Advisers express the need to regularly review a client's financial plan to ensure that the portfolio is heading in the right direction, to confirm that the client's goals have not changed, and to see if adjustments are needed to the rate of spending, saving or investing. Ironically, it seems few advisors listen to their own advice when it comes to reviewing their RIA's technology stack. A regularly scheduled audit of the firm's vendors and more importantly, the integration and adoption of the various technology tools that make up the firm's back office infrastructure will reveal inefficiencies, redundancies and a general lack of utilization across the firm. With this knowledge, an RIA owner can determine whether they are spending too much or too little on their current infrastructure and what changes need to be made in the coming year.
The main reason this assessment is not done in most VNRs is simply because RIA owners don't know where to start. I hope this article can provide some guidance for conducting your next technology assessment at your firm.
This analysis should cover at least the following main systems:
- Caregiver interface
- Performance Reporting
- Customer Portal
- CRM
- Financial Planning
- Trading/Rebalancing
As part of this review, various team members with varying degrees of responsibility and function should answer the following questions:
- How often do we use each back-office system?
- Are we using each system as originally designed/intended?
- Is the current technology user-friendly and intuitive?
- What is the level of adoption of each system across the firm?
- Are the various systems integrated in an efficient manner so that duplicate and manual data entry is kept to a minimum?
The purpose of this analysis is not simply to identify what vendors currently make up the technology stack and their associated cost. RIAs must dig deeper to determine exactly how they are using each system and how the various components work together. This deeper analysis of the firm's technology infrastructure will lead to a better understanding of whether the team needs to use each system differently, or if new systems are required to continue to gain efficiencies through integrations and automated processes. Ultimately, an RIA's technology stack is only as strong as its integration and the integrity of the data contained in each of the underlying systems.
This self-reflection is healthy for all VNRs and should occur at least once a year to maintain the most automated and efficient workflows within the business. The systems that drive your RIA's core processes can't be viewed as set-it-and-forget-it partnerships with vendors—these tools and the processes around them will always require minor tweaks to maximize their capabilities. “Within the custody interface, are there certain money movement thresholds that we need to create a second reviewer/approver before allowing money to leave a customer's account?” “Should we install an Outlook plugin to allow advisors to more easily push emails to CRM?” “Has the investment committee increased/decreased the cash reserves in our model portfolio so that those adjusted limits need to be updated in the Rebalancer to eliminate the manual intervention our portfolio managers have been performing every time they rebalance accounts?” These questions go far beyond, “Should we continue to use ________ as our financial planning tool?”
Another reason this analysis does not happen regularly is that RIA owners assume that any revision of the technology stack will lead employees to demand more money for new systems. While this is a valid concern, RIA owners should understand that this analysis often leads to a reduction in technology vendors, as duplicative systems and processes are uncovered. Without a holistic review of the overall technology stack, many firms have fallen victim to the “shiny object syndrome” and have added more and more technology tools over time without taking the time to remove the systems that these “toys” new ones were meant to replace. Disposal of unused technology assets must occur, which naturally results in a reduction in technology expenditures.
When determining whether a new tool/vendor should, in fact, be added to the technology stack, the goal should always be to relieve employees of the time spent completing tasks that can be automated. The additional cost of the new system is easily justified by the team's enhanced ability to provide deeper service to existing clients and acquire new client relationships that were previously unmanageable without the new automation in place. However, before adding a new vendor, always check with existing ones to see what improvements they have added to their service offering. Many RIAs add a new technology solution for a specific functionality, only to later realize their existing vendors added that functionality without them realizing it.
An updated technology suite not only reduces redundancies and improves the quality of work for employees, but also increases profit margins and customer satisfaction. By embracing fully integrated and robust technology infrastructure, RIAs position themselves as cross-functional organizations capable of competing for additional clients or advisors if the firm pursues an inorganic growth strategy. It is high time that RIA owners realize that a regularly scheduled technology assessment is the first step in achieving their growth goals in the most efficient way possible.
Matt Sonnen is Chief Operating Officer at Coldstream Wealth Managementas well as the creator of the digital consulting platform COO Society, which educates RIA owners and operations professionals on how to build more impactful and profitable enterprises. He is also the host of the popular The COO Roundtable Podcast.