Historically, there has been more technology adoption by advice firms in the US than in the UK, according to Ian McKenna, founder and director of the Financial Technology Research Centre.
The reason for this, McKenna believed, was because there haven’t been the same regulatory constrictions in the US.
He said: “Where the big difference is, the US market regulates differently to the UK. It doesn’t have anywhere near the level of consumer protection regulation that the UK has, and that’s actually led to the UK market having a significant advantage in selling technology into the US because of its robust regulatory infrastructure.”
Though, the lack of financial regulation in the US has made its advice tech businesses uncompetitive globally, according to McKenna.
John Westwood, group chairman of Blacktower Financial Management felt one of the challenges facing US-based advisers was navigating increased regulatory compliance and the tightening of anti-money laundering rules.
“These challenges are not unique to the US however, the US’s decentralised regulatory framework requires advisers to adapt to varying state-level regulations, which can be a significant challenge,” he said.
“This situation offers a learning opportunity for UK advisers on managing compliance across different regulatory environments,” he explained.
Similar to McKenna, Westwood believed UK advisers had “significantly” adopted advanced technology platforms.
He added: “These include comprehensive data analytics tools to monitor transactions for anti-money laundering purposes and robust CRM systems to manage international client interactions.
“This technological adoption showcases strategies that UK advisers might consider to enhance their own practices, especially in handling cross-border clientele.”
While Heather Hopkins, founder of NextWealth, felt regulatory disruption was much more pronounced in the UK in comparison to the US.
She said: “The regulator certainly is a focus in the US but doesn’t get the same level of focus when discussing business challenges.”
Hopkins believed a common challenge to both US and UK advisers was tech integration.
She said: “While there are fewer custodians / platforms in the US, there is a challenge of integrating across systems – particularly marketing systems, financial planning and custody systems. They refer to this as swivel chairing. The idea is that you need to swivel your chair between systems.”
For Bryce Skaff, co-head of the global client group at Dimensional Fund Advisers, while technology was being used by US firms for some elements of the adviser delivery like client onboarding, meeting preparation and plan design, it had yet to materially move the needle on live client interactions or digital marketing.
He said: “I suspect it’s true across markets that the vast majority of the top vendors in every part of the advice tech stack are the same names. The most important element isn’t the technology you choose to deploy, it’s how you choose to deploy the technology.
“Too few firms maximise the productive capacity of the tools they use. They should be asking questions like, can this technology, if properly utilised, create a meaningful impact on our businesses and client experience? How much have we institutionalised the tech we already have? Can we get more out of it if we invest a bit more in training and onboarding staff?”
Growth
In terms of US firms embracing technology, Hopkins said there was a much bigger focus in the US on actively trying to grow the client base with more firms employing marketing teams to nurture leads from existing clients, professional referrals and to drive inbound leads.
Skaff also discussed how US advice and wealth management firms were “wrestling” with growth.
He said: “While some channels are growing faster than others, we observe organic growth is universally the most difficult to achieve (vs market or acquired/inorganic growth).
“The good news is that the industry at large has evolved from a sales business to a client-centric advice business, where most arrangements are on a fee-basis. The challenge for some now is that the fee model is no longer a differentiator for growth.
“For differentiation to lead to growth, prospects need to believe your firm has experience working with clients like them. Of course, they also need to understand your value proposition and trust you can capably and credibly deliver on it.
“Some market entrants have tried to commoditise advice with advice fees at a fraction of the level of traditional financial advisers. This may make prospect engagement more difficult for incumbent advice firms.”
Proactivity
Hopkins believed we would see a greater focus on marketing from financial advice firms in the UK as seen in the US market.
She said: “There is a huge need for financial planning advice in the UK and a massive opportunity for financial advice firms to work with more clients.
“This requires a proactive approach to marketing and outreach. Some firms in the UK are already seeing strong business results from proactive marketing. I expect to see more firms in the UK to focus on business growth in the coming years.”
McKenna thought that fundamentally the behaviours of US and UK advisers were similar, however he felt there was a difference in attitude between the two.
He explained: “The difference between the US and the UK is the ‘let’s do it attitude’. You put forward an idea in the UK, and everyone goes, I don’t know. The sucking of teeth. People in the US are absolutely proud to be financial advisers. They are proud to be financial planners. It is one of the most sought after occupations for university graduates.
“If there is one thing that we could learn, it’s to be prouder of what we would do in the industry and quite how much value it adds. Now, I’m not saying people in our industry aren’t proud, but I see both sides and financial planning is a much sought after occupation in the US.
“However, in the UK we haven’t done a good job of convincing consumers the value of what financial planning does.”
alina.khan@ft.com
