Top considerations for evaluating your RIA’s technology stack
Author: Jennifer Valdez, president of Americas, intelliflo
The technology landscape for financial advisors remains highly fragmented. There are hundreds of point solutions to choose from, each touting their own differentiators and benefits. Not to mention, new technology entrants emerge seemingly daily. Such a crowded, complex market makes selecting and maintaining the right technology stack difficult and time-consuming, especially for smaller firms with limited time and resources.
Even though the task is daunting, strategically assembling the right technology has never been so important. As advisors are challenged to accomplish more with less resources and better engage with a digital-first audience, firms’ reliance on technology is at an all-time high. Every few years, the tech stack should be re-evaluated, making sure that the existing technology supports the firms’ unique goals, growth and investor experience. Below are key considerations for how to best assess technology and build a solid tech strategy.
Understand your DNA
In order to select the technology that best fits and supports a firm’s needs, the firm must first know and understand who they are and what they want to accomplish. What is the firm’s main differentiator? What is their niche? What’s the culture like? And perhaps most importantly, what does the investor experience look like?
For example, firms that prioritize connecting with young professionals must invest in digital engagement tools, ones that allow investors to collaborate with the firm when and how they prefer and enable them to receive advice and information on demand. Those firms that value social responsibility must have technology that can effectively manage an ESG strategy, including the rebalancing and trading to back it up.
Understanding a firm’s strategic differentiators also helps determine what areas, if any, should be automated or outsourced. Outsourcing is rising in popularity as firms look for ways to boost efficiencies, save costs and navigate key man risk. Such a strategy gives advisors time back in their day to focus on what they do best. For many firms, this means more employee hours dedicated to sophisticated investment strategies, financial planning or intricate relationship management. Those that effectively outsource have been proven to grow faster and more efficiently with reduced risk.
Manage the timeline
Because the technology ecosystem has so many options and components, careful attention must be given to the timeline. To give proper time for technology evaluation and selection, the process should kick off around 18 months ahead of implementation. Think about which parts of the tech stack will take the longest to implement, and therefore should be evaluated first. For example, the portfolio management system tends to be the long pole in the tent.
Prioritize the investor experience
Too often, firms make the mistake of letting the technology they select dictate what the user experience looks like. In a landscape where the investor experience is the ultimate litmus test for loyalty, firms must be more proactive when it comes to architecting that journey. Instead, it should be mapped out from the start, with the firm then choosing what technology can support those specific aspects of the investor experience.
Evaluate carefully
When assessing the different technology options, having a clear outline of the most important questions to ask and what areas to examine the closest is key. For example, it can be tempting to get distracted by shiny new market entrants touting the newest technology, but firms shouldn’t ignore the validity and reliability of a trusted, proven technology provider. They should also consider things like technology’s architecture – is it cloud-based and modern, allowing the firm to nimbly adapt to business or client needs? Does it allow them to easily access and leverage data?
One of the most important areas to consider is integration. Because there are so many pieces that make up a firm’s tech stack, it’s critical that those components are able to tightly integrate. If they don’t, the firm risks having disparate systems that don’t communicate well with another, which is detrimental to efficiency, productivity and both the employee and investor experience. Firms should look for technology providers that prioritize open APIs to avoid these challenges.
As firms look to compete and grow in today’s uncertain market, it’s more important than ever that they approach technology strategically and comprehensively. And this doesn’t just mean a one-time decision, but an ongoing process of evaluation and consideration for each aspect of the tech stack. Those that go about their technology in the right, measured way will be well poised for success.
