Investing in a digital system or implementing a robo-advice capability means advisers can sell their business for significantly more money, according to Digital Wealth Insights director Ian McKenna.
Speaking at the latest Space 01 'Money Talks' seminar, McKenna (pictured) said it had been suggested to him there was "zero value" in paper-based advice companies. That, he argued, should provide "a strong incentive" to older advisers nearing retirement who might otherwise consider robo-advice unnecessary or advanced back-office digitalisation an annoyance.
"To me, a digital enterprise is one where all the information and the records are electronic," he added. "It's a massive investment - anybody selling a business obviously wants to get the maximum return for it but the more you do to embrace technology, the greater the value of the business going forward."
For McKenna, this can mean anything from digitising an accounting system, client records or regulatory reporting, through to adding a robo-advice capability to the business - though he did suggest the addition of robo-advice would increase the value "exponentially", as it signals the firm is investing in the future, while the robo-advice itself will provide a new income stream.
He added: "We've moved forward phenomenally in 20 years and a lot of the financial advice industry hasn't kept up. Technology is the thing, sooner or later, that will steamroller a business. You either get on board the information super highway - or you get crushed under it."
Innovative back-office system
Bradbury Hamilton founder Sheriar Bradbury echoed these thoughts, drawing upon his own experience of growing his business through acquisitions and adding value through the implementation of more innovative technology.
Over the past 20 years, Bradbury Hamilton has acquired 49 client banks, he said, adding: "We have created extra value by acquiring firms with antiquated systems - some paper-based, some a little more advanced - and innovating the back-office systems to make them more data-friendly.
"The more structured, larger acquirers will look for something a little more slick and then look to exploit the data available. If someone buying it isn't able to do that, they are not likely to pay as much. What's important is to get accurate data in a digital form."
Bradbury said his firm runs Intelligent Office, a back-office system that uses an external web-based service. "Accurate and complete data sets can be downloaded from any locations and the adviser doesn't have to be in the office," he said.
Bradbury also agreed a firm using robo-advice is more likely to prove more valuable than one without but added: "For now, Bradbury Hamilton isn't proactively looking to acquire more client banks - it is focusing on its current database and trying to improve service standards for its existing client bank."
The chairman isn’t answering his email
Reforms not enough
An economic cocktail
To encourage consumers to shop around
Will report to Pat Shea