Build or Buy? To Truly Modernize Your RIA Practice’s Technology, Choose the Latter

Build or Buy? To Truly Modernize Your RIA Practice’s Technology, Choose the Latter

Written by: By John Kirkpatrick | Stanford Investment Group

The question in the headline is one that entrepreneurs across all industries ask themselves as their businesses grow and compete.


Obsolete software applications and operating systems are a threat to survival in today’s digital age, especially for independent RIAs, which are under increasing pressure to be more efficient, precise and responsive. The pace of change and level of sophistication in technology are increasing at what seems to be an exponential rate. It is simply no longer possible for an RIA with a few good technology skills to keep up.

At Stanford Investment Group, we have tangible experience with both building and buying technology to modernize our RIA firm. Experience is the best teacher, and we possess the wisdom to know for sure that partnering with a technology vendor that emphasizes integration and automation is now the ideal long-term solution for independent RIAs.

Growing up with Silicon Valley


Our wealth management firm was established in 1982 in Mountain View, Calif.—the heart of Silicon Valley—as a broker-dealer. As the tech world grew and prospered, so did we—by working with entrepreneurs and their families, and high-net-worth individuals and families, to manage wealth through sophisticated financial planning and investment management.

In the late 1980s, we began building up the RIA side of our business, and it soon became our predominant area of service. We were one of the first RIAs on the Charles Schwab & Co. platform, and they remain our primary custodian today. Working with technology entrepreneurs and developers rubbed off on us, and we created a suite of in-house software to power our financial planning and portfolio management, filling a need that was not served by commercially-available solutions at the time.

But our areas of expertise are in wealth management, not technology development, and we found ourselves struggling to keep up with the ongoing support and enhancement needs for the software.

For example, we developed a Microsoft Excel-based program to rebalance accounts. Our advisors used spreadsheets to calculate allocations and define trades, and would then generate paper trading tickets and hand those tickets to a trader who would manually enter each one into Schwab’s trade blotter.

Our rebalancing solution was creative, but its rebalancing and trading workflows were still quite labor-intensive and did not enable us to scale for growth. The solution also was not conducive to executing nimble responses to market conditions. These limitations became clear in 2007, when the market began experiencing gyrations that would culminate in the worldwide financial crisis the following year. We found it challenging to keep up with the huge surge in rebalancing activity necessitated by the market fluctuations. This prompted our decision to find a commercial rebalancing solution that offered flexibility and automation, and would allow us to spend more time focusing on our clients and less time on software and trading.

Going from building to buying—and just in time


In 2007, we conducted a search for a commercial rebalancing software application. Our due diligence led us to choose Tamarac Advisor Rebalancing (now Envestnet | Tamarac). Our decision was based equally on the capabilities of the solution and our belief that the company would be an ongoing technology partner that would be there for us long after installation was complete. Indeed, Tamarac assigned us our own dedicated implementation team to handle system and data conversions, as well as train our staff. After we were up and running on our new rebalancing solution, Tamarac continued to monitor our progress and roll out regular product enhancements and updates.

Knowing we had an engaged and enthusiastic partner was especially comforting for us—because the financial crisis was unfolding just as we were acclimating to our new software. We adopted our automated rebalancing solution just in time, going “live” in mid-2008. By automating our rebalancing and trading workflows, we could make portfolio changes across hundreds of accounts and households, and customize rebalancing settings for each account according to their goals and objectives. We estimate that we saved, and continue to save, about three to four days of labor per month alone on trade execution and compliance trade review. In addition, the application removes a potential error point by eliminating the re-entry of trades from paper trade sheets.  

Imagine how much more time we would have spent on rebalancing in an unusually hectic period like 2008-2009 if we had to continue manually going through every account to make changes!

We also improved the consistency of client portfolios by standardizing risk-based allocation models, and benefited from a significant increase in the speed and efficiency of implementing changes to our target models. Furthermore, the rebalancing solution allowed us to easily perform tax-loss harvesting to help maximize the tax efficiency of our clients’ portfolios.

All of these operational efficiencies gave our small team of advisors the freedom to spend more time working with clients—enabling us to strengthen our client relationships as well as efficiently grow our practice during an extremely uncertain period.

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Advisors Will Be Extinct in 5 Years Unless…

Advisors Will Be Extinct in 5 Years Unless…

I’ve had financial advisors for more than 40 years. Not once in those years have I called my advisor to find out what stock/funds I should buy or sell. But I have called to find out where I should get my first mortgage, when to sell my house, or how much income I could get in retirement.

In short -- and I think I’m pretty typical – I was looking for financial advice, as it relates to my life.

Here’s the disconnect, what most advisors do is simply manage their clients’ assets. They determine what to buy, and what to sell, they think about risk management, about growing their practice by finding new clients and about getting paid.

Historically that has been the business model. But as more women take control over financial assets, they, like me, will be looking for a different experience. And unless the financial community is willing to change ….. advisors, as they are today will be extinct in five years.

Advisors who want to survive will have to do a lot more than just manage money – they will have to provide genuine “advice”.  That means doing what’s right for the client, not pushing product and pretending it’s advice.

Women especially, but all investors generally, are becoming more and more cynical. They says, “If I want advice about reducing my debt, that’s what I want and not ‘here’s more debt’ because that’s what my advisor gets paid for! And if saving taxes is what I want then saving taxes should take precedent over selling me a product.”

You may be thinking that spending your time providing advice isn’t lucrative but the reality is that in the long run – it pays off in spades. The advisors who take the time to build real relationships with clients, who provide advice as it relates to their clients’ lives, even when there is no immediate financial benefit to themselves, those who don’t simply push product – are the ones who over time have the most successful practices.

Generally women understand and value service, but they will say, “If I’m paying, I want to know what I’m paying for: Is it for returns? Is it for advice? Is it for administration? I want to know. Then I can make up my mind what’s worth it and what isn’t.”

Investing is becoming a commoditized business and technology is replacing research that no one else can find. Today the average advisor is hard pressed to consistently beat the markets, and with women emerging as the client of the future, unless they start providing real advice, their jobs will likely be extinct in five years.

Learn how to Retain Female Clients through this online course and earn CE credits. Or visit us at here and learn everything there is to know about what women want and how to serve them well.

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Paulette Filion and Judy Paradi are partners at Strategy Marketing and have run their own businesses for more than 20 years. Paulette is an expert in financial services and Ju ... Click for full bio