Forward-thinking RIAs are taking a different approach to technology. Once viewed by most as a burden on the firm’s balance sheet, savvy RIAs recognize that strategic investments in tech can serve as a linchpin to fuel growth and better serve the evolving needs of next-generation clients.
This modern perspective stands in contrast to firms that cast a wary eye toward tech expenditures, hesitating to adopt new solutions because they loathe the complexity and cost of constructing a composite system built from multiple vendors. Worse, some make the critical mistake of putting on a CTO hat, pouring resources into the development of proprietary technology that often winds up being more costly and inefficient.
Michael Kitces and his team highlighted this ongoing shift in a study, emphasizing that the effective application of technology can empower advisors to stay ahead of client expectations. The study notes that while tech cannot replace the human element in financial advice, it can significantly streamline workflows and back-office operations.
Given that tech spending typically represents one of the largest expenses for RIAs—ranging from 4% to 6% of revenue according to Kitces—strategic investment in this area can yield substantial returns. Advisors who carefully assess the positive impact that technology can deliver to both the practice and its clients are better equipped to thrive in the future.
All-In-One Versus A Multi-Vendor Approach
Before this new mindset took hold, some RIAs believed they could optimize their spend by choosing a single, “all-in-one” tech vendor that promised to meet every need. While this approach may have worked well for certain functions—such as customer relationship management (CRM) or document management—these comprehensive solutions often fell short in other critical areas, like portfolio management or financial planning.
Thanks to advancements in software integration, firms can now piece together best-in-class solutions from a host of vendors, building a tech stack tailored to both advisor and client needs. While some firms may still attempt to stand out by customizing their tech interfaces, these efforts don’t always yield meaningful competitive advantages. Instead, the real opportunity lies in creating a seamless, technology-powered client experience that enables better financial planning, collaboration and personalized advice.
Forge Strong Partnerships With Vendors
One critical component of maximizing technology ROI is forging strong partnerships with the tech vendors that you rely upon. Rather than viewing tech providers as simply service suppliers, forward-thinking RIAs work closely with their vendors to help refine the solutions and make suggestions in the development of product roadmaps. Many vendors, especially newer entrants looking to expand their market presence, are highly receptive to client feedback. By becoming active participants in shaping a solution set, RIAs can unlock greater value from their investment.
It may be prudent to request a trial period.
Additionally, for firms considering new solutions, it may be prudent to request a trial period—typically 90 days or more—to thoroughly evaluate the platform. While larger, more established tech providers may impose stringent exit clauses, many newer vendors often offer more flexible terms to attract clients. This flexibility allows RIAs to test-drive systems before committing to a long-term contract, helping to ensure the technology aligns with the firm’s operational needs and client service goals.
Establish Protocols To Maximize Advisor Adoption
Even the most advanced technologies are only valuable if firmwide adoption by advisors is high. It’s imperative to establish clear protocols for using the firm’s solutions to help ensure all team members adhere to them. A well-integrated system can enhance client communication, identify potential concerns with prospects and ultimately improve conversion rates. However, for this to happen, the entire advisory team needs to embrace the technology and be trained in its effective use.
RIAs should maintain an ongoing dialogue with their vendor(s), inquiring how the system can better support client interactions and improve service offerings. Technology should not be a passive tool but an active component of the firm’s growth strategy. Being vocal with vendors ensures that the firm is taking full advantage of the system’s capabilities while driving improvements that can lead to better client outcomes.
Perfection Is The Enemy Of Progress
While this concept may sound like a cliché, it rings true when it comes to an RIA’s technology. Chasing full utilization of every feature often results in diminishing returns. Technology is most valuable when it aligns with a firm’s long-term vision and enhances efficiency, even if some capabilities remain underutilized. Keep in mind the vendor feedback loop—improvements can be made along the journey.
Chasing full utilization of every feature often results in diminishing returns.
Rather than focusing on the minutiae of each investment, firms should concentrate on the broader picture: How does the tech stack support their longer-term goals? By strategically aligning solutions with the firm’s long-term vision, technology can become the firm’s most valuable investment—not just a line item in the budget.
Mike Capelle is Co-Founder and Co-Chief Executive Officer of Modern Wealth Management, a $6 billion RIA and wealth management platform provider with a team-based approach to financial advice.
