Data in the Aite Group LLC white paper on integration released last Tuesday may be more than a year old, but they still show some mighty interesting things about the subject. If you are a regular reader of mine, you will take solace in knowing that during the intervening year, the pace of integration has only increased.
The white paper, done in collaboration with Envestnet | Tamarac (part of Envestnet Inc.), indicates that “financial advisers at independent RIA practices with some degree of technology integration earn approximately 20% more in annual income than their counterparts at independent RIA practices with no technology integration.”
NO SURPRISE
Readers will not find this surprising, given all my years of beating the drum on the virtues of integration, but it is interesting to see it compiled from data collected by a respected research firm — even if those data are based on a fairly small sample. That size is by design; the data are culled from a study Aite performs in March every year.
The analysis for the report, “RIA Productivity and Profitability: Integration Pays,” is based on an online survey fielded in March 2012 with the following methodology: “In order to target independent RIAs of similar size, this study focused on a subset of the 201 independent RIAs surveyed that have between four and 16 team members (inclusive of the primary adviser, other client-facing advisers and support staff). The margin of error for the full sample is 7 points at the 95% level of confidence. Data from firms with some versus no integration provide good directional indication of conditions in the market. For the case studies, Aite Group interviewed executives at each firm via phone.”
Among the findings pointed out in last week's prepared statement and summary: Registered investment advisory firms with any level of integration have almost twice the amount of assets under management as RIAs of the same size, in terms of staff, without any integration. That, on average, amounts to about $90 million more in client assets. Similarly, those firms produce, on average, $100,000 more in annual revenue than the firms with no integration.
FREEING UP TIME
Even more interesting to me was that “the staffs of firms with at least some technology integration spend 32% less time on operation pro-cesses than the staffs at firms with no integration at all.”
They calculated that this equates to freeing up about 40 weekdays a year “for every employee to engage in more revenue-generating activities, including client management and prospecting.”
Now, for a sort of mushy finding that I nonetheless believe: Just 7% of surveyed advisers reported that their “business applications have deep and meaningful cross-product functionality” — deep integration, in other words.
And as sad as it might seem (to me, at any rate), more than 30% of respondents indicated that their firms are completely lacking in technology integration.
The Aite findings parallel findings we recently published as part of our InvestmentNews 2013 Adviser Technology Study.
In that study, the InvestmentNews Research Group found that firms committed to technology tend to generate higher levels of revenue, efficiency and profit.
INNOVATORS
Referred to as innovators in the InvestmentNews study, these firms weren't grouped based on integration alone. Rather, they were identified and grouped based on the number of software categories they employ in their practices, as well as the overall number of integrations between those categories — and their reliance on cloud-based technology and mobile applications.
Visit Tamarac online (tamarac inc.com/white-papers.aspx) to register and get access to the full Aite Group white paper.
