What should firms do when upgrading technology is so cumbersome, it feels a bit like repairing a jet in midflight?

The future of wealth management could be a bionic one, but firms looking to upgrade their technology stacks face serious roadblocks, Ron Carson, CEO of the Carson Group, said at a session on hybrid investors at the In|Vest conference in New York.

“I hate the term ‘robo,’” Carson says. “If you look at the whole question of traditional or digital, it’s going to be a combination of both. Today, in our society, you better be able to demonstrate value, or, without a doubt, you’re going to be replaced.”

The Carson Group recently invested $52 million into its technology stack, according to the firm. Revenue is up 243% over the last five years. Nine new partner firms were added between April and June, and AUM grew to $6.1 billion at the end of the second quarter, the firm says.

Invest 2018 ron carson hybrid advisors IAG
Patrick McLain


But adding new technologies — especially for firms with existing legacy platforms — can prove daunting, if not unmanageable. “It’s like changing the engines on a 747 in flight,” Carson says. “It’s just not going to happen.”

So, how can firms create the impossible?

“I would go back to the strategic conversation,” said Angela Pecoraro, CEO of Advicent. “What is the firm attempting to do? Where are they growing? Where are they better?”

For example, if a firm is trying to improve its margins by cutting costs, it could use technology to automate and streamline back-office systems, she says. On the other hand, if a firm is trying to strengthen its value proposition in the market, it might be better to focus on front-office solutions and technology that can demonstrate more value to clients and prospects.

“Really understanding what you’re trying to do as a business should lead you down the path to get started,” Pecoraro says.

Video
Ron Carson foresees AI besting human advisors within a year
Data about client behavior will drive better user experiences.

While the fully automated solutions have grown in popularity, the majority of clients prefer technology with a human touch, says Eduardo Queen, director of digital management at Wells Fargo Advisors. For example, only about 10% of his firm’s customers are looking for a fully automated investing experience. On the other hand, more than 70% want a combination of digital and human investment tools.

“The basic question is what do our clients, and next generation clients, want? A digital-only solution was not going to please the majority of them,” Queen says. Wells Fargo Advisors manages roughly $1.7 trillion in client assets, according to the firm.

If clients only need portfolio management and tax optimization services, then machines make sense, he says. On the other hand, human advisors provide value when it comes to coaching investment behavior and understanding needs and risk tolerances, he says.

For Carson, the perfect solution that will come to dominate the future of automated investing starts with the technology itself. “The client doesn’t know what they want,” Carson says. “They know it when they experience it.”

Sean Allocca

Sean Allocca is an associate editor of Financial Planning, On Wall Street and Bank Investment Consultant.