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Technology to spark big changes in financial services

Technology will have a major impact on the future health of wealth-management firms as advisors look to leverage solutions to provide better experiences for clients.

While new technology solutions will increasingly take the grunt work out of the day-to-day business activities, it will also commoditize advisor services, according to industry pundits. To that point, technology will put pressure on firms to increase the human element in an effort to stand out from the competition.

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Wealth-management firms will have to provide more services and adopt a more collaborative relationship with clients as automated websites and mobile trading provide self-directed investors with the tools to manage their own investments.

"[Firms] that sell the value proposition of asset allocation and portfolio rebalancing will have a hard time charging 1 percent or 2 percent of assets when investors can get those services for free [from digital advisors]," said certified financial planner Joel Bruckenstein, the founder and president of newsletter "Technology Tools for Today."

"Five years ago, investors never questioned the cost of investing, [yet] more and more, they are asking advisors to explain their fees," he said.

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Technology will also improve the advisor-client experience by delivering client-related tools that merge both online and offline services, according to a study by Aite Group, a financial research and consulting firm.

When it comes to high-end clients, that means financial services firms will continue to find ways to stand out from the crowd and build on "white-glove" services, said Sophie Schmitt, a senior analyst at Aite Group.

Higher costs coming

In some cases, clients will be offered discounts to add more services, such as loans or banking, which make them "sticky" or less likely to leave, according to officials at Aite Group.

However, from philanthropy to financial planning, large firms will charge all but the wealthiest clients for such extras, which are now usually free. Firms of all sizes will need to focus on client niches, such as gay-lesbian investors, or skill niches, like retirement distribution, Schmitt said.

One result of the fee-pricing pressure that Bruckenstein alluded to will be higher costs of doing business, which will then result in increased consolidation of firms.

Read MoreTop 100 fee-only wealth-management firms

"There will be tremendous consolidation at the top," said Philip Palaveev, owner and CEO of The Ensemble Practice, a business management consulting firm. He explained that wealth-management firms competing for the richest clients will undergo consolidation first.

No. 1 fee-only wealth-management firm: CNBC
No. 1 fee-only wealth-management firm: CNBC

Smaller advisory firms will also look to team up, to gain cost savings and diversified skills.

"We have asked our advisors in their mid-40s and younger what their businesses will look like in the next 10 years," said Amy Webber, president of Cambridge Investment Research. "They say that they will go from firms of three to four up to 50 or 100 advisors and support staff," she said, adding that "they're much happier if they can collaborate and build an organization, and they are very focused on diversity in skills, gender and ethnicity."

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Michael Kitces, a certified financial planner and director of research at the Pinnacle Advisory Group, said that to lower costs, smaller advisory firms will either tuck into larger ones or adopt a technology or platform that does a lot of the heavy lifting.

"The general trend is [that] large firms will get larger, and solo or very small firms will stay small," he said.

In the future the wealth-management business will become more client-centric, said Tom Nally, president of TD Ameritrade Institutional.

He said the advisors with whom he works start every discussion with: "How can I do a better job for my clients?"

We're looking for trends in how our advisors are using customer relations management and income distribution generated from different products.
Wayne Bloom
CEO, Commonwealth Financial Network

It will help broker-dealers to segment investors differently, by characteristics such as life stage, age, profession and goals, rather than just by assets, according to the Aite Group. Big Data will assist these efforts, with clearinghouses and broker-dealers examining patterns found in advisor and client information.

"We're looking for trends in how our advisors are using customer relations management and income distribution generated from different products," said Wayne Bloom, CEO of Commonwealth Financial Network.

In the future, Aite Group predicts firms will offer portals that will allow clients to aggregate their assets so they can see all their financial business in one place on real-time basis. Currently, a minority of high-net-worth advisory firms have portals that also aggregate client accounts and budgets.

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Commonwealth Financial Network, for example, offers aggregation of everything from airline miles to artwork, which is all tied to the advisor CRM, Bloom said.

The portal also serves as a marketing tool. "Mrs. Jones will see that you offer long-term care," he added. "She may not need it, but her mother might. It helps build awareness to things we offer."

Social media will be a key role in an advisor's marketing model and efforts as well.

Online 'dating'?

Certified financial planner Sheryl Garrett, founder of the Garrett Planning Network, said financial advisors could take a tip from online dating.

Content-rich websites and social media will allow clients to find ways to better connect with an advisor they like, she said.

"Investors can learn about an advisor, what they're working on, or maybe 'go on a date' and ask them a financial question," Garrett said. "It's more natural than getting married and then finding out who your spouse is."

Meanwhile, the Aite Group reports that advisors in the future could grab client attention by using "insight selling" instead of needs-based selling.

Read MorePassing the advisory baton

That involves giving clients some valuable insights about their behavior, their "investment personality" or financial planning strategies that they had not thought of.

All this communication will be managed from any mobile or digital device.

It makes sense for advisory firms to take advantage of these online tools, because "everybody is using online banking and check deposits," said Bruckenstein of "Technology Tools for Today."