What top advisory firms do right when it comes to technology

Seventy-four percent of Elite RIAs said technology is strengthening their effectiveness as advisers, allowing them to better customize services to their clients

Sep 21, 2016 @ 2:17 pm

By Sheryl Rowling

The recently released 2016 Study of Elite RIAs, prepared by InvestmentNews, chose the group of Elite RIAs from among 401 firms that responded to a survey between March 10 and May 10. Firms deemed “elite” had more than $250 million in assets under management and ranked in the 50th or higher percentile on productivity metrics. Although the study uncovered many interesting differentiators between elite firms and nonelite firms, the differences in the technology area were striking.

How is it that elite firms are able to manage more AUM per professional and reap higher profits? Besides the fact that Elite RIAs tend to have higher-net-worth clients, technology seems to be a huge contributor. In fact, 57% of the Elite RIAs believe that the effective use of technology will be a key driver of success over the next one to two years. This is the single driver most frequently identified by these elite firms. Evidencing this as a priority, 33% of elite firms have employees dedicated to technology versus 23% of other firms. Additionally, 74% of Elite RIAs said that technology is strengthening their effectiveness as advisers, allowing them to better customize services to their clients.

The 2015 InvestmentNews Adviser Technology Study noted that top firms utilized the following technologies as core elements of their platforms:

• Customer relationship management.

• Financial planning.

• Portfolio rebalancing.

• Account aggregation tools.

In interviews, Elite RIAs are now focusing more on how technology can improve the firm's client experience rather than on improving internal productivity. In other words, these successful firms have already implemented tools for increasing efficiency and are now moving toward higher levels of technological functionality.

The key implied take-aways from this study are as follows:

• To be an elite firm (more profitable), implementing technology beyond the basic tools (CRM and financial planning) is essential. Rebalancing and account aggregation solutions should be the next step.

• Elite RIAs ensure they are fully utilizing the technology they have. For example, they use their CRM to track performance indicators, such as assets and revenue per professional, as well as the effectiveness of workflows.

• Elite RIAs are careful when choosing new technology, preferring tools with proven track records that will fill specific needs.

• Elite firms are learning from robo-offerings to determine strategies for supplementing current offerings and client services. Technology will likely play a significant part of this initiative.

Elite RIAs have about six times the revenue of other firms with only four times the number of employees. Given the opportunity to significantly boost profits, adding technology should be looked at as an investment rather than a cost. Based on the success of Elite RIAs, the focus should be on adding the right technology rather than the least expensive.

Sheryl Rowling is head of rebalancing solutions at Morningstar Inc. and principal at Rowling & Associates. She considers herself a non-techie user of technology.


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