Consumer Duty pressure will spur one in five adviser firms to change or ditch some of their tech tools in the next 12 months, a new report predicts.

The report, from wealth consultancy NextWealth, says many are also planning to “rationalise” their tech, cutting back rather than switching providers.

The study found that rationalisation may be under way, with one in seven firms switching cashflow modelling tools in the last 12 months.

NextWealth says that the Consumer Duty and pressure on fees is fuelling a revaluation by advisers of their tech stack (the tech tools they use to run their firms) and many will get rid of tech that does not pull its weight or help meet the new Consumer Duty requirements introduced in July.

NextWealth’s latest report Advice Tech Foundations: Stability and satisfaction in adviser tech finds that a fifth of financial advice firms plan to make a change to their tech in the coming 12 months.

Heather Hopkins, managing director of NextWealth, said: “Consumer Duty and pressure on fees is prompting advice firms to ditch tech that they believe doesn’t work hard enough. This rationalisation comes after the number of tech partners recruited by advisers swelled during and immediately after the pandemic. Sadly, some tech providers can expect a “Dear John” letter this year.”

The report, based on interviews with more than 1,000 financial advisers, also found;

• Advice firms spend the largest share of their technology budget on their back office - for every £1 spent on their client portal advisers spend £5.20 on their back-office
• Fewer firms say they have in place, or refer clients, to a digital advice offering – just 7%.
• The share of firms saying they are developing or considering developing a digital advice offering remained steady at 13%

The report found that the tech most valued by advice professionals included: cashflow modelling, risk profiling, prevention of foreseeable harm tools such as cyber security protection and boosting efficiency including the back office.

Most firms said that tech has a clear role to play in supporting their firms in demonstrating the value of advice delivered to clients, with 46% expanding the role of their cashflow modelling tools to help with this.

Tools to monitor client sentiment are also being added, with 45% of respondents using client satisfaction scores to help demonstrate value.

The report also features over 4,000 reviews for tech providers from advice firms, plus in-depth feedback from 244 advisers.

• The report used two surveys of a total of 1,003 financial advice professionals (financial advisers, Financial Planners, Paraplanners and operations managers). It also drew on advice tech reviews and market share reports based on a sample of more than 244 employees of financial advice firms. Platform reviews were based on a survey of 759 financial advisers and Paraplanners. There were also 10 in-depth phone interviews with a mix of financial advice professionals representing a range of firms by size.