Netwealth’s 2020 AdviceTech Report unpacked

Profitability outcomes from leveraging technology

The report identifies firms who are growing their funds under advice (FUA) and revenue year-on-year and are adopting a planned approach to automating many of their day-to-day business processes through technology. Businesses who scored high on both of these metrics are characterised as ‘AdviceTech Stars’, which represent only around 12 per cent of the total advice industry.

The report finds that these AdviceTech Stars are generally managing larger amounts of FUA, generating higher revenue and have a better EBITDA to revenue margin than practices across the industry more broadly. They also report that use of technology in their business has led to higher levels of customer engagement, better back office efficiency and more new clients, compared to firms that adopt less of a planned approach to technology and report these benefits less often.

In terms of why these firms may be able to leverage technology more effectively in their practice, the data points to AdviceTech Stars taking more time to understand the technology offerings in the market and make a clear plan as to how technology fits into their business. While 54 per cent of the industry as a whole cites lack of time and understanding as a barrier towards more technology adoption, this is only the case for 35 per cent of high-performing firms. Around 43 per cent of AdviceTech Stars also have a clear technology roadmap in place, compared to 12 per cent of ‘moderate performing’ firms with lower business success scores.

How high-performing firms use tech to boost engagement

AdviceTech Stars are using client portals to provide a range of different services to clients allowing them to become more engaged with their finances, the report finds. Around 35 per cent of these firms are providing finance news and updates to their clients through portals and 53 per cent are interested in offering a news service to their clients in future.

Providing clients with basic oversight of their advice portfolio is another key service, with 32 per cent of AdviceTech Stars saying they offer clients the ability to view their account balances and transactions through a client portal. Another 29 per cent provide clients with the ability to generate their own reports, while 29 per cent allow clients to update their own personal information through a client portal.

These firms also report using digital communications regularly, with 71 per cent saying they update their website at least once a month, and 43 per cent saying they post to social media at least once a week.

The key AdviceTech trends star firms are taking note of

High-performing firms report more interest in automating services like SOA generation and compliance checks, and in providing low-cost, efficient single-issue advice in the future. Around 60 per cent of AdviceTech Stars believe regulatory compliance will be impacted significantly by technology in the next five years, compared with 49 per cent of the industry more broadly.

Around 68 per cent of these high performing firms believe technology will also have a strong impact on SOA creation, while 46 per cent say scaled advice technology will have the greatest impact on advice practices in the next five years.

AdviceTech stars are also heavily invested in cloud technology, with 100 per cent saying they use cloud-hosted document storage and sharing technologies compared to 72 per cent of the rest of the industry. These firms also place a strong emphasis on integrating CRM with other business processes, with 59 per cent saying their CRM is integrated with email marketing and 40 per cent saying they integrate it with client pipeline management.

In addition, high-performing firms are regularly taking note of the position of their business and clients through reporting and dashboard tools. The report notes that around 61 per cent of AdviceTech Stars make use of dashboards and reporting tools to better understand their business and clients, compared to 32.5 per cent of the industry more broadly.

Broadening service offerings

Through leveraging technology, high-performing advice firms are able to scale up and broaden out the range of services they offer clients. The report notes that around 86 per cent of AdviceTech Stars offer SMSF services to their clients, compared to 69 per cent of the whole industry. Similarly, 64 per cent of these firms offer debt management services to clients, 54 per cent offer aged care and 39 per cent provide tax services.

AdviceTech Stars are also simplifying the ability for their clients to access different services in their business by using scaled advice tools. Around 32 per cent of these practices indicated they used scaled advice tools compared to 19 per cent of the broader industry. Of those who used these tools, 56 per cent said they used them at least once a week.

These high-performing advice practices also expect to gain further insights into how they can better serve their clients through artificial intelligence. About 46 per cent of AdviceTech Stars think big data will have the greatest impact on advice of any technology in the next five years, and 42 per cent think AI and machine learning will have the strongest impact.

To learn more about Netwealth's 2020 AdviceTech Report, click here.