With new wealthtech platforms continuing to emerge and a consistently growing buzz around the opportunities AI presents for financial services, it might seem like advisory firms have mastered operational efficiency and the ability to turn technology into a competitive advantage.
But when you consider that, according to Advisor360, 79% of financial advisors who changed firms said their firm’s technology was a key factor in their decision, with 98% indicating they faced technology challenges at their previous firms, it becomes clear that a major gap exists between where the industry should be operationally and where it actually is.
Milan Doshi, Founder and CEO of Doshi Consulting Solutions and a veteran in industry change management, spoke with us about the forces shaping the operational future for broker-dealers, asset managers, wealth management firms and the vendors that support them.
WSR: What are the biggest operational challenges facing advisory firms today?
Doshi: Today’s advisory firms are dealing with increasing complexities across the board, including operational bottlenecks, rising costs and growing regulatory demands – all while facing growing competition. But another pressing issue I’m seeing is that many firms are still relying on manual processes instead of finding ways to automate and streamline their workflows. This can hinder growth and increase errors.
WSR: There’s a lot of buzz around generative AI. How do you see it impacting advisory firms?
Doshi: Generative AI isn’t just hype (it is a little bit, because it’s become somewhat of a buzz word) – it’s already transforming how firms operate. We’re seeing firms use it to automate proposal generation, personalize client communications and even enhance investment research. Firms are also using it in the back office to convert hours of work into minutes. But the real power comes from its ability to analyze vast amounts of data and identify patterns that humans might miss, which leads to better decision-making across the entire operational lifecycle.
WSR: Let’s break down that lifecycle. What are the main pain points in advisor onboarding?
Doshi: The biggest issue is time. It simply takes too long to get advisors up and running. We’re still seeing firms struggle with manual data mapping, fragmented processes and time-consuming account openings, all of which can be fast-tracked and streamlined using solutions like digital document signing and optical character recognition technology.
WSR: What about trading operations? How are firms adapting to new demands?
Doshi: Trading has become incredibly complex, especially as client demands increase to include more customization and strategies that include alternative investments. The traditional challenge of executing trades across multiple custodians is now compounded by the need to personalize solutions and incorporate new asset classes. Forward-thinking firms are implementing advanced order management systems and using AI to generate personalized investment recommendations. It’s very cool, but the key is to make sure it’s reviewed by human eyes before anything is actioned.
WSR: What are your thoughts on portfolio management? Is this another lifecycle stage in need of innovation?
The days of generic proposal generation and Excel-based rebalancing should be behind us.
Doshi: Absolutely. The days of generic proposal generation and Excel-based rebalancing should be behind us. Firms are implementing proposal automation tools and integrated portfolio management software that leverages AI to aggregate and analyze big data so they can make better decisions faster. They’re also moving beyond traditional strategies to offer more sophisticated solutions, which means it’s increasingly critical to make sure they’re using systems that can handle this level of complexity while maintaining efficiency. I’m keeping an eye on some really neat stuff like AI sentiment and future event prediction models.
WSR: What about back-office operations? Any hidden opportunities there?
Doshi: Now you are talking my language. The back-office at a clearing firm is where I first started. Many firms don’t realize how much value they’re leaving on the table with their clearing firm relationships. We often see outdated processes requiring manual intervention and a lack of effective measurement. Building strong relationships with your clearing firm to understand their full abilities is key, along with implementing robust reporting tools, and designing repeatable processes with clear KPIs. You can only manage what you can measure. I have always loved that phrase.
WSR: What’s your advice for firms that want to start implementing some of the automations and enhancements we’ve talked about?
Doshi: Start with a thorough analysis of your current state. You need to know where you are before you can plan where you’re going. Next, be methodical about vendor selection and project lifecycle planning. We see firms try to do too much at once without a clear strategy, which just leads to wasted time and resources. Remember, this is about building a foundation for long-term success, not just implementing the latest technology.
We see firms try to do too much at once without a clear strategy.
Ultimately, firms need to effectively combine human expertise with technological innovation to thrive.
Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at michael.madden@wealthsolutionsreport.com.
