For many advisory firms, the past year has had significant challenges, new rules creating new requirements and new resource constraints. However, it has also been a time ripe with new opportunities for growth and expansion. As firms continue to grow their business and their client base, they must have a keen understanding of the evolving nature of the financial landscape and the associated operational implications.
In our recent publication, “By the Numbers: A Compliance and Regulatory Technology Analysis for the Financial Services Industry,” we assessed the compliance landscape through two lenses:
- Firm Growth and Evolution
- Compliance Challenges and Implications
In this blog, we dive into the specifics of firm business dynamics and what future growth looks like for firms of every size.
How Much Are Advisory Firms Growing?
Firms continue to have steady but impactful growth within the industry. Two key stats supporting this finding:
- 47% of firms plan to add 1-5 new representatives in the next 12 months
- 35% of firms expect to add 1-5 new clients, while 16% of firms expect to add 6-10 new clients
While not huge numbers, these statistics point to ongoing stability and growth within the financial advisory landscape.
Although the average client age range for those surveyed fell between 50 and 70, we continue to see younger investors breaking into the market, especially as digital assets like cryptocurrency create new investment opportunities.
What Technology Are Advisory Firms Using?
As firms continue to grow and evolve, they are likely to adopt technologies designed to aid business practices and automate manual processes.
Overwhelmingly, we found that Customer Relationship Management (CRM) and Document Storage solutions topped our survey respondents’ list of must-have business technologies. Specifically, the advisory firms surveyed reported:
- 72% use a CRM
- 67% use a document storage/management system
- 65% use a reporting/portfolio management solution
- 60% use a financial planning technology
- 33% use a portfolio risk solution
- 21% use digital marketing tools/services
Are Firms Using Generative AI?
It seems like you can’t go a day without seeing headlines about Generative AI/ChatGPT. Whether positively or negatively, this transformative technology has undoubtedly changed the industry.
When conducting our survey, we encountered mixed results as to the adoption and usage of AI in financial advisory firms.
We surveyed two separate groups regarding their usage of Generative AI/ChatGPT and found:
- In the first study, only 33% of those surveyed used Generative AI/ChatGPT for business purposes
- While in the second study, 52% of those surveyed used Generative AI/ChatGPT for business purposes
We also found a variety of uses and concerns when it came to AI in financial services.
Uses include:
- To prepare marketing/communications
- To use for innovation in the technology stack
- To make due diligence faster/more efficient
- To support deal sourcing, internal processes, and searches
- Internally to make regulatory reviews faster/more efficient
While concerns include:
- Potential compliance violations
- Technical limitations or errors
- Lack of accountability
- Overreliance on AI
- Ethical implications
- Job displacement
Evolving Your Firm While Maintaining Compliance
For the financial advisory industry, stagnation is unlikely. Digital transformation, firm evolution, and regulatory overhauls will only continue to make the already dynamic landscape that much more progressive.
For firms navigating this change and uphevel, proactively integrating the right tools, services, and techologies can be the difference in scalable growth and significant growing pains.
As COMPLY Compliance Advisory, Senior Director Amber Tatman put it, “Many firms are experiencing dramatic growth, which has resulted in quite a few firms then finding themselves in the position of having to scramble to find and implement solutions. The best strategy is for advisers to plan for the firm they want to be rather than the firm they currently are. Having trusted providers in place that suit the adviser’s future rather than its current status will help the firm achieve its goals more quickly, as the benefits of increased efficiency and scalability will be realized much more quickly.”
COMPLY has helped over 7,000 firms navigate firm and compliance evolution, configuring solutions to match speciifc firm needs and business practices. Ready to see how we can help you COMPLY with confidence?