How To Orchestrate Data And Merge Tech Stacks

Experts From RFG, Dispatch And Modern Advise On Steps To Blend Tech Stacks For Advisory Practices And Optimize Data For Firms Seeking Inorganic Growth

While much is said concerning the challenges with data management and tech stack integration for organic growth, these are equally important for firms and practices looking at inorganic growth, whether they are on the buying or selling side. Data management isn’t just for lead generation – it’s also a competitive edge for firms that successfully mine insights for optimal business strategy.

Similarly, the tech stack conversation isn’t just around integrating different tools and platforms in a single firm’s tech stack, but also integrating disparate tech stacks when advisory businesses are brought together through inorganic growth.

To learn how to strategize for these challenges, we reached out to Mike Capelle, Co-Founder and Co-CEO at Modern Wealth Management; Madalyn Armijo, Co-Founder and COO of Dispatch; and Jordan A. Hutchison, VP of Technology at RFG Advisory.

We asked each of them: Why is client data management so important for firms pursuing inorganic growth? From large aggregators to firms onboarding one-advisor tuck-ins, how can firms effectively bring together different tech stacks?

Their answers follow.

Mike Capelle, Co-Founder & Co-CEO, Modern Wealth Management

Mike Capelle, Co-Founder & Co-CEO, Modern Wealth Management
Mike Capelle, Co-Founder & Co-CEO, Modern Wealth Management

Many RIA acquirers don’t think about their data strategy ahead of time. This mistake often leads to a highly complex, unorganized and unusable set of data. Acquirers need to think ahead about reporting and using company data – not only for regulatory purposes, but also for their own business analytics. Below are a couple of primary strategies that acquirers can utilize.

One strategy is to bring all the core data into common databases across your firm. This would encompass a single portfolio accounting system, CRM, financial planning system and more, potentially with a separate data lake to bring the different functional databases together. Combining the data into common databases may have higher upfront costs, but lower costs in the long run, especially considering the economies of scale regarding ongoing training and maintenance around a limited number of systems.

A second approach is to allow the data to continue to reside in its original database and create an overlay that will bring all the data together, integrate it and normalize it into a usable fashion. This results in having multiple systems – including portfolio accounting systems, CRMs, financial planning systems – to manage and train on, and the overlay on top of the data typically creates another layer of ongoing costs to aggregate all the different databases.

Both strategies have their pros and cons, but acquirers should decide up front which strategy they will pursue and stick with that approach as the business grows to achieve the most benefit.

Madalyn Armijo, Co-Founder & COO, Dispatch

Madalyn Armijo, Co-Founder & COO, Dispatch
Madalyn Armijo, Co-Founder & COO, Dispatch

Efficiently managing client data is a challenge for advisory firms of all sizes. That said, the larger the firm, the more complex the challenge given the number of tools, staff and clients. Further, firms pursuing inorganic growth generally target certain efficiency and ROI metrics. The faster they can onboard both clients and advisors, the faster they can recognize these metrics.

Effectively managing client data allows advisory firms to build the specific tech stack that’s best for their firm. Advisors should not have to make product or feature compromises based on integrations (or lack thereof).

Lastly, but most importantly, client management software makes advisory and operations teams more efficient. Firms can reduce the number of hours required to manually collect, input and maintain data and instead focus on client-centric activities.

The first step to blending different tech stacks is to develop a strategy for how internal workflows should function. It’s necessary to partner with a software vendor who can provide guidance and expertise around this process. Once an advisory firm can determine their requirements, they can evaluate whether the software will provide both the functionality and ROI. Metrics driven businesses generally seek an ROI multiple of two to three on software. The software provider must be able to demonstrate its ability to meet the advisory firm’s ROI threshold.

The second consideration is that the software provider should be a platform company, not a professional services company. Data orchestration is not a one-time project and requires continual updates, improvement and input from the advisory firm.

Jordan A. Hutchison, VP Of Technology, RFG Advisory

Jordan A. Hutchison, VP Of Technology, RFG Advisory
Jordan A. Hutchison, VP Of Technology, RFG Advisory

Gordon Gekko famously said, “Money never sleeps.” To this, the financial services industry needs to add a new phrase: “Data never sleeps.” Every minute, 231 million emails and 16 million text messages are sent. The number of actionable insights aggregators and advisors have in their data is vast. Data hydrates all facets of a business. If you are not discussing data orchestration in your organization, you are already behind.

When aggregators are focused on inorganic growth, they need to start with the firm’s technology vision. Do you have a defined technology stack or an open architecture that the firm can choose? What level of support are you offering if you have not helped build the technology stack? From my experience, the service is usually subpar if you have not helped build the stack for your advisors.

Next, aggregators need to take a consultative approach and have a clear game plan around what current technology stack the firm is leaving and how the porting of that data happens. The speed and efficiency of porting data can save a significant amount of time for your team and translate to large revenue numbers for the advisory firm.

The final key is maintaining the ability to hold and progress with clean data. As the old adage says, “Garbage in, garbage out.” You need to be monitoring for, supporting and training about clean data, which will be the hydration to all growth in your firm.

Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at mmadden@wealthsolutionsreport.com.

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