3 key barriers to business growth for advice firms

New and ongoing research from Objectway sheds light on the top priorities for advice firms and what is preventing them from achieving their goals. 

The top five priorities for advice firms are: 

1. Updating/changing legacy systems 

2. Client onboarding 

3. Better client digital services 

4. Client suitability 

5. Improving efficiency dealing with compliance/regulation 

HOWEVER, even if firms have one or more of these goals in mind, there are some significant barriers to actioning them. 

AdviceBridge Chief Commercial Officer Bruce Ely-Johnston states “We see many firms using technology believing that they have a good system, only to show them how antiquated it really is”. 

He continues “One of the big issues for firms is the small number of large providers dominating the space, which is compounded by advisers lack of engagement with smaller providers who can provide much needed improvements”. 

The Top 3 barriers we see preventing advice firms from growing their business 

1. Legacy technology 

As firms have grown over the first 20 years of this century, they have acquired different systems for various different functions. These have predominantly been based off “old” technology and hence most firm’s tech stacks are clunky, leading to a multitude of issues. One issue, which is well documented, is having various systems that aren’t well integrated, thus making the process of using each system very long-winded. 

Although most will have adopted tech that, at the time, improved how quickly a task or process was completed (over a purely manual process, for example), these solutions aren’t nearly as effective as more modern pieces of technology. 

Ely-Johnston states “The whole process of onboarding a new client typically takes between 25 & 35 hours. Modern systems can help to improve this to under 5 hours. The underlying systems and processes used by the majority of firms are making it more time-consuming to complete their work, less profitable and more difficult to grow their business”. 

One of the main issues for this legacy technology is… 

2. Need for culture change 

The Covid-19 pandemic was responsible for significant changes in the way many firms function. Simple things like being able to offer remote financial advice via video conferencing, for example, became a necessity extremely quickly. 

But firms really had little choice. Some firms have continued to stay abreast of the cultural changes required to keep up with shifting client demands, but not all. 

Firms who resist the tides that are steering many towards a more digital approach could find themselves lagging behind in terms of profitability. Not only will firms be challenged by their peers, but they could also wake up to firms like Amazon or Apple assaulting their business. It’s worth contemplating what has happened before: Blockbuster versus Netflix for example, and the cautionary tales of firms like Kodak and Nokia. 

AdviceBridge finds that many firms don’t know where to start or where to look, and often stop there. The first step is to look at themselves as a business and understand the culture they have to enable them to move beyond their current model or approach. Which leads onto… 

3. Lack of skill set within the company 

In 2022, a Censuswide survey of more than 7,300 business decision makers found that just 24% considered themselves to be data literate. It also discovered that 78% would be willing to learn how to become more data literate. So, a great thing to do is start by asking: is it you that’s holding things back or your team? 

Firms often struggle or hold themselves back, purely through lack of understanding. By investing in data literacy and educating themselves, they can bring more diverse and creative thinking to their conversations about technology. This can aid problem solving and also help identify inefficiencies and opportunities. 

Although 90% of business leaders cite data literacy as key to company success, only 25% of workers feel confident in their data skills. 

A great way to improve things is to raise its profile among everyone. Making it a conversation piece and empowering people to speak up, encourages them to discuss it more openly, which leads to making improvements and generating new business ideas. 

Ely-Johnston states “Implementing software nowadays is much more intuitive and does not require a tech wizard to get their head around”. 

Lack of understanding of the business benefits 

Investing in the correct systems can make significant improvements. However, firms can get hung up on what the cost will be, rather than viewing the value of these technological improvements and improving profitability. 

Business outcomes can be overwhelmingly positive in increasing AUM, profitability and staff costs, where fewer support and admin staff are needed for each front office member of staff, for example, a real case where the firm reduced the ratio from 2.55 to 0.7 

Automation and artificial intelligence ARE the future of your business 

If you’re planning on making improvements to your service offering and front office productivity, investment into the right pieces of technology can do wonders, enabling firms to achieve their goals. 

Investment in IT systems can overcome these barriers. 

But investment in yourselves first, is key.