our WealthStack 2024 Studythe 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% drop in respondents reporting the use of marketing and technology related to customer retention as a business area that their technology supports.
This dropped from 52% who reported using marketing technology in 2023 to 45% this year.
It's hard for me to guess why this might be.
Maybe it has to do with the large number of new introductions to automated marketing and communications technology available to advisors and some advisors/firms are between vendors. There has been an increase in the use of artificial intelligence technology by these providers and there has also been significant consolidation in the sector, with firms acquiring or merging with each other.
Or perhaps with an increasing number of consulting firms using marketing services that are described as platform-as-a-service, they no longer consider it part of their technology stacks.
It's also quite possible that this is a bit of a statistical anomaly. Ultimately, the three main business areas supported: financial planning (70%), portfolio management (70%) and compliance (54%) however fell by 3% (financial planning and compliance) to 5% (management of portfolio) since the year. 2023.
I need to touch on the methodology of the study before I continue. As in previous years, it was based on an online survey, this year it was completed by 416 respondents who are active users of WealthManagement.com and represent primarily a mix of advisors (70% of respondents), C-suite executives (16% of respondents) and others across industry consulting firms.
RIA stores accounted for 40% of survey respondents, while dual/hybrid registered 13%, followed by regional brokerages (11%), insurance firms (10%), banks/credit unions/trust/thrifts ( 6%), wire (5%) and others (15%).
The surveys were completed between June 12 and July 16, 2024 (the 2023 and 2022 survey versions 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 happy to see a steady decline in advisors/firms classifying themselves as laggards (10% in 2024), which are firms that said they did not prioritize or were using technology effectively – 12% self-classified as laggards in 2023 and 13% in 2022.
Similarly, I was happy to see an increase, even 1% year-over-year, in those firms that self-classify as innovative firms (33% in 2024), which distinguish themselves by investing in technology to deliver the best experience best possible for the customer (and this has increased from 28% in 2022).
While innovators make up a third of respondents, the majority (57%) consider themselves operators, which is defined as firms investing in technology primarily to improve their operations and internal efficiency.
I was also happy to see that financial planning technology continues to be thought of in general terms as the technology that delivers the best return on investment (50% of respondents thought so), although this is a significant drop from last year ( 59% in 2023). This still represents a major advance from decades of financial planning either not being offered at all or as fairly static window dressing in the form of a one-time plan. However, the fall is another thing worth watching.
Finally, I'm happy to see the overall satisfaction with the technology continuing to grow; The percentage of all respondents who say they are very satisfied rose to 44% from 37% last year, and those who say they are dissatisfied fell from 8% to 4%.
Curiosity
Beyond the decline in the use of marketing technology, I find the perceptions around artificial intelligence curious. Over the next five years, 75% of respondents say artificial intelligence will be the technology trend with the biggest impact on the wealth management industry, up from 82% in 2023. To me, this is a sign that advisors and firms are becoming increasingly comfortable with, if not their actual use of AI, then at least its existence and potential application in wealth management.
In the past year alone, dozens of large firms have announced deployments of AI technology, and I've personally met with dozens of providers, from startups to larger companies, that have built or are building AI technology specifically for use cases wealth management.
Another 52% of respondents say the biggest impact will come from regulatory compliance and cybersecurity solutions, 25% from access to centralized data, 22% as a result of consolidation through M&A and 19% saying they will be blockchain. It is interesting to consider that some of these technology categories will also be greatly affected or transformed by the use and/or integration of AI, particularly compliance, cybersecurity, and centralized data management and analysis.
Other points to note
When it comes to the top three business objectives for the coming year, respondents have remained consistent in their choices across all three surveys — and that's out of a total of nine choices in 2024 (two additional choices were added this year).
These top three business objectives include adding more customers (63%), deepening relationships with existing customers (51%) and improving the customer experience (44%), all three within three percentage points of the 2023 findings.
Asked to rank their top three considerations when assessing their firm's technology needs, not surprisingly, 40% of respondents cited revenue growth as the top consideration. The second most popular consideration was alignment, at 21%, for increasing revenue and reducing cost/improving efficiency.
There is much more that advisors may wish to analyze within this report, particularly when it comes to seeing the breakdown of some of these categories and technologies and their use by the three classifications of firms (innovators, incumbents and laggards). Downloading the report is freealthough you will need to provide an email address.