Industry Insights

Key 2023 Economic Trends & Challenges—and How to Respond

By Ideas @ AppDirect / January 16, 2023

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Curious how economic trends may impact your advisor business in the coming year? AppDirect’s Co-Founder and CEO, Nicolas Desmarais recently sat down with Meggie Daoust, Senior Investment Director, Capital Solutions to talk about the economy and how advisors can stay competitive in this challenging environment. Here you can find a snapshot of their conversation that explores inflation, changing expectations around cash as an asset class, productivity, and the impact of a service-based economy on interest rates, and more.

Catch this discussion here and sign up for our monthly State of the Union series for 2023.

> Hear key insights starting at minute 6:51 from Meggie and Nicolas.

What are the two biggest economic challenges and changes right now?

Some of the biggest economic challenges that Meggie identified for businesses in 2023 are the effects of inflation and the return of cash as a high-value asset.

1. The ripple effects of inflation

Inflation is a big topic right now and at the top of everyone’s minds. But does it look like it’ll be settling down any time soon? The truth is that no one knows for sure, but it is likely to remain a challenge for all types of businesses for the foreseeable future.

This is partly due to the aftereffects of the pandemic and supply chain issues that affected many industries. Higher demand for goods skyrocketed prices across various industries partly due to disruptions in supply chains. While most of the supply chain issues are returning to normal, prices are not showing signs of coming down, signaling that this may be the new normal.

2. Cash now has value

We’ve heard the sentiment for a while now: Cash is making a comeback. Long considered to be declining in value over the past 15 to 20 years, cash now has more value, according to Meggie.

Generally speaking, cash will keep up with inflation if we also see rising short-term interest rates.

As a result, cash and cash equivalents are increasingly being seen once again as an asset class for investors. However, cash will still be affected by inflation in real terms which means that it’s best to avoid holding only cash assets.

What to expect from inflation

Is the new normal two percent and above for inflation? While it’s impossible to guess what inflation will look like over the next few months, Meggie and Nicolas share their predictions.

In Meggie’s view, inflation has been affected by things like the minimum wage being stuck at low rates since 2009, which has caused inequality to build up over the years. This, paired with low levels of productivity in the U.S, means that more needs to be done in those areas to curb inflation in the future.

From conversations Meggie has had with economists, it’s becoming less likely that we will see extremely low-interest rates make a comeback. This signals a structural change, and while that may result in slightly lower rates later down the road, we’re unlikely to see a return to the historically low-interest rates that we’ve had over the past decade.

Nicolas remains optimistic. He says that to reduce inflation, we don’t need prices to drop, we just need prices to stop rising so quickly.

Regarding inflation, he hasn’t heard predictions of double-digit rates as we saw in the 1970s, and that is partly due to how different the economy is today.

In a service-based economy– the U.S. is now almost 80 percent service-based– it means that inflation responds a lot less to interest rate fluctuations than it would in a real estate or manufacturing-based economy.

In a service-based economy there is generally less of a priority placed on driving down interest rates to keep inflation under control.

What does this mean for advisors? What technology segments have the most opportunity?

According to Meggie everything in the economy is being compressed around the same rate, which translates to a general cooling of the economy as opposed to specific areas being impacted. The market is not discriminating against any particular companies or stocks. But while markets may be suffering right now, the rebound is likely to result in a better and higher-quality market.

Meggie says that productivity is a key focus within the economy. While it’s not a sector in itself, productivity and resilience will be important as we head into a possible recession. As a result, we will start to see higher growth in areas of technology that promote productivity, stability, and security for example.

Key technology opportunities for advisors in 2023

  • Technology that promotes productivity

  • Cybersecurity solutions

  • SaaS and cloud solutions

  • XaaS (or the everything as-as-a-service model) that can potentially cut costs and generate efficiencies

Meggie also suggests that we will see more companies branching out into the SaaS model of selling services as well as products. As companies continue to transition to the SaaS model, they can potentially cut costs, boost productivity, and enjoy more longevity in difficult market conditions.

Where advisors should be looking to continue to grow is in recession-resistant sectors and technologies. Nicolas believes that some sectors won’t really see a recession, especially cloud-related sectors. While there have been some signs of a dip, most of that is exchange rate-related rather than business-related. In fact, the cloud sector is growing at around 20 percent, which would suggest it’s not going to face the same recession fears as other sectors.

Tune in to our State of the Union episode to hear more from Meggie and Nicolas. During the State of the Union webinar you’ll also hear from Matt Gibson, our Senior Director of Product Management. He explores the latest innovations and upgrades to the Marketplace and the advisor experience.

> Hear key insights and Marketplace updates from Matt starting at minute 26:54 of our webinar.

What’s new in the Marketplace ?

For the second part of our webinar, Matt Gibson, Senior Director of Product Management, at AppDirect, joined to explain the recent changes to the platform.

Our work has been focused on trying to make the platform easier to use and to enhance our users’ overall experience.

1. AppSmart Office becomes Provider Sales

    The first change is around AppSmart Office, the portal for viewing orders and quotes. Until now, users have accessed this functionality from a tile under My Apps, and it behaved like a different application.

    Advisors can now access their back office tools directly from the Marketplace under the Provider Sales tab. Previously known as Appsmart Office (ASO), Provider Sales includes all the functionality advisors are used to, to manage quotes, orders, and commissions for connectivity sales billed directly by the service provider. Within the Marketplace, advisors can also access the AppDirect Sales tab to manage and visualize SaaS or cloud sales billed by AppDirect.

    The goal is to put all of these tools in a more convenient place to make it easier to move between them.

    2. An easier way to search for orders and quotes

      Another change we’ve added is the ability to quickly find and open quotes, orders, and commission tickets.

      You can now search for those from our universal search bar at the top of the Marketplace. We want this to transform the way our users navigate through the platform.

      3. A new and improved activity feed

      The third change we’ve made is around your activity feed.

      We’ve added those same orders, quotes, and commission tickets directly to an activity feed. This means you can click on the activity feed icon on the top bar and see all the updates and changes to your quotes, orders, and tickets in real-time. You can also see previous changes by clicking on the history icon.

      4. Behind-the-scenes improvements

      Finally, a more behind-the-scenes change we’ve made is we’ve enhanced our Service Locator tool. AppSmart's tool for researching available business connectivity options, now includes even more serviceability data by leveraging the APIs of ConnectBase. Access to greater serviceability data within Service Locator saves valuable time and allows you to efficiently solve customers' connectivity challenges.

      It now offers a serviceability coverage of about 122 million U.S. locations and around 5,800 U.S. connectivity providers. This will make it easier to find your service availability coverage for your buyers.

      To hear more insights into economic trends and challenges, and also to get the full picture of the exciting updates we have going at AppDirect, tune in to the full webinar.