The 3 Most Common Technology Headaches RIAs Face

April 8, 2019, by Anna Maria Garcia
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Technology reporter Ryan Neal’s recent article offered a refreshing (and interesting) perspective of problems RIAs often face with their technology suite of systems.  He provided an entertaining spin on this common challenge for firms, likening popular Netflix star Marie Kondo’s philosophy of cleaning house to revising an RIA’s technology infrastructure.  As operations and technology consultants, it got us thinking… when we have worked with RIAs that have been in business 10+ years, the systems that the founders had excitingly selected years ago are now causing headaches and inefficiencies throughout their organization.

We have found that technology-related problems can usually be attributed to one of three areas:

  1. The RIA has too little technology;
  2. The RIA is using the wrong technology, or the end users at the firm aren’t properly leveraging technology; or
  3. The RIA has too much technology.

Too Little Technology

When advisors are first building out their RIA, they are often hyper-aware of their expenses, as it’s not cheap to build a business.  Some might determine they don’t need all the technology solutions that an established firm typically uses right at the launch of their RIA.  For example, as long as advisors have a way to log client notes in a compliant manner, they may not want to pay top dollar to implement a best-in-class CRM that allows them to assign tasks and create back office workflows.  But if advisors have more than a handful of clients, multiple employees, and processes that need to be built out, this bare bone way of getting by is not feasible as a long-term solution.  It leaves their business vulnerable to missed opportunities, limited in what services they can provide to clients, and unscalable for growth – organic or inorganic.

If employees are stuck doing manual work that can or should be automated, the firm does not have enough technology or integrations in place.  If it takes hours to export specific reports from an RIA’s system because the firm has too many client accounts that the system can no longer handle, or if it takes multiple days to piece together a client report from the few systems they do have, an RIA does not have enough technology in place.  Just as end clients may outgrow advisors throughout their life, some of the legacy systems that are still available to advisors are no longer feasible for how their business has grown and developed over time.

Wrong Technology or Wrong Usage of Technology

Some advisors are great proponents of technology, but their enthusiasm may inappropriately lead them to upgrade their firm to the latest and greatest system that has been released.  While it’s important to be privy to available solutions, it’s key to perform proper due diligence to see whether this new technology solution is appropriate for their specific business, clients, and employees tasked with servicing those clients.  For example, if an award-winning performance reporting provider is best known for their ability to report on alternative investments but the RIA doesn’t work within the alts space at all, that particular tool may not be the best fit for that RIA.  This is a wasteful use of the firm’s capital, and often leads to low adoption of existing systems as the employees may expect for it to be replaced in short time anyway.

On the opposite end of the spectrum, some RIAs that have been around for 10+ years are perfectly comfortable sticking with the same systems they’ve been using since the founding of the firm.  After all, why disrupt inertia when they have been successful in running their business all this time?  What is commonly overlooked is the fact that what an RIA’s book of business looked like 10 years ago is often completely different from what it looks like today, or their needs have outgrown what their current stack of systems is capable of.  Another issue RIAs often face when taking an honest look at their technology is the fact they may very well have the proper systems in place, but the integrations between them are weak, leading to duplicative manual data entry and inefficiencies within the business’ processes.

Too Much Technology

Finally, a surprising finding we have uncovered when working with legacy RIAs is some firms may have too much technology.  This is most common with advisors that look to add features and capabilities because one single client asked for them.  While the solution doesn’t apply to 90% of the firm’s clients, the advisor looks to implement a new technology anyway at the suggestion of one client.  While it’s great to be responsive to clients’ requests, this unfortunately leads to an over-complicated infrastructure with way too many systems.  Redundant systems lead to time wasted on duplicative tasks and confusion with staff as it’s challenging knowing what exact piece of technology they should be using for what task.  If current technologies have more bells and whistles than needed, there are other simpler systems available.

Back to Ryan’s (Marie’s) question: Does it spark joy?

While I would never have thought of assessing an RIA’s technology leading with this question, it’s key in attributing the crux of an RIA’s underlying tech issues.  Perhaps the more important question behind the question is why isn’t an RIA’s infrastructure sparking joy?  The answer to this puzzling question could lay in the fact that advisors may have too little technology, have the wrong technology (or wrong usage of their technology), or have too much technology.

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