Skip to main content

Those adopting digital transformation projects must also stay nimble because the dangers include getting bogged down in multi-year projects that don’t deliver enough up-front benefits.Leo Wolfert/iStockPhoto / Getty Images

Sign up for the new Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.

The digital transformation that’s taking place in the investment industry is empowering wealth management firms with better productivity and client experiences. That’s because technologies such as cloud computing and artificial intelligence (AI) are helping cut costs and make advisors more responsive.

Digital transformation involves using new technologies to change a company’s underlying business processes. That creates a range of possible benefits, says Marina Shtyrkov, associate director, wealth management, at financial services research and consulting firm Cerulli Associates Inc. in Boston.

“Technology can help teams address the complexities of wealth and open up time for higher-value activities,” she says. “It can improve the client experience, allow advisors to scale client relationships, and enhance advisor productivity through process automation and workflows.”

Financial technology firm Broadridge Financial Solutions Inc. found in its annual survey of Canadian financial services companies that 58 per cent increased their productivity and lowered costs through digital transformation.

Joseph Lo, vice president, wealth product innovation, at Broadridge in Vancouver, says that cloud computing is a foundational technology for digital transformation and had the biggest digital impact on financial firms – cited by 56 per cent, up from 41 per cent two years ago.

“It’s cloud-based technology that enables things like better integration,” he says. Cloud platforms let developers use software services to build powerful new applications.

One technology that cloud computing opens up for advisors is AI. This technology, which uses brain-like neural networks to view data in new ways, depends on the cloud’s scalable data storage and computing power. It’s also gaining more traction. Broadridge’s research shows 41 per cent of financial services firms are investing in it, up from 34 per cent in 2020.

How firms are using AI to manage relationships

Laura Money, executive vice-president and chief information officer at Sun Life Financial Inc. in Toronto, says the company has just begun exploring AI for better data analytics. It will use machine learning among other technologies to produce insights that could help advisors during conversations with clients.

“Some of those might be ‘nudges’ to help our clients live healthier lives or save a little bit more efficiently,” she says.

Sun Life is also revamping its cloud-based Salesforce customer relationship management (CRM) system to make use of these data.

“Some of those [data] would be loaded into the CRM so that when the advisor has the conversation, they get that insight,” she adds.

Broadridge sees opportunities in using AI to predict which clients are at risk of leaving. The company has just signed its first customers for a service that scans thousands of data points to see which clients are most and least satisfied. That can drive better client conversations for advisors, Mr. Lo says.

Cloud is also essential for digital collaboration applications such as video conferencing and electronic document signing, he adds. These technologies topped adoption globally among advisors in another Cerulli survey, at 88 per cent and 86 per cent respectively.

Collaboration goes beyond traditional video conferencing to what Mr. Lo calls “co-browsing.”

“If you’re doing financial planning, then maybe clients don’t have to go into the office,” he says. “Now you can do that collaboratively through digital secure screen sharing.”

Meanwhile, Sun Life recently launched Prospr, an online platform to reduce friction for clients. It enables them to prioritize and track goals in preparation for an advisor meeting. It can also handle electronic document signing, Ms. Money says.

Although AI and digital collaboration have captured investment firms’ attention, blockchain is still struggling, Broadridge’s research says. Investment in that technology fell to 13 per cent in 2021 from 15 per cent in 2020. Nevertheless, it still holds promise in applications such as documenting private equity ownership.

Documenting alternative investment information is often a manual process, which makes it difficult for advisors to get up-to-date data on client investments, Mr. Lo says. They can often wait up to 90 days for an update. Storing the information on the blockchain changes that.

“Blockchain technology allows wealth managers and broker-dealers to have better access to the data,” he says. “They can better track these positions.”

The cost of transforming your business

While digital transformation offers potential for wealth management firms and their advisors, it also brings challenges, Cerulli warns. The research firm found the biggest challenge facing financial services companies is insufficient time to learn and implement technology. Another problem is assessing the return on investment (ROI).

“Independent practices need to juggle the price of each individual technology solution with the value it will add to their firm and whether it warrants the additional cost, which can quickly add up,” Ms. Shtyrkov says.

Investment companies can look to qualitative metrics such as client retention rates and customer satisfaction scores to help assess their ROI, Mr. Lo says.

Meanwhile, Ms. Money points to levels of digital engagement with clients as a key factor.

But those adopting digital transformation projects must also stay nimble, Mr. Lo says. The dangers include getting bogged down in multi-year projects that don’t deliver enough up-front benefit.

Another common mistake investment companies make is focusing too heavily on technology without including advisors in the conversation, he says.

“When there’s a disconnect between head office and the advisors, that’s when things fall apart,” he adds. “You have to communicate with your advisors, collaborate with them, and educate them.”

For more from Globe Advisor, visit our homepage.