What's next in advisor tech?

Three emerging technology trends that will help advisors add value and hone their competitive edge

Key Points

  • Custom indexing will become an important tool for building portfolios that match a client's unique needs.

  • Integrated software will help advisors streamline their practices so they can focus more on client relationships. 

  • Sophisticated trading platforms will help advisors take advantage of tax-loss harvesting and rebalancing easily and at scale. 
     


Digital tools are integral to running a successful practice. But technology is constantly in flux: Advisors have more options to choose from every year, and platforms and tools constantly grow more powerful and sophisticated. Staying up to date can be challenging—but advisors who do will be in the best position to serve clients and give their practice a leg up. 

Here's a look at three key tech trends advisors should look out for.

Next-level personalization

Technology can make custom indexing not only possible, but easy—helping advisors add value through personalized, diversified, low-cost investment options. Standard indexes are essentially one-size-fits-all, with a single methodology that dictates what they can own and when they rebalance. Custom indexes' methodology is based on a client's circumstances and goals, and it can be adjusted as a client's situation and preferences change. 

Custom indexes are made possible by a combination of innovative software, zero-commission trades, and fractional share trading. They are separate accounts in which clients own a mix of stocks and bonds directly, rather than indirectly through ETFs or mutual funds. Advisors will be able to build custom or thematic indexes that fit their clients' unique situations—for example, a desire to exclude heavy polluters or the need to work around a concentrated position. 

Total integration

As the advisor tech ecosystem continues to evolve, it's becoming more interconnected. Vendors are trying to make sure their tools and platforms can "talk" to all the other pieces of technology a practice might be using. This connectedness is critical for practices that want to streamline their activities to become more efficient and proactive. 

An integrated, automated system can help advisors push tasks to the appropriate person when a specific action needs to take place. Alerts can provide the information and steps needed to complete the task, helping minimize the possibility of tasks falling through the cracks. 

Fully automated workflows can take over some tasks entirely. For example, a customer relationship management (CRM) that is integrated with calendars and an email marketing system can send automated emails, confirmations, and more. 

Application program interfaces (APIs) connect computers and software for use by customers and employees. Firms that understand and can build APIs will be able to create a more powerful digital experience at every step of the client life cycle. 

Managing workflows through integrated platforms can help create a consistent, seamless experience for employees and clients, while freeing advisors and teams to spend more time on client relationships. 

Super-sophisticated trading platforms 

New trading platforms with built-in, artificial intelligence (AI) enabled features make it easier for advisors to handle tasks such as rebalancing and tax-loss harvesting. They make it possible for advisors to offer these services efficiently and at scale. 

Trading platform algorithms can maintain a portfolio that closely tracks a client's strategic asset allocation. The algorithms check daily to see if asset classes remain within a client's drift tolerance. Assets that have drifted above the threshold can be sold automatically, while the software may add to positions that have drifted below the threshold.   

At the same time, these platforms can use AI to monitor opportunities to capture tax-deductible losses without running afoul of wash sale rules. A systematic, automatic approach to tax-loss harvesting has the potential to improve clients' returns over time without adding risk. 

Building client relationships

Technology will continue to be a difference-maker for advisors. The tech of the future will help advisors add continually greater value for clients—not only by helping tailor investments to clients' needs, but also by liberating advisors from day-to-day tasks so they can spend more time helping their clients. 

What you can do next

  • Check out Schwab's technology integration to learn how we're using APIs to deliver seamless experiences for you and your clients.
  • Discover more about our flexible technology platform and digital tools. 
  • Consider a custodian that invests in your success. If you're thinking about becoming an independent advisor, contact us to learn more about the benefits of a Schwab custodial relationship.