where they favour AI adoption as:

·   Automation of standard tasks (59%)

·   Summarising meeting notes and actions (58%)

·   Drafting client letters and emails (58%)

The primary applications of AI amongst advisers are focused on enhancing internal processes and streamlining operations, rather than direct client service. The percentage of advisers using AI for compliance checking and initial client communication stood at only 33% and 26% respectively, highlighting the importance of maintaining human involvement in client interactions and compliance-sensitive areas.

Many financial advisers are still waiting to feel the full benefits of AI. Ninety percent of financial advisers surveyed reported less than 4 hours/week in time savings from AI. Advances in AI will be key to realise these benefits.

Nevertheless, financial advisers reacted positively to questions about the opportunities presented by AI. Fifty-seven percent said that AI systems could improve the quality of service offered to their clients and 47% said that AI could improve their client outcomes.

Stephen Ford, Head of UK Distribution at FE fundinfo said: “The challenge is greater than ever for financial advisers to prove their value to clients. Our research makes clear that the profession is prioritising continuous innovation to modernise and optimise their operations. Of particular note is the popularity of cashflow modellers, pointing to the shift in industry strategy from investment planning to financial planning. Consumer Duty is a clear driver of this trend, with cashflow helping advisers make the ‘informed decisions over their options’ that sit at the heart of this regulation. 

“There is cautious optimism among financial advisers towards AI adoption. Although the research indicates growth in applications of AI, scepticism remains about its use in drafting technical materials, promotional documents and compliance tasks. The era of ‘robo-adviser’ is clearly a long way off.

“Financial advisers are fundamentally focused on building a more connected and efficient operation. Integration is critical here, avoiding a disparate set of siloed tools and solutions, and instead ensures everything works together. Backed up by the seamless flow of reliable and accurate data throughout their operations, financial advisers will be well equipped to support and engage their clients on their wealth management journey.”

Read the full report here: FE fundinfo – Financial Adviser Survey 2024.