It makes good business sense for financial advisors to implement best-in-class fintech applications to address challenges, create efficiencies, or enhance transparency in individual areas of a financial advisory practice. However, the downside of this approach is that RIAs and wealth managers often wind up with too many different applications in their technology stacks, which creates complexity and erodes efficiency and transparency.
Every software application powering a wealth management practice, or any business, must be regularly updated with new or enhanced features—but maintenance costs you time and money. Take a moment and think about how many different technology systems you use to run your practice. Taking one or more of them offline to make updates risks seriously disrupting account, client, or investment management processes across your organization. And you also manage multiple vendor relationships, which is time-consuming for those on your team who are paying the bills, renewing contracts, contacting service/relationships resources, and monitoring service levels.
Multiple technology applications can introduce inefficiency and complexities into your workflows and make it much more difficult for your team members to share data with each other as well as with clients. When data has to pass through more than one system, the likelihood of processing errors increases. Whether these multiple tech tools are integrated or not, if there are multiple points where data inconsistencies can occur, this can create not only errors, but confusion for your team and for clients, especially in terms of reporting and discussions about account performance and allocations.
How to Begin Tech Consolidation
When assessing the tech systems powering your advisory practice, ask yourself whether or not each application truly gives you a competitive edge. Think honestly and objectively about how meaningful a certain tool in your tech stack is to your business, and to your ability to showcase your value proposition.
These aren’t idle questions. They go to the core of managing your business, since you have limited time and resources. An extra few minutes or half-hour every day or every week, over the course of a year, really add up. Imagine if you could take much of the time your organization spends on inefficient workflows resulting from a complex tech stack, and redirect it towards engaging with existing and prospective clients and growing your business!
If a tech system or application doesn’t clearly give you a competitive edge or differentiate you from your competitors, you may want to consider looking at unified platforms which perform its function. You can also investigate whether some of the other tools you currently have in-house offer additional modules that cover this functionality in a more integrated and efficient way.
What You Need, and What to Look For
Practices that undergo conversions from multiple systems to a single, end-to-end platform are typically hoping to reduce operational costs by at least 20 percent, according to Celent. However, depending on practice size and focus, technology integration can produce varying results, and different types of unified platforms or providers may be appropriate. Nevertheless, regardless of how much money advisory practices can spend on integrated technology, or which tools they find most useful for servicing clients, there are certain elements all unified platforms need to address.
From an operational perspective, every advisory practice must have at least one technology system to manage four core aspects of the business:
- client relationship management (CRM)
- financial planning
- investment book of record (IBOR) application to centralize data about all exposures and positions across the firm. Accurate, up-to-date data about intraday holdings for all accounts in one place enables advisors to manage and trade portfolios, perform tax-loss harvesting, and rebalance in real time within the platform.
- Client reporting (regulatory and ad-hoc). Although this is almost always offered as part of a unified platform, many advisors choose to integrate a third-party application to accomplish specific objectives for high-net-worth or other specific segments of clients.
Ideally, advisors should be able to utilize a unified wealth management tech platform which integrates all four of these core aspects—and which can integrate additional tools which are nice-to-haves instead of need-to-haves, such as proposal generation, risk tools, reporting tools, and client collaboration tools—from the platform vendors, or from third parties. The key is true integration and data consistency. When conducting due diligence on unified systems, make sure their providers can seamlessly incorporate other applications—and check to see that the systems can support your client accounts and your overall practice as they grow, as well as facilitate meaningful engagement with clients.
Stay Agile to Stay Competitive
Financial advisory practices need business agility in order to retain their competitive advantage. When RIAs and wealth managers utilize a strategy to keep their tech stacks streamlined, their organizations operate and communicate more efficiently, enabling them to stay one step ahead of regulatory changes and evolving client expectations.
Technology consolidation and business agility also make it easier for advisors to keep their systems up-to-date with the latest features. According to Forbes Insights, 31 percent of clients under the age of 50 would be prompted to part ways with their advisor due to inadequate technology—underscoring the urgency of maintaining fewer technology systems which can be updated more efficiently and cost-effectively.
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