Advisors Grow Their Tech Stacks as Clients Demand More

To borrow from Apple’s famous slogan of the late aughts, there’s an app for that. Or at least, there’s wealth management tech. 

As more financial advisors extend their services beyond traditional investment management, they’re employing tools that can help them get ahead. A recent report from Cerulli found that roughly half (47%) of advisors who are not currently using portfolio tax optimization technology expect to start in the next year, and 37% of those who aren’t tapping specialized estate planning technology plan to adopt it within the same time frame. 

“The right technology helps clients understand their full financial picture, find tax savings and get organized in ways that used to take far longer,” said Adam Spiegelman, founder of Spiegelman Wealth Management. “The challenge is that the bar for sophisticated advice keeps climbing, and advisors who don’t invest in these tools — and the expertise to use them well — will find it harder to meet what clients now expect from a comprehensive relationship.” 

Growing Tool Boxes  

Advisors are certainly feeling the pressure of changing client demand. While much of what they provide is still grounded in tried-and-true investment management services, they’re offering 7.6 services on average, the study found. 

“Investment management used to be the differentiator, but today it’s just the baseline,” Spiegelman said. He added that clients expect advisors to understand taxes, estate planning, insurance (both personal and property/casualty), Social Security and increasingly Medicare, not just markets. That’s even led his firm to evaluate Medicare planning software.

But building a tech stack comes with challenges: 

• Roughly seven in 10 advisors identify integration as the biggest pain point with the technology that they use. 
• AI is a “potential game changer” in terms of increasing the efficiency with which advisors can offer income tax planning and estate planning, which have historically been fairly laborious and time consuming, said Michael Rose, director of Cerulli’s wealth management practice. But “some of these solutions are relatively expensive compared to other technology solutions advisors use, and are less likely to be used on a daily basis, which according to our research, has been a barrier for adoption.” 

Uncle Sam Calling. Not all services are on every advisor’s implementation list. For instance, just 40% of advisors offer income tax planning. That’s the result of a variety of factors, including firm policies that restrict advisors from offering tax planning, insufficient knowledge and expertise necessary to offer tax planning, preferences among some advisors to partner with a CPA who can offer those services and more, Rose said.