Four Financial Advisor Trends Reshaping #AdvisorTech

Four Financial Advisor Trends Reshaping #AdvisorTech

Despite the reality that change is inevitable, it’s remarkably difficult to identify in real-time which new innovations will stick around and change the world, and which will never manage to gain traction (or turn into a fad that is quickly adopted but just as quickly forgotten). In some cases, the reality is that the idea was good but its execution was poor, and couldn’t stand up to reality. In other cases, the idea was ‘right’ but was before its time. In the end, it takes the right execution of the right idea, and the right environment that fosters the demand, to make innovation happen.

The past year witnessed an immense amount of change in the AdvisorTech landscape, driven by a combination of new innovations that came to market, and some ‘old’ ideas whose time has seemingly come. All of which is driven by broader structural trends that are slowly but steadily reshaping the financial advisor landscape… and formulating the conditions that allow new technology to take hold.

In the current environment, the four trends reshaping #AdvisorTech include: 1) an ongoing transition From Products To Advice as advisors increasingly sell advice (not products); 2) a growing hunger to Automate The Back Office, as the shift to recurring revenue business models is driving a push to better scale the back office (to service that recurring revenue more efficiently); 3) Scaling New Revenue Growth, as advisory firms increasingly separate the advisors who service clients, and the (non-advisor-driven) marketing systems that bring them in; and 4) Evolving Investment Demand, as anticipated low returns for both stocks and bonds lead to a growing desire to invest in… almost anything else (from alternatives to structured notes and annuities to cryptoassets).

In last week’s discussion, we explored the first two trends – the shift from products to advice, and the growing demand for solutions to automate the advisor’s back office – while this week, we delve further into the #AdvisorTech trends that are driving some of the biggest investments: scaling new revenue growth, and platforms to meet the evolving investment demands of advisors (and their clients). As the reality is that advisors pay substantially more for #AdvisorTech solutions that power revenue growth – either directly in the form of marketing solutions, or indirectly by powering the portfolios of advisors still primarily operating on an Assets Under Management (AUM) model. Which means trends that impact the ways advisors generate (new) revenue are especially lucrative (as reflected in some eye-popping capital raises in 2021!).

In the end, though, it’s important to recognize that trends persist (which is what makes them trends, and not fads!), which means the trends that drove AdvisorTech innovation in 2021 are likely to continue well into 2022 and beyond. So hopefully this discussion provides some helpful perspective in not only looking back at where AdvisorTech has come over the past year… but where it will continue to go in the year to come!?

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