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The leadership in the fastest growing wealth management firms think about and execute differently on their technology strategy than other firms. These growth-oriented firms understand that so much of their future survival is based on the technology they make available to their advisors and clients, and how they can leverage technology to make their business run better and smarter. While more experienced advisors and older clients may be tolerant of technology that is outdated and not well integrated, the next generation is not going to be as patient. Growth-oriented firms are getting themselves future-ready for this next generation. For firms that are behind, it will increasingly be difficult to compete and survive. The decline in the number of FINRA-registered firms over the last 10-15 years includes many that found themselves behind and were forced to sell.
What are growth-oriented firms doing and how are they thinking differently about technology?
In some cases, these firms have made their technology capabilities a core part of their value proposition. They are very deliberate in their approach and can stand behind the claims of having “great technology.” They are differentiating themselves based on their technology capabilities and can articulate those differences to their advantage. In other instances, these firms are just good at executing on delivering for their advisors, clients, and employees. They understand the unmet needs of their constituency and relentlessly focus on delivering. In every instance, growth-oriented firms are taking an incremental approach to their strategy. While sometimes they need to sprint, most of the time they are running a marathon for which there is no destination other than excellence in service to their clients.
Here are seven ways in which growth-oriented firms are thinking differently:
1. Leverage a platform – Almost every wealth-technology solutions provider and clearing and custody firm claims to have a “platform.” A platform needs to fulfill three criteria: a) serve as one place for an advisor or an investor to do everything (i.e., one login will allow a user to get to anything without having to log in separately); b) allow for the integration of disparate solutions, whatever a firm may be leveraging; and c) provide a firm with the option to build proprietary capabilities or solutions on top of it.
This definition eliminates many of the “platforms” being advertised as such in the marketplace. Some firms have the wherewithal to build their own platform, which provides full control but often at a steep cost. In my experience, very few wealth management firms have a core competency in building technology. Other firms leverage their CRM or pre-built platforms, which for many firms is the best option.
2. Focus on strategy and execution – Growth-oriented firms are good at defining their strategy and even better at executing on it. They align their technology strategy with their business strategy. The best strategies are often not the most complex, but can be understood by everyone in a firm and are clear to those people who are charged with implementing them. I have seen great strategies fail at firms because of challenges involved with executing on them. I’ve also seen good strategies be wildly successful because the execution was timely and flawless.
3. Emphasize experiences – While many firms are focused on checking the box that they have a specific capability or a particular vendor, advisors and clients are looking for a specific experience when using the technology of their firm. Just saying that you have a CRM or that you offer digital investing isn’t enough. Cobbling together a bunch of point technology solutions that don’t integrate with one another and don’t drive the desired experience is not a strategy. Many wealth management firms miss this point.
How do you better understand what experiences your advisors and clients are looking for? It’s easy – talk to and ask them. Many firms don’t talk to their advisors and clients about whether the implementation of capabilities would deliver on the desired experience and then wonder after the fact why the adoption is low and ROI, or whatever measure of success they were looking to achieve, is not realized.
4. Enable advisor productivity – Growth-oriented firms understand the role of technology as an enabler. Advisors want to more easily get their work done and serve their clients more effectively. They don’t care about the fact a particular solution has the coolest technology underpinning it. The ability for firms to train their advisors on how to utilize a solution is critical in this enablement. Firms that are good at doing this understand that providing different avenues to learn is critical. Some advisors might need more hand holding while others might be self-directed in their training and pick things up easily. Most advisors end up utilizing a very small portion of the capabilities in a technology solution. Most wealth management firms and technology solution providers can help make this better.
5. Embrace making investments – Whether a firm is looking to make their technology capabilities part of their value proposition or want to be able to be on a level with their competition, they are going to have to invest money. Growth-oriented firms know this; they budget accordingly, understand how they are going to measure and deliver ROI, and have a bias towards action. Unfortunately, there are many firms that are afraid to make the necessary investments and with the passage of time find themselves further and further beyond.
Like most things in life, you will get what you pay for. Firms that want to invest a little and expect to be able to deliver a lot of capabilities to their advisors and investors will come up short. There is nothing wrong with firms taking an incremental approach to investing in their technology, but they need to have a strategy to get to where they want to go and not get stuck. There is a cost in deciding to do nothing.
6. Are humble in their approach – Growth-oriented firms are more likely to work with technology solution providers to achieve their desired outcome rather than trying to build solutions on their own. Most wealth management firms lack the resources and ongoing capital required to build and maintain their own technology capabilities. When I meet with firms that think they can build a technology solution better than a solution provider who has been doing it for years and has made substantial ongoing investments, it’s usually a reflection of someone’s ego. If you are a wealth management firm owner or executive with a team that is recommending a “build” decision over a “buy” decision, be very cautious, ask a lot of questions, and seek outside opinions.
7. Focus on next practices, not best practices – While it’s perfectly okay to have a stated goal of having technology capabilities that are on par with other firms, growth-oriented firms have a very good perspective on what’s next (“next practices”) versus what was (“best practices”). Best practices put you on par with everyone else, which may be okay in some instances, but growth-oriented firms are curious about what’s next. As executive coach Mike Myatt says, best practices maintain the status quo and next practices shatter it.
Every high-growth wealth management firm has an intentional focus on most, if not all, of these seven principles.
Marc Butler is president and chief operating officer of Skience, a leading financial services solution and consulting provider.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
