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Technology's role in keeping RIAs ahead of the disruption curve

Embracing unifying technology that fortifies practices will help independent advisers secure their businesses' futures.

Oct 10, 2014 @ 1:33 pm

By Jud Bergman

Nearly 20 years ago, Harvard Business School professor Clayton M. Christensen coined the phrase “disruptive innovation” to describe the trend of cheaper, often lower-quality products chiseling away at the market share of established, successful firms — and in the process drastically altering entire industries.

These innovators unleashed new values and possibilities on unsuspecting markets. Seemingly overnight, a previously unheard of demand became consumers' bottom line. Once they had what they didn't realize they wanted, clients couldn't live without it.

Financial advisers are no stranger to this phenomenon. The pioneers who broke from the wirehouses set in motion a wave of change that ultimately led to advisers, clients and considerable assets moving to the independent space. The disruption wasn't just confined to the financial industry, but sparked a national conversation about the merits of fee-based financial planning and a fiduciary standard of care.

The movement could not have happened without the introduction of new technology and services to meet the growing independent adviser population. Disruptive innovation as a whole is powered by technology — the Model T disrupted the horse carriage industry; more recently, the smart phone disrupted the market for personal computers.

In the financial realm, portfolio management, customer relationship management (CRM) and financial planning tools that had been previously captive within the wirehouse framework had to be rebuilt, reimagined and customized for hundreds of independent firms. Today, technology will continue to evolve as the breakaway movement continues apace.

(Related read: How technology can transform an RIA)

Faced with the new threat of so-called robo-advisers and other online investing tools, independent advisers have doubled down on innovation. But to maintain their disruptive advantage, they need support from technology that meets the following characteristics:


Technology must align and integrate the key applications that support an adviser's practice.

A recent Aite study found that advisers who use a fully-integrated technology platform — one that joins together all key applications—experience a dramatic lift in productivity. These advisers spend 40% less time on back-office and technology problems, which translates to 90% more face time with clients and prospects. That translates to growth being 110% faster in those practices compared with advisers who do not use fully integrated technology, and instead have to manage separate systems for customer relationship management, portfolio management, rebalancing, performance reporting, aggregation and custody.


Innovation-driven technology strengthens best practices across activities and ultimately helps support advisers in upholding their fiduciary standard of care.

The right technology solutions provide not just full transparency on fees, but give advisers a broader picture of their clients' portfolios and entire financial picture. By combining best practices for tax-optimized portfolio management, multi-custodial consolidated reporting and unified fund and manager research, disruptive advisers see how different pieces of their work impact each other, which ultimately leads to more informed decision making and better outcomes for their clients.

(More: Tech's role in deepening adviser-client relationships)


Too often, talk of technology hinges on how it can replace human activities. Disruptive technology plays up advisers' differential advantages and can actually improve the end-client experience.

There are thousands of successful advisory practices. The most disruptive use technology to automate their advice and portfolio offerings, and virtually "touch" more clients more frequently.

There's been a lot of talk about robo-advisers changing how wealth management is rendered and reaching new markets. This conversation almost always pits the technology solution against the human touch of the adviser. But the most disruptive advisers are already leveraging proven technology to service and support a segment of their client base that opts to receive advice exclusively through a web portal.

This is a powerful development among the most disruptive advisers.

No business is invulnerable to disruptive technology — not even disruptive technology startups. But by making technology work in their favor, maintaining the mindset of the disruptor, and embracing unifying technology that fortifies their practices and empowers them to leverage their services in new ways, independent advisers will go a long way to securing their own business future.

Jud Bergman is chairman and CEO of Envestnet, a provider of integrated, web-based portfolio and client management software for independent advisers and wealth managers.


How is your firm staying ahead of the technology curve?

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