New technologies, like presidential candidates, go through a cycle that starts with a great build-up, lots of interest followed by many tests, and then a phase of sobering reality that will ultimately determine their fates. This last phase is underway for social media and mobile technologies, which are seen in a new light now that the hype has subsided.
This phase of demystification about new IT tools is essential before they become part of middle and back office operations because it’s an effective way of vetting new systems. (This demystification was first noted by Cris Conde, the former president and CEO of SunGard when FTF spoke to him a year ago about cloud computing.)
Market research firm Aite Group in a recent report found that financial advisors have been reporting “limited or diminished returns from their use of social media” in large part because they have unrealistic expectations or fail to correctly exploit social media. The report, “Financial Advisors’ Use of Social Media 2011: The Bloom Is Off the Rose,” is based on a 2011 survey of 437 U.S. financial advisors.
A key reason why there is less enthusiasm for social media may be that it has not turned out to be a panacea for attracting new clients, according to Aite. Oddly enough, less than one-fifth of survey participants, or 19%, said that reaching new prospects is a benefit of social media. This is a major setback as Aite’s survey of advisors in 2009 found 36% of them embraced social media to drum up new prospects.
Aite also found that advisors who see social media as a way to set themselves apart from competitors dropped from 21% in 2009 to 9% in 2011. In addition, financial advisors that have seen an increase in revenue or fees via social media slid from 16% in 2009 to 6% in 2011.
“It’s hard to criticize advisors for aggressively going after new clients, but many seem unwilling to admit that social media may be better suited to communicating with existing clients than to finding and acquiring new ones,” said Ron Shevlin, a senior analyst with Aite, in a prepared statement.
This same kind of new realism has overtaken mobile technologies and wealth managers, according to a new report from market research firm Celent.
Wealth managers are battling client mistrust and self-directed service offerings, which are putting increased pressure on wealth managers to justify their fees. Clients want better service and more transparency supported by technology, according to the report, “Wealth Management IT Spending: A Survey of Priorities and Spending Among Wealth Managers.” Wealth managers are supplying mobile tools for advisors and end users, “albeit slowly,” according to the report.
Despite the cautious embrace, wealth managers will be launching mobile applications for advisors and end users over the next 18 to 24 months. “However, many firms have yet to view mobile technology as a ‘must have’ service differentiator. Firms are more likely to launch tablet applications for advisors, as opposed to smartphone applications. Firms launching applications for end users will have to launch on both smartphones and tablets,” according to the report. The Celent researchers add that vendors and wealth managers “will slowly rebuild the advisor desktop into a tablet-based desktop.”
Celent also predicts that wealth management clients will want better communication and transparency as new products and services grow in complexity. To achieve this, wealth managers will need to spend more on technology and Celent predicts that they will modestly boost their IT budgets, balancing systems maintenance and new technology projects.
“On average, survey participants indicated that they are expecting to increase their IT budgets in 2012 by 5% to10%,” according to Celent. Wealth managers are likely to use a combination of third-party solutions and internally developed technology. And, as FTF has reported previously, many of these mobile tools will be able to glide in and out of middle and back office systems in order to facilitate the transparency that clients demand.
Yet, as the Celent researchers make clear, “Technology alone will not make the trusted advisor relationship.” Poorly designed and executed, even the sexiest IT tools could actually harm business relationships. Celent adds that “a clear vision and sound planning” are essential for a successful wealth management platform. I would only add that clear-eyed realism also helps and prevents nightmares.
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