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Jason Pereira is a partner and senior financial consultant at Woodgate Financial Inc., a financial planning firm under the IPC Securities Corp. umbrella in Toronto, and president of the Financial Planning Association of Canada (FPAC). The FPAC is hosting the second annual Canadian AdvisorTech Expo from Nov. 14-17.
As much of the Canadian financial services industry continues to pat itself on the back for how quickly it adopted various digital technologies during the pandemic, the fact remains that it still remains very far behind its U.S. counterpart. In many ways, the fault lies squarely on advisors.
Before offices were forced to shut down because of COVID-19, few practices, if any, were ready to support a virtual workforce. And if it weren’t for businesses not having a choice, they may not have been ready for decades still.
After more than two years, adoption of video conferencing, VoIP phones, collaboration tools such as Slack, Microsoft Teams, and Docusign, among various other cloud-based technologies, is commonplace.
While much is made about how far we have come so quickly, there’s one small problem with that – most of these technologies are 10 to 20 years old. So, let’s not stop and ask for an ovation for adopting mid-2000s technology.
When you look around the world, there are certain technologies that are becoming table stakes that barely exist in Canada. Technologies such as data aggregation, in which clients’ bank account data are pulled into financial planning and other software. Systems that scan clients’ tax returns and wills that produce reports within minutes, integrated client portals, and many more.
So, why do Canadian advisors’ digital tools lag behind those of our U.S. colleagues?
While many will point to Canada’s relatively small size, that’s not the full story. Canada has more advisors per capita than the U.S. with approximately one advisor (loosely defined) per 360 people versus the U.S.’s one advisor for less than 1,000 people. So, it’s not a lack of buyers.
Instead, the answer is simple: everyone wants change, but no one wants to change – or worse yet, pay for it.
Take the case of data aggregation providers in Canada. Multiple companies looking to bring this functionality to market in planning, cash flow coaching, and data-gathering software have all said the same thing – they faced massive pushback from advisors saying their clients would never approve the use of such tools.
This position ignores the fact completely that this technology is the minimum service provided in the U.S. Apps like Mint boast of more than 20 million users, while one of the largest providers of this service, Plaid, was valued at more than US$13-billion in 2021, with several Canadian banks already using its technology. Many of our clients are using it, but some advisors have pushed back so hard that companies have even gone so far as to turn off this functionality.
Then, there’s the issue of cost. Unfortunately, Canadian advisors haven’t been willing to spend on buying this technology. Companies have gotten a bad response on software that costs less than $75 a month despite the proven efficiency gains.
Lastly, there’s the issue of adoption. Many dealers are reticent to go out of their way to offer better solutions, given that adoption rates for many technologies at various dealers are reported to be at 20 per cent.
All this combines to create an apathetic cycle of “they won’t use it if we get it, and they don’t want to pay for it, so what’s the point.”
Worse yet, it even leads to steps backward as evidenced by various insurance companies moving back to physical delivery of policies as a default from the virtual delivery many adopted over the pandemic.
How to start the change
The reality is that only advisors can turn this around.
Depending on the firm at which advisors work, they have varying degrees of autonomy over their technology decisions. Unfortunately, this dynamic can create learned helplessness and dependence on the dealer to solve all their problems.
For the sake of advisors’ businesses and, by extension, their digital experience, this mindset needs to change, and that autonomy needs to be exercised wherever possible.
Advisors need to start looking at their processes for delivering value and services to clients and, preferably, mapping them out. From there, they need to ask themselves how they can make everything in that process faster, better, and less labourious.
When solutions are found, cost needs to be considered relative to the efficiencies gained. An example is when I freed up more than 50 per cent of one of my staff members’ working hours with a calendar booking software that costs less than $20 per user a month.
Lastly, we must stop assuming we know what our clients are willing to do without asking or trying to use it. Just like any other business, new solutions should be tested with a small pilot group to get user feedback and work out the bugs. Only then will one know what a client will or won’t use.
The answer to this industry problem is not going to come from outside, it must come from within. Otherwise, we will be waiting for another global pandemic to make us adopt 15- to 20-year-old technology.
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