It’s time to start your RIA’s digital upgrade

Where is your registered investment advisory firm in terms of digitalization? If it remains a gleam in your eye, you’re not alone among RIA owners, who generally prefer slow change to radical adoption.

Pushing back against this change-resistant mindset, however, I’m here to suggest that an entirely passive attitude toward digital transformation isn’t adequate to the demands of a post-Covid marketplace.

First, though it’s not too late to get going on digitalization, it’s definitely time to make it a priority. Second, digitalization could increase the market value of your RIA, a vital consideration in succession planning and enterprise value. Third, it won’t be an option in a few years: Either your firm will be digitalized, or it will be struggling in a backwater of time-killing manual workarounds.

BENEFITS OF DIGITALIZATION

Before we delve further, let’s lay down some definitions. Have you noticed I’m saying “digitalization” as opposed to “digitization”? That’s because they’re different things. Digitization refers to the process or result of converting data and documents into digital formats that can be shared, analyzed and reformatted in aid of specific tasks or queries. Digitalization — our topic — is about converting business processes to digital technologies instead of paper, whiteboards and manual-input spreadsheets.

Across all industries, among further benefits of digitalization are:
● Specific and growing in-house and industrywide data arrays that improve efficiency and streamlines decision-making processes.
● New contact channels for clients and prospects that increase brand awareness, sales and client loyalty, and reduce client-service costs. This also makes for more efficient internal and external communication and collaboration — a particular boon as the companies question the value of maintaining shared work spaces in post-Covid work environments.
● Having a digital presence that sets the business apart as a demonstrably cutting-edge enterprise through tools such as corporate pages, blogs, social media and online stores.
● Encouraging innovation by boosting a workforce’s understanding of, and ability to respond to, new tech trends and dynamics.
● Altogether, digitalization makes enterprises that have taken the plunge more attractive to workers and less likely to send them packing out of boredom or frustration with old-school processes. 

In addition to all of the above, broad-based advantages of digital transformation for RIAs include:
● Opportunities for positive disruption by nimble, data-driven players of all sizes. Scalable, client-centric processes equip smaller firms to compete with larger rivals, including global banks and big tech names like Amazon and Google, that are edging into financial services.
● Curb appeal. Firms on the acquisition trail will favor targets that have extensive digital capabilities — either because they need such enhancement (and deliberately seek it via acquisition), or because they want to buy firms that share their views on the importance of digitalization. 

RESISTING THE ‘IF IT AIN’T BROKE’ MINDSET

Although it isn’t hard to grasp the advantages to RIAs of digitalization, especially with the coronavirus pandemic throwing so much light on the topic, the biggest obstacle to adoption is a formidable one: cultural inertia. In this view, the old ways have been working just fine for the past 80 years, so why mess with a winning formula? 

We’ve enumerated the reasons for overturning the status quo above, but the fact remains that there will always be backwater wealth management practices that are happy to stick with the tried and true — just as, with a little effort, you can always find someone to sell you a buggy whip or a beeper. 

By the same token, it’s unhelpful to defy reality and pretend digitalization isn’t expensive. It’s a firmwide retooling whose costs should be weighed, with meticulous care, against each and every benefit. 

In fact, it may be advisable for RIAs to engage a third party that specializes in digital transformations as a way to understand the specific advantages of adoption, manage costs and make sure inter-tech integrations are seamless.

At root, digitalization is about enabling superior performance. It’s about data and insights that flow precisely where they’re needed, instantly. It’s about effective and holistic oversight. It’s about collaboration that isn’t just a work-around for physically distanced teams, but a viable alternative to face-to-face interaction with clear-cut benefits. It’s about getting a better understanding of, and ability to respond to, your clients. 

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GETTING THE MOST FROM A DIGITALIZED RIA

And, to no small extent, it’s about enhancing the value of the RIA, an asset of great value you’ve worked long and hard to build. 

Given the stakes involved for firms considering digital restructuring, it’s not surprising that many seek third-party advice — especially around such digitalized core functions as marketing, accounting, and M&A development.
● On the marketing front, scattered data and out-of-date reports are roadblocks to making smart decisions — a process that’s significantly enhanced when a firm’s marketing efforts are implemented, monitored, organized and accessed on a digital dashboard. It helps too if this infrastructure is bolstered by a library of effective online tutorials and master classes on a range of mission-critical topics.
● With reference to accounting and CFO functionality, a consultant can help by providing an intuitive overview of up-to-the-second financial data and peer RIA benchmarks within a digital repository to help you better manage and make plans for your RIA.
● When it comes to building an M&A pipeline, an outsider can show your firm how to glean comprehensive RIA market analysis and identify merger or acquisition prospects that are tailored to your search criteria.

Again, while it’s not too late to undertake a digital transformation of your firm in the name of enhanced efficiency and immediate curb appeal, the time to take action has arrived.

Ed Swenson is president of ASx and chief operating officer of Dynasty Financial Partners, a wealth management platform provider based in St. Petersburg, Florida.

Related Topics: Client Servicing, Digital Marketing, Dynasty