7 wealth management takeaways from Arizent's latest technology research

For Charles Reiling, the question isn't if tech will be a priority for his firm in the coming year. Long a top priority, the question for Reiling's firm is what will stand out enough for investment.

"We're constantly looking at tech. And it's constantly changing," said Reiling, CEO of the Delaware-based independent broker-dealer and RIA platform CoastalOne. "But we really focus on a couple of things when we're evaluating technology. Primarily, is it going to make us and our advisors more efficient? That's the primary consideration for us. Is this going to improve everybody's daily lives? In some cases, that might be the same tech for both the firm and for the advisors. And in some cases, it may be different.

"But the key consideration is how is this going to make things better, smoother, give us better reporting, give us better insight, make the advisors' lives easier, improve workflows, add accounts, to improve the relationship with clients."

That sentiment is shared by James Bogart, CEO and president of the McLean, Virginia-based financial planning firm Bogart Wealth. He said while the growth his organization has experienced in recent years is worth celebrating, the need to scale up creates gaps that only wealthtech can fill.

"It's been important, and it's becoming even more important. I think the biggest struggle my firm is having is still around staff and staffing capacity. I think that's the same case with pretty much everybody, honestly," Bogart said. "But what I've been doing in response to that is finding more ways to be as efficient as possible. My team knows I look for the one-plus-one-equals-three-type scenario, because I really do want to find those leverage points. So technology, for us, has been that way of really finding more productivity and more efficiency. And I believe that that's going to become more and more and more important."

With that importance rising as quickly as customer and client expectations, the ongoing pandemic-fueled shift from physical to digital in financial services means getting it right with tech in 2023 is more crucial than it has ever been.

So how are wealth managers looking to level up over the next 12 months?

New research conducted by Arizent, Financial Planning's parent company, takes a look at the priorities and attitudes that will dictate the tech agenda across financial services for the rest of the year. More specifically, the study explores the strategic goals shaping today's approach, the effectiveness of firms at aligning technology investments to advance those goals, the role of fintechs and sentiment around transformational technologies. 

This research was conducted online in December 2022 among 525 respondents with knowledge of or involvement in their organization's tech initiatives across financial services. By sector, the research reports on views from 191 respondents from the wealth management industry, 164 banking respondents, 83 from insurance and 87 from mortgage firms.

Scroll down to see some key wealth management takeaways from the research. The entire analysis can be found here.

Compliance, cybersecurity and customer experience lead the way

Those categories came in as the top three active projects on wealth management's tech agenda. But unlike the banking sector, wealth management shows a more direct link from transformational technologies like digital platforms and client portals to these focus areas. 

In addition, real-time financial activity reporting and advanced risk-profiling software match well with wealth management emphasis on enhanced security and fraud mitigation.

Wealth management spends the least, but tech budgets continue to climb

Across the financial services sectors included in the survey, more than half (57%) of the respondents are increasing their tech spending in 2023 compared with 2022. And 22% are holding their budgets steady. Just 13% of respondents expect to decrease their tech budgets for the year. 

Looking at overall budgets shows that wealth management is hoping to get a lot more bang with far fewer bucks than other sectors. When asked about their firm's 2023 tech budgets, responding wealth managers came in the lowest with a mean spending budget of just $7.9 million. 

Banking firms, meanwhile, had a mean budget of a whopping $255 million. Insurance firms came in at $71 million, and mortgage firms came in at $68 million.

Improvement is all about getting more efficient

While most organizations feel they are highly effective at aligning tech investments with strategic outcomes like compliance, cybersecurity and remote work, there is plenty of room to improve tech alignment to advance other goals. 

Strategic goals around which wealth management firms could improve tech alignment include reducing operational expenditure, improving data-driven decision making and fostering CX innovation.

Fintech partnerships will continue to be a difference maker

If it feels like wealthtech partnerships and integration announcements moved at a breakneck speed in 2022, don't expect the pace to slow down in 2023.

The majority of respondents in all industries report they are at least somewhat likely to partner or engage with fintechs in 2023 as one path to getting their hands on the tech they need. Stakeholders cite a variety of reasons for doing so, including a desire to tap into the expertise these partners offer, drive efficiencies, accelerate innovation and sidestep regulatory burdens.

Not quite taking a mobile-first approach

Despite the focus on customer experience, and with wealthtech leaders long saying they want to see the industry reach e-commerce levels of usability, a notable number of wealth managers don't see going mobile-first a major priority at the moment. 

When asked how important it is for your organization to have a mobile-first approach to customer-facing technology, just 37% of wealth management respondents considered it "critical/very important." And 25% said it was "not very/not important at all."

Market conditions may lead to a reshuffling of the deck

While firms continue to invest in technology to reach their goals, they're not shy about saying that economic volatility and evolving business conditions are contributing to a reshuffling of tech priorities for 2023. 

Seventy percent of all respondents said concerns regarding economic headwinds are causing a reshuffling of priorities for 2023, but only 10% expect a significant reshuffling, while 59% predict a moderate or minimal amount of reshuffling.

What's getting moved to the front burner, and what's boiling in the back?

With the acknowledgement of potential reshuffling, the Arizent research set out to determine what priorities would make their way to the top of the pile.

In wealth management, the winners are enhanced security, customer onboarding/origination and fraud mitigation. 

The losers are citizen development, digital payments and API integrations.