1 wealth management technology today timothy d. welsh, cfp ® president nexus strategy, llc
TRANSCRIPT
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Wealth Management Technology Today
Timothy D. Welsh, CFP®
President Nexus Strategy, LLC
About Nexus Strategy, LLC
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• Founded in 2006• Strategy and Marketing Consulting Firm• Industry Domain: Wealth Management, Independent
Advisors• Principal Experience: Merrill Lynch, Schwab Advisor
Services• Current Clients: Technology firms, Custodians,
Independent B/Ds, Wealth Management Platforms• Columnist and Blogger for Investment News, RIABiz
and WealthManagement.com
Agenda
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• Wealth Management Landscape Today• Technology Adoption Issues / Solutions• Process Automation Example• Questions?
Financial Advisor Landscape – 300,000 advisors by channel
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RIA13%
Independent B/D35%
Wire-house24%
Regional B/D5%
Bank B/D6%
Insurance B/D17%
Independence Continues to Win - Assets by Channel Cerulli 2012
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Channel Assets in Billions
5 year CAGR
Wirehouses $5,360 - 0.4%
Independent B/D $1,801 3.1%
Independent RIA $2,302 8.8%Regional B/D $1,867 3.4%
Dually Registered $1,091 7.2%Bank B/D $629 -0.9%
Insurance B/D $434 4.5%
Bank Trusts /Private Client Groups $3,345 1.9%
Direct $3,997 N/A
Totals $20,104 N/A
The Greying of an Industry – Financial Advisor Demographics
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• 51 – Average age of advisors– 59 – Average age of advisor/owners
• 43% are over the age of 55• 33% are between 55-64• $2.3 trillion is controlled by advisors over 60
100,000 advisors will exit the industry in the next 10 years, yet only 25% have a succession plan
Source: Cerulli Associates, 2014
Wealth Management – The Big Strategic Technology Trends
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• Advisor Productivity• Ownership of the Home Screen• Mobile• Digital Advisors (Robo)• Next Generation Wealth Views• Technology Adoption
Technology Adoption – The Final Frontier
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• What is your CRM? (top 3)– Microsoft Outlook – 23%– None – 14%– Other (spreadsheet) – 14%
51% of advisors are not using a CRM
Source: 2013 Financial Planning magazine technology survey
Technology Adoption – The Final Frontier
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• What is your Financial Planning software (top 2)– None – 31%– Other (spreadsheet) – 18%
49% of advisors are not using financial planning software
Source: 2013 Financial Planning magazine technology survey
Technology Adoption – The Final Frontier
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• What is your Portfolio Management software (top 2)– None – 29%– Other (spreadsheet) – 17%
46% of advisors are not using portfolio management software
Source: 2013 Financial Planning magazine technology survey
The Bad News – Technology Adoption Challenges
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• Highly fragmented industry• Lack of data standards• Changing regulatory environment• Bull markets subsidizing inefficiencies• Inertia• Advisor age
The Good News: Technology Adoption Opportunities
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• Succession Planning• Regulatory changes – Compliance demands• Next generation of advisor• Success of online advice platforms• The leverage power of operational
efficiencies
The Economics of a Financial Advisor
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Revenues
- Direct Expenses
= Gross Profit
- Overhead Expenses
= Operating Profit
100%
44%
56%
42%
14%
Industry Benchmark
Source: Nexus Strategy, LLC aggregation of FA Insight, Investment News, Schwab Advisor Services benchmarking studies
Income Statement
The Power of Operational Leverage
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Revenues
- Direct Expenses
= Gross Profit
- Overhead Expenses
= Operating Profit
100%
44%
56%
42%
14%
100%
44%
56%
33%
23%
Industry Benchmark
“Post Technology Implementation”
~9% of revenue improvement
Income Statement
Source: ROI for RIAs – Laserfiche Industry White Paper
Operational Leverage Business Value Impact
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Size of Firm $500,000 $1,000,000 $4,000,000
Multiple on cash flow
5 7 10
Increased net income
$43,000 $89,000 $342,000
Net value increase
$216,000 $626,000 $3,421,000
Source: ROI for RIAs – Laserfiche Industry White Paper
Lessons Learned from Successful Technology Deployments
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• “Involve all stakeholders in the planning and requirements process - especially advisors and their staffs”
• “Don’t touch the software until all processes are mapped out in excruciating detail”
• “Develop a detailed and comprehensive communication plan for roll out”
Lessons Learned from Successful Technology Deployments
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• “Training, training, training – spend 30 cents on training for every software dollar”
• “Phased roll out – get early wins and points on the board quickly”
• “Celebrate and promote early adopters”
• “Develop reporting for executive management on progress”
Process Example: New Account Opening with E-Signatures
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Wealth Management Today
Timothy D. Welsh, CFP®
President Nexus Strategy, LLC