NextWealth’s latest report (Advice Tech Foundations: Stability and satisfaction in adviser tech) finds that a fifth of financial advice firms plan to make a change to their tech stack in the next 12 months, with many of those deciding to rationalise their tech rather than switch providers.

Heather Hopkins, Managing Director of NextWealth comments:

“Consumer Duty and pressure on fees is prompting advice firms to ditch tech that they believe doesn’t work hard enough. 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 finds:

• 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.
• Fewer firms this year say they have in place, or refer clients, to a digital advice offering – just 7%. The share of firms saying they are developing or considering developing a digital advice offering remained steady at 13%.
• One in seven firms have switched cashflow modelling tools in the last 12 months

The report highlights the tech that is most valued by advice professionals:

1. Delivering value: Cashflow modelling, risk profiling

• A core element of Consumer Duty compliance is evidencing fair value to clients. Cashflow modelling was cited as a key tool for this.

2. Preventing foreseeable harm: client portal, cashflow modelling, risk profiling

• Cyber security is a key concern for all firms and given the sensitive information held by financial advisers, it remains top of the agenda.
• Client portals are used by firms to reduce cyber risk as documents and trading instructions can be shared securely. This makes them essential to many adviser businesses.
• Another component of preventing foreseeable harm is helping to manage client risk appetite against a backdrop of soft / declining markets and rising rates on cash.

3. Boosting efficiency: Back office

• Slowing business volumes has prompted some firms to focus on business efficiency to maintain profitability and set the business on a firm foundation for future growth.

Consumer Duty

Tech has a clear role to play in supporting advice firms in demonstrating the value of advice delivered to clients:

• 46% of firms are expanding the role of their cashflow modelling tools to help in this regard. NextWealth heard from firms who are filing a “before” and “after” cash flow model to show the impact of the advice given.
• Tools to monitor client sentiment are also being rolled out. 45% of respondents are using client satisfaction scores to help demonstrate value

Adviser reviews

 The report also features over 4,000 reviews for tech providers from advice firms, plus in-depth feedback from 244 advisers.

Advice Tech Foundations: Stability and satisfaction in adviser tech report is available here.