Ask Brad: Do Broker/Dealers or RIAs Have Better Technology?
This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Twenty years ago, the answer to this question was obvious. Wirehouses had better technology compared to any other firm or affiliation model.
The reason was math.
There is a cost involved with building and maintaining technology.
The users of the product ultimately absorb those costs. Whoever has more users has a broader base to spread development costs across.
Twenty years ago, an individual wirehouse firm had more users (advisors) for their technology than any standalone software provider. That scale enabled a wirehouse to invest in and build superior technology.
Fast forward to today. That scale advantage has reversed.
Building and using proprietary technology is a two-edged sword. Superior scale gives you a competitive advantage with your user base. But when you no longer have the scale advantage, and your addressable user base is limited due to the proprietary nature of your product (i.e., you don’t sell it to other firms/advisors), you risk losing your advantage.