A fifth of financial advice firms plan to scale back their tech stack in the next 12 months, as financial pressures take their toll, new research from NextWealth has revealed.
In its latest report ‘Advice Tech Foundations: Stability and satisfaction in adviser tech’, NextWealth said many advice firms are choosing to rationalise their tech rather than switch providers, following a surge in technology during the Covid-19 pandemic.
“Consumer Duty and pressure on fees is prompting advice firms to ditch tech they believe doesn’t work hard enough,” says Heather Hopkins, managing director of NextWealth. “This rationalisation comes after the number of tech partners recruited by advisers swelled during and immediately after the pandemic. Sadly, some tech providers can expect a ‘Dear John’ letter this year.”
The report also found that advice firms spend the largest share of their technology budget on their back office. On average, for every £1 spent on their client portal, advisers spend £5.20 on their back office.
Less than one in 10 (7%) firms said they have in place, or refer clients, to a digital advice offering, while 13% say they are developing or considering developing a digital advice offering.
Advisers said their top priority for technology is the ability to deliver value, with tools such as cashflow modelling and risk profiling, followed by technology that prevents foreseeable harm. NextWealth said cyber security remains a key concern for all firms and client portals are used by firms to reduce cyber risk.
The third most important component was the ability to boost efficiency across the back office.
The report also highlighted the role technology will play in supporting advice firms in meeting their Consumer Duty requirements. Nearly half (46%) of firms are expanding their cashflow modelling tools to help them with this, while 45% of advice firms are using client satisfaction scores to help demonstrate value.
