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A couple of years ago I was leading organizational growth efforts for a large RIA. We made the decision to develop a digital advisory solution. We were a bit early in the game – there were no custodian-driven offerings, Betterment Institutional was just rolling out and the majority of robo-advisors were focusing exclusively on business-to-consumer (B2C) models in their approach.
The development of this digital advisory solution took far longer than expected, looked only moderately like we anticipated, and was not nearly as initially impactful as we hoped. Was the rollout a mistake? No. Was our timing off? Possibly due to the limited initial options. Should advisory firms be looking to incorporate digital advisory solutions into their businesses? Absolutely!
The landscape of digital advisory solutions available to advisors is far different than it was only two or three years ago. All of the major custodians have one-stop offerings and most, if not all, of the initial B2C robo-advisors have turned their attentions toward the advisory channel. Even with more options available, in reflecting on my experience there are eight lessons that other firms can learn from as they look to bring digital advisory solutions into their businesses.
Eight key lessons learned:
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Know where you’re going before you begin the journey – Do you want a standalone solution as a new business unit? Are you planning on transitioning your existing business to digital? Maybe you want to gradually incorporate digital technology? These types of questions are crucial. If you don’t know where you’re trying to end up you are almost certain not to get there.
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Get all key stakeholders fully onboard from the very beginning – Digital advisory is a radical change for most firms and change is sure to generate fear, apprehension and opposition. If any key stakeholders are not fully onboard with the development of a digital advisory solution, it will be nearly impossible to get the rest of the firm to make the sacrifices necessary for success.
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Have designated roles and decision-making processes – Digital advisory is often outside the knowledge base and expertise of most advisors, especially founders and CEOs who have spent their entire careers in the advisory industry. Delegating key decisions to others in the firm with the passion, knowledge and expertise eliminates unnecessary, disruptive effort and is critical to staying on time and on budget.
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Be flexible, yet firm with your non-negotiables – No solution will offer everything you want. Know which aspects of digital advisory are mission-critical for staying consistent with the culture, vision and strategic direction of your business. Don’t negotiate on those. If a solution doesn’t offer what you need in those areas, move on, there are plenty of other solution providers who will.
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Beware the shiny new object – With any industry or product that is evolving as quickly as digital advisory solutions it is extremely common for something new or cool to come out right after you choose an option. If you are constantly attracted to the shiny new object you will spend all your time chasing and none of your time actually delivering anything to your clients.
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Don’t expect perfection – There will always be something that immediately seems better or more capable than what you are delivering. Technology and solutions are constantly being upgraded. Don’t let perfection get in the way of delivering something that is good enough today, knowing future versions will benefit from early client feedback.
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Be careful of ceding total control to a major custodian– The one-stop offerings of the major custodians make incorporating digital advisory easier than building it yourself and integrating several different providers into a custom solution. However, for that ease of development you will be giving up a meaningful portion of control over the timing of integrations, rollout and future enhancements. Neither option is necessarily better than the other. You should be aware of and analyze the tradeoffs of each option and determine which path is best based on where you want to end up.
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Stay focused, realistic and committed – Adding a digital advisory solution, or a few digital advisory components, to your business is like any other new offering. You will not see a wave of new business right away. If you, and key stakeholders, are not realistic with your expectations it is easy to turn your focus elsewhere and cause your digital advisory effort to flounder and be seen as a disappointment.
I experienced each of these issues, positively and negatively, during the development and rollout of this digital advisory solution. Compiling this post-mortem was very useful in identifying where we did well and what could have been done differently to minimize the frustration experienced in the process. My hope is that these lessons will prove helpful as other advisors explore and engage digital advisory solutions in their businesses.
Drew Taylor is the Founder of DTaylor Group, a strategic consulting firm and organic growth authority for wealth advisors and asset managers, helping them achieve their highest-potential growth resulting in stronger client relationships and greater revenues and profitability. Prior to starting his own firm, Drew held senior management roles at American Funds and Halbert Hargrove Global Advisors. He can be reached at [email protected].
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives
