The Data Storm report from Marshan Consulting, commissioned by Elemnta, revealed that the somewhat inconsistent implementation of technology by advice firms can cause more harm than good, potentially leading to gaps in essential data that can negatively impact the quality of advice they give to clients.
Following a review of existing research, the report found that despite the development of new technologies, such as online self-service risk profiling and fact-finding tools, advisers have been slow to adopt, highlighting a “disconnect between technological availability and practical implementation”.
Notably, even as technology has introduced more efficient ways of interacting with clients and collecting information, the report said many advisers are still opting for “traditional, time-consuming methods for data collection”, such as in-person meetings and paper-based forms.
“The combination of this fragmentation and reliance on manual processes impacts efficiency and raises significant concerns about data quality and consistency,” the report said.
“The lack of a ‘single source of truth’ for client data leads to discrepancies between systems, potentially resulting in flawed financial plans, unsuitable product recommendations, and, ultimately, damaged client relationships.”
Furthermore, the report explained that this penchant for taking on additional technologies has left many businesses using several unintegrated systems, leading to inefficiencies as well as increased risks for error.
The piling of technology has also played a role in the increasing cost of advice, with technology costs accounting for as much as 10 per cent of practice revenue in Australia, compared with other countries that generally spend up to 6 per cent.
While practices may see technology as a potential “quick fix” to their data issues, the report explained that this has also given rise to challenges as they attempt to manage large amounts of complex data and navigate unnecessarily bulky tech stacks.
Elemnta chief executive Shaun Green argued that the future of the advice industry is dependent on a strong data infrastructure foundation but changes are needed to heal the current infrastructure to accommodate this.
“The research makes evident a severe disconnect between the top-down technology solutions and bottom-up practitioner challenges. The ’fracture’ stems from a lack of standard data and system integration at the base of our industry,” Green said.
Dave Curran, chairman and non-executive director at Elemnta, said effective technology is key to helping the diminished advice profession meet the needs of Australians.
“The wealth and financial advice sector is at a crossroads. Our industry has been grappling with the fragmentation and inefficiencies that arose after the 2018 financial services royal commission, which led to the exit of major banks from providing advice,” Curran said.
“The industry is simply not equipped to meet the growing need for affordable, accessible advice.
“Ultimately, we need to ease the burden on wealth managers and financial advisers by providing them with integrated, scalable tools that improve efficiency and reduce the cost of delivering quality advice. This is a crucial part of solving the ‘access, affordability, quality’ challenge.”
Green argued that technology providers need to step up to address the challenges facing the advice industry as future loyalties will lie with those that can deliver tangible benefits.
“Our goal with this research was to spark an industry conversation and bring awareness to the fact that we are rapidly approaching a new competitive frontier driven by digital-first strategies,” Green said.
“Given the scale of pain points experienced by practitioners, power will lie with the product providers who place technology at the centre of operations and customer engagements.
“We’re already seeing the potential of this approach to grow and transform the industry … The product providers who fail to adapt risk falling behind.”
