What's next in financial advisor technology?

Digital tools are integral to running a successful practice. However, as platforms and applications change, 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 are five tech trends advisors are using today that can help you position your practice to grow and thrive.

Next-level personalization

The standard, one-size-fits-all index fund is not for every client. But building a diversified portfolio of individual securities is not always possible, especially for clients who are in early stages of building their wealth.

Thanks to the speed and sophistication of new trading technology, custom indexing is now available to nearly every client. With personalized indexing strategies, advisors can add provide diversified, low-cost investment options tailored to clients' interests, goals, or needs.

Custom indexes are now possible thanks to 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 can 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.

You're not like everyone else. Your clients aren't either. Now you can give them the custom fit they deserve.

Total integration

As the advisor tech space evolves, it's becoming more interconnected. Vendors are working to make sure that the tools and platforms they offer can "talk" to all the other technology an RIA firm might be using. This connectedness is critical for practices that want to streamline their activities to become more efficient and proactive.

For example, an integrated, automated system allows advisors to push tasks to the right person to get the job done. And alerts can notify people of timely actions they need to take, reducing the possibility of tasks falling through the cracks.

Fully automated workflows can even 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 the different parts of your technology ecosystem together. Firms that build APIs or work with vendors who offer sophisticated APIs, will be able to create a more powerful digital experiences at every step of the client life cycle.

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.

Holistic data security

Every firm needs a comprehensive strategy for protecting itself and clients from cybercrime, technological failures, natural disasters, and honest mistakes. Every firm needs a security plan that considers these five categories:

1. Physical safeguards: Where you store data and backups should be protected against natural disasters, sabotage, and power outages.
2. Network security: Updates and patches, encryption, antivirus software, intrusion detection, and regular testing help protect data from cyberattacks.
3. Application security: An extension of network security, application security is about monitoring what applications your firm uses, how employees use them, and whether third-party vendors are meeting standards.
4. Capacity planning and reliability monitoring: Plan against lapses in service, security, and data reliability that may occur as a business grows.
5. Disaster recovery: If a major disaster knocks out technology or data centers, how will you prevent data loss and get back online?

Together, these are the parts of a strong, holistic security infrastructure. Read our whitepaper Keys to a More Secure Data Environment to learn more.

How will AI change the future

There's a lot of talk about artificial intelligence right now, but tech fundamentals—data storage, account opening, integration, CRM systems, cybersecurity— took center stage at the 2024 T3 conference, according to Family Wealth Report.

That's not surprising. Many advisors are wary of the risks that this new technology could bring. There's also the regulatory environment to consider. How will regulators rule on the use of AI at RIA firms?

At T3, Alison Dooher, Managing Director, Digital Advisor Solutions, offered that it's helpful to focus on things that won't change versus focusing on what will. "What won't change is that this is a relationship-oriented business," Dooher said. "How it's powered by technology is how it will."

Building stronger client relationships

Technology will continue to be a difference-maker for RIA firms. It will also help advisors deliver greater value to their clients and deepen relationships. Personalized investments, less friction in client service, trading tools that improve returns, and a more holistic approach to data security can add up to higher client satisfaction. And satisfied clients are the foundation of every successful practice.

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.
• Learn about our flexible technology platform and digital tools.

If you don't yet work with Schwab, consider a custodian that is invested in your success. Contact us to learn more about the potential benefits of a custodial relationship with Schwab.