Back-office digitisation delayed by inadequate funding

While the industry has witnessed a notable surge in the adoption of client-facing technologies in recent years, how advice practices are faring internally has largely taken a back seat.

Last week, AZ Next Generation Advisory chief executive officer, Paul Barrett, highlighted the growing prevalence of firms that fail to make sufficient investments in the systems that serve as the bedrock of their back-office operations.

“Flowers in reception and mints in meeting rooms are nice but they don’t move the dial on performance. Advice businesses need to spend more time on the unseen to ensure the right enterprise architecture to underpin growth,” he wrote in a recent article published on AZ NGA.

In conversation with ifa, Mr Barrett reiterated the important role that digital tools play in streamlining these processes but conceded that there is more to the story especially regarding tech providers.

“I think the challenge we have as a sector is that we haven’t seen real capital flow into digital tools for advisers,” Mr Barrett told ifa.

“I meet with a lot of providers of digital solutions for planning firms, and one of the first questions I ask them is if they can tell me about their capital structure.”

According to Mr Barrett, these same providers are typically in an early business or start-up phase, with the ambition to come up with the “latest and greatest” tech tool.

“It’s not easy, you need real capital. The thing is, there’s a lot of great people trying really interesting things. There is definitely increasing innovation happening, and it’s only a matter of time.”

The industry’s inability to break new ground is due to its ongoing recovery from being a “vertical product shop” for the last three decades, Mr Barrett explained, but opined that money will flow once the industry has broken that mold.

“If we can put man on the moon in 1969, I’m sure we can provide digital tools to financial planners in 2023.”

Dr Paul Moran, principal of Moran Partners Financial Planning and founder of iFactFind, held the same sentiment, and encouraged advisers to lean on the resources available to them.

“By using some of the already available advice tech solutions to drive practice efficiencies and make the advice process more effective, advisers could see more clients without compromising quality,” Dr Moran told ifa.

“Around the edges of this discussion sits technological advances that can help professional advisers deliver more and/or better advice to their clients. This has been a little lost in the push to develop robo-advice platforms but has the potential to significantly improve advice accessibility and affordability.”

But, according to Mr Barrett, it doesn’t stop there. He noted that digital providers shouldn’t just be developing these back-office technologies but should be actively engaged in their integration.

“In these SME businesses, when you look under the bonnet, you don’t see change management or project management capability,” he said.

“In the old days, practices got their tech fed to them by an institution like a bank or a life insurance company. If you look at the trends, practices are now moving away from that and are searching for the next tech solution. It’s hard for small practices because they don’t really have the time.

“If a firm has got a digital solution and they take it to a financial planner, they can’t just sell it and walk away. They’ve got to be able to help the firm deploy it.”

While the industry has not yet seen a significant flow of capital into new digital tools, Mr Barrett explained that digital advice is likely to move full steam ahead once it is adequately invested in.

“Once technology is deployed in the advice space and people with capital are coming in on scale, I think things are going to start accelerating, and when they do, it will accelerate quickly.

“It’s the same as what we have seen in the AI space. Trying to understand the impact this may have on the advice process down the track is something we should all be looking at and be thinking seriously about.

“Looking at the pace of change, there might be a trickle at the moment, but that trickle will soon become a raging current,” Mr Barrett concluded.