Irene Guiamatsia

The uptick in technology usage during the Covid-19 pandemic’s first waves, and better integration between platforms and software providers, has led to increased profit margins for better-run advice practices, according to new research from Investment Trends.

The twentieth edition of the research house’s ‘Adviser Technology Needs Report‘, extracts of which were exclusively shared with Professional Planner, found a strong correlation between profitability and technology adoption and integration.

“Advisers that have bigger client books, use more technology and use more integration are spending the most on technology,” Investment Trends head of research Irene Guiamatsia says.

The data shows that adviser appetite for experimenting or adding on new tech applications “ramped up” in 2020 and 2021, when the profession was mostly restricted to work-from-home arrangements, alongside the bulk of the broader population, during the mandated lockdowns, Guiamatsia says. She points to adoption of even simple technologies, such as online meeting and planning tools or digital signatures.

Two to three years on, those investments are starting to pay dividends, she says, as the promise of increased efficiencies is realised.

Guiamatsia says the “whole ecoystem” — that is, advisers and licensees willing to allocate more capital to their tech stacks, and technology providers being willing to partner and integrate with each other — deserve credit for the open architecture culture now starting to take hold in the industry.

“There’s profitability benefits [for the] adviser, if they’ve kind of cracked that nut,” she says. “[But] if advisers are profitable then of course, the platform providers and other service providers to advisers are likely to  benefit as well. So, it’s a win for everyone.”

Dunbar’s cognitive limit

The research found the pace at which advisers are embracing technology continues to rise. A growing portion of advisers are satisfied with the tools they currently have access to, and increasingly, they are willing to pay more to access better or more relevant technology tools. Applications related to retirement planning and cashflow modelling were found to have the strongest demand, with 32 per cent and 31 per cent of the surveyed cohort voicing a preference for these tools.

“There is no subsiding in the interest advisers express for seamless data transfers between the various systems they use,” Guiamatsia says.

“While the focus remains on traffic between planning software and investment platforms, there is also substantial demand for integrations with bank accounts, trading tools, and appointment scheduling software – all of which can support advisers in meeting growing client demand.”

The report found a rise in the number of active clients per adviser had risen to 120 from 113 last year and 107 in 2021, which Guiamatsia says is slowly approaching “Dunbar’s cognitive limit” – a theory that any person can only reasonably and successfully manage 150 relationships.

But she says it would be wrong to interpret the trend as indicating advisers are servicing a large number of lower balance or less profitable clients, often called  C- and D-grade clients.

Instead, the nation’s most profitable firms are actively recruiting and onboarding clients in their core target markets. Again, Guiamatsia attributes this to partly to efficiencies gained through technology.