Why technology is key to unlocking organic growth for financial advisors

Artificial intelligence, generational transfers and talent shortages are coming together in a confluence of trends impacting wealth management.

But what’s got the attention of advisory firms at the moment, says Joel Bruckenstein, founder of the Technology Tools for Today conference, are anemic organic growth rates being experienced by RIAs.  

In a conversation with Action! magazine, Bruckenstein notes that whether it’s the big trends reshaping the financial planning industry or the day-to-day business challenges facing RIAs, technology is at the center.

Suleman Din: The latest research shows organic growth rates among RIAs hovering at just 2%. What are the hurdles firms are facing, from your perspective?

Joel Bruckenstein: From my perspective, the main culprit is that many of these firms seeing low organic growth rates haven’t embraced technological tools built to help them achieve that growth. To expand your business, you must be able to operate more efficiently. So, there’s absolutely no reason why your firm should still be doing anything with your clients on paper. And I bet I could find several ways your firm could be doing things in a smarter, quicker process than how you’re doing it now. There are so many tools available that can help you automate your workflows and, make better sense of your firm data, and visualize it in simple terms. Your onboarding process should be totally digital. Your marketing and prospecting today needs to have a strong digital component to it. You need to reimagine all of your processes and make them more efficient by taking advantage of the technology available today.

Din: How does automated technology help a firm achieve organic growth?

Bruckenstein: Quite simply, it takes unnecessary tasks off the hands of advisors, and it saves firms hours that they can better spend with clients. The job of an advisor is to help clients identify their financial goals, build a plan with them to meet those goals and counsel them along that journey. The more efficiently you can do that with more clients, the more clients you can take on. You have more time for prospecting new clients, and you have more time to service existing clients, so you’re putting the work into retaining them. From our research, the difference between firms using automated technology versus those that don’t is a clear competitive advantage for tech-savvy firms.

Din: We’ve heard technology firms use the term “platform mentality” several times. What does that mean at the execution level for the average RIA?

Bruckenstein: There are two definitions here. One is literal – that you are open to bringing a wealth management platform into your practice to help you manage the business. That means deciding to invest in any of the providers that have built sophisticated all-in-one solutions to automate a variety of your daily practice tasks. You’re moving from a traditional, paper-driven workflow to a modern, digitized method of managing your business.

The other is thinking about how to connect all the elements of your business digitally. And to be efficient, one action should drive the next. For example, if you bring in a new client, it proactively sets off a series of documents that need to be signed, accounts that must be opened, etcetera. You’re thinking about the data that each process creates and letting that drive your business – feeding tools again that simplify your daily tasks, as well as providing you key insights into the overall health of your business. What you’re doing with a platform mentality is seeing how your practice can work in a single process rather than chopped up into different units and tools.

Din: Are we leaving behind the era of “set it and forget it?” In other words, everyone must become an expert with the tools they have; there can’t be just one ‘tech expert’ at a firm?

Bruckenstein: I think so, but it doesn’t mean it needs to be difficult. New advisors coming into the field are already tech-savvy in a way that older practitioners are not, but when you think about it, there’s no reason why they can’t be just as attuned to new tech. In your daily lives, the technology you use is constantly evolving; you learned how to pay with your phone or watch streaming shows. So why shouldn’t your business technology and your practices evolve, too? Now, in the past, there was a drive for simple solutions that took care of your business challenges. Tools in the market today are still going to do that, but they’re intelligent tools, which means you’ll have to get smarter about how you use them, too. That requires effort on your part to learn, to understand, and to stay on top of new ways of doing things.

Din: We’re experiencing several major industry changes: generational wealth transfer, technological evolution, and practice management changes, particularly in recruitment. How well are advisory firms managing to stay on top of it all?

Bruckenstein: It’s a mixed bag. As always, some firms are doing a great job, a large percentage of firms that are getting some things right, and then there are firms that are just falling behind. Several industry surveys, including ours, point to the same outcome: What separates the leaders from the laggards is the willingness to invest and adopt technology. They’re also more open to recruiting talent and re-evaluating their businesses. It’s all about the priorities you have about growing your practice. If you’re standing still, you’re going nowhere.

Din: Are industry technology providers meeting their needs? We’ve seen shakeups among them, too, whether it’s been big changes in leadership or further consolidation. How is that impacting the way wealth management firms are being served?

Bruckenstein: It’s certainly injecting a level of uncertainty into the market. I understand and can appreciate the forces behind some of the shakeups we’ve seen in the last 12 months. But I think the onus is on the tech provider to embrace a culture of open communication and ensure that the client is being seen and heard. Any technological tool is a sizable investment, and RIAs want to feel confident they’ve got the support behind the product. So, as part of your vision, I need to know, as a potential client, how you will ensure continuity. Because if there’s a drop in service or I feel neglected, I will bolt. I have many more tech choices today than I did even ten years ago.

Din: AI tools for wealth management continue to develop. What’s got your attention right now?

Bruckenstein: I’m keeping an eye on the tools aiming to replicate front-facing client service. The first robo-advisors weren’t built to sit down and discuss your financial dilemmas. They were tools designed to quickly put you in a portfolio, and a simple one at that, too. Everyone now sees them for what they really are – automated TAMPs. They were never going to upend the advisory business. But a system that can have a human face and voice, carry a free-flowing conversation with you and build you a portfolio?  That’s certainly a challenge.

Din: How do firms manage the compliance concerns surrounding the use of AI?

Bruckenstein: This isn’t as complicated as some folks want to make it to be. If you have a robust compliance program, you’ve already got a lot of the language and checks to evaluate and monitor the tools you want to use. There are some new elements to AI tools, such as plagiarism concerns and hallucinations, that require a little more language and consideration, but at the end of the day, you’re a fiduciary; you’re bound to put the client’s needs first; no matter what tools you rely on to get that done.

Din: The industry is investing more in cybersecurity, but it’s difficult to keep up with all the threats. Where should advisors focus their attention?

Bruckenstein: Cybersecurity is such a critical area, but advisors just haven’t given enough attention to it to begin with, so any firm that’s taking it seriously at all has my hearty approval. Look, it’s a complicated field; there are constant threats, and it’s almost impossible to keep on top of them all without a dedicated resource to the issue. That’s why there are any number of consultancies out there willing to work with RIAs to help them become more secure and stay protected. But I think there’s got to be a basic level of literacy among RIAs about risks to client data and how to mitigate them, protecting the tools you rely on, and knowing your responsibilities according to the regulators.

Din: You spend a lot of time thinking about what’s coming next – which prediction of yours has already panned out?

Bruckenstein: AI, for sure, has developed a lot sooner than I or anyone else thought it would. People used to believe we were decades away from getting to the point we’re at now. It’s a new world out there, and it’s time wealth management takes advantage of the power these tools can offer.