Advising Is Late to the Party When It Comes to Digital Transformation

Updated: Dec 17, 2019


While many businesses are talking about digital transformation, relatively few have actually implemented it.

According to a recent IDG Research Services survey of 200 IT ​executives across multiple industries with over 5,000 employees, more than half of major employers undertaking digital transformation initiatives have paused or cancelled projects in light of the complexity—including people, processes, and technology—needed to meet business challenges. The survey found that 44% have not yet made process, operational and/or technology changes to support IT transformation initiatives, showing that a large number of even enterprise-level businesses are still in the early stages.

The financial advising industry is lagging even farther behind. According to PwC, only 10% of asset and wealth CEOS are currently planning to improve their digital capabilities, even though 65% believe that technology will reshape and significantly impact competition in their space within the next five years. Additionally, only 27% stated an interest in collaborating with startups, a lower percentage compared with both banking (31%) and insurance leaders (37%). According to PwC global asset and wealth management leader Barry Benjamin: “Confidence is high, but the sector is showing signs of being slow to innovate and adapt – particularly to technology and demographics.”

But if digital transformation is so badly needed because it’s so much in demand, then why is it happening so slowly? Why the disconnect between belief and action?

Challenges in strategy and implementation

The current race to transform established retirement plan advising services comes with major challenges. While it’s important to question the status quo and introduce solutions that will secure a competitive edge, the most difficult part remains designing and implementing innovation that solves real problems and makes sense in terms of a longer term business strategy as well as the technology needed to execute it. It’s all too easy to get carried away by the most immediate need and implement fragmentary or temporary solutions instead of seeing the bigger digital transformation picture.


According to the IDG survey previously cited, nearly two thirds of executives (62%) have failed to implement a strong foundation for digital transformation due to a failure to document and communicate the plan throughout the organization. Thirty-nine percent have documented the strategy but have not shared it—which limits an organization’s ability to create the culture of change necessary for success. A majority of organizations (64%) also cite legacy IT infrastructure, processes, and/or tools among the top five barriers to transformation, followed by data security (60%), technology silos (59%), budget (54%) and competing priorities (53%).

Changing daily work processes can also be challenging, and advisors typically are not experts in information technology or in architecting IT solutions. Only 26% of advisors are under 44. According to Cerulli Associates, advisors over 55 manage about 37% of assets and comprise 39% of advisor head counts, and some consultants believe that the pace of digital transformation may pick up as older advisors retire. Advisors may also believe that older clients or participants are not interested in or seeking a digital experience.

Yet, in spite of the perception that older participants may be less tech savvy and thus less likely to use a fully digital service, baby boomers show the highest adoption rate of robo-advisor use – 44%, with GenX close behind at 34%, in a 2018 Accenture survey. Gen Y had only a 9% share, smaller even than the Silent Generation at 13%.

Cerulli also found that 75% of advisors feel they could get greater leverage from the technology tools at their disposal. Technology tools that foster a collaborative approach to planning and advising will assume increasing importance as the generational wealth transfer continues. “As next-generation investors age and accumulate or inherit assets, practices must adequately prepare for a client base that will not only seek a consultative approach but also a more collaborative experience,” states Donnie Ethier, director of the wealth management practice at Cerulli.

Ironically, younger consumers rate frequent communication as a more important factor influencing loyalty than their elders in one study by Charles Schwab. While access to self-service mobile tools is important, 44% of millennials stated that it was actually the follow-up contact with their advisors that determined whether they would stay with a firm or switch to another. Regular personal communication between advisors and clients lowered the likelihood that millennials would switch firms to just 17%.

Read more on Digital Transformation in our recent whitepaper, "Doing Well by Doing Good: The Key Role of Financial Wellness Technology in Digital Transformation for Advisors."

#DigitalTransformation #RetirementPlanAdvisors

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