Whether they own RIA businesses outright or have varying ownership stakes in or relationships with RIA firms, RIA aggregators find themselves in the role of tech provider. As such, they face a challenge.
Should aggregators invest increasingly expensive capital to build the more sophisticated technology infrastructure that advisors and their clients are now demanding? Or, instead, should aggregators outsource a greater share of their tech infrastructure and, if so, which components should be outsourced and how can they be certain that users have a seamless and satisfying experience?
In weighing these choices and mapping their firm’s technology future,
Here are three factors that aggregators should consider:
1. Complexity
With RIA firms striving to offer their clients the best products and services available, the operational infrastructure required to support the myriad linkages necessary to carry out that objective has grown inordinately complex. What’s more, the rapid pace of change in products, services and providers requires aggregators to be continually updating their technology, including their vital core systems that involve trading, order management and portfolio management. Not only is keeping up with complexity challenging and expensive, it also often thrusts aggregation firm leaders — who typically come from the advisory business and have their feet and hearts planted firmly in that space — into the uncomfortable position of having to make critical decisions involving technology, an area where they may feel less than confident.
Turning to fintech providers that specialize in tools used by advisory and asset management firms can help aggregators better cope with tech’s complexity and ease the burden of managing that job in-house. Long-time fintech providers in the wealth and asset management space, such as Flyer, have experience in developing, maintaining and upgrading essential advisory firm tools. Their industry-wide perspective gives them insight into what’s on the horizon and how to prepare for it. And they have the financial incentive to make sure they provide the highest level of service and cybersecurity. What’s more, tech firms that offer a full menu of plug-and-play APIs, like Flyer, allow aggregators to seamlessly and cost-effectively expand their offerings with much faster time to market, as well as an extensive track record of successful integration with countless combinations of software.
2. Human Resources and Time
Attracting and retaining a skilled tech staff — one that knows technology broadly, but also the specialized needs of the wealth management business — is expensive. Such people also are a scarce resource, especially outside of areas with a large concentration of wealth management firms. Another scarce resource is time. RIA aggregators often find that with all the work needed to manage and update current software and onboard new advisors, their lean in-house tech staff usually does not have the bandwidth to accommodate the tech demands that come with adding new products or services.
Instead of “buying” tech talent, many aggregators have found that “leasing” that talent by using the services of a fintech provider generates a cost/benefit ratio that’s tilts heavily in favor of outsourcing. Flyer, for example, maintains a large, dedicated team of programmers who continually update and improve our systems for trading, order management and portfolio management. Among its many tools, Flyer’s integrated order management software is “the gold standard,” according to financial planner and RIA influencer Michael Kitces. For most aggregators, the cost of maintaining a team in-house with equivalent depth as those of a specialized tech firm would be prohibitive. In short, freeing tech budgets through outsourcing allows for the channeling of resources into better serving current RIA businesses as well as being able to more aggressively pursue potential partner firms.
3. Competitive advantage
How much more compelling would an aggregator’s marketing proposition be if a prospective partner firm could become a partner without having to make wholesale changes to its operations? Using an outsourced tech provider like Flyer, whose APIs routinely connect with virtually all the industry’s asset managers, trading venues and custodians, enables the onboarding of new firms to be accomplished quickly and seamlessly because existing relationships can be maintained. Also reassuring to prospective partner firms is that end-clients are not disrupted in any way. As a behind-the-scenes partner of many of the wealth management industry’s leading firms and service platforms, Flyer has extensive experience onboarding new users, even if many of them aren’t aware that they have been added to the Flyer network.
In the past, outsourcing technology was typically an all-or-nothing choice. Since technology is often a core component of an RIA aggregator’s value proposition, the least risky option was usually to keep tech in-house. But times and economics change, as do the metrics of safety. Today, outsourcing need not be a binary choice; tech firms like Flyer enable users to select from a menu of service options that best suit their needs. Whichever services an aggregator chooses, however, being able to offer ultra-secure, state-of-the-art technology to partner advisory firms — and enabling them to connect easily with their preferred service provider — seems like the safest way to secure continued business success.
Ready to take the first step to optimizing your tech? Book a meeting to discuss the best options for your business.
