Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It takes a team to run a growing RIA. But technology for RIAs does not always reflect this reality.
Here’s what I mean: an RIA undergoes major changes when it evolves from a small practice to a multi-office, multi-state business. You have to hire and delegate, sharpen your identity in the marketplace, and weigh your capital investments and costs against the growth they will produce in the long term. Less obvious is the shift in responsibilities as a firm matures.
Advisors are inseparable from the business of financial advice. When investors need guidance for their money, they don’t shop around for compliance officers. But try running an RIA of any respectable size without a compliance team and see how long you last!
There is much more to a thriving RIA than the front office. Modern advisors are just as important as leaders in compliance, operations, business development, and marketing. But a lot of advisor software – particularly the customer relationship management (CRM) software that forms the hub of their work – is either built solely for an advisor, or it’s a generic solution built for nobody in particular.
CRMs can fill multiple roles
A compliance officer, for example, wants to use a CRM as their gateway to manage risk, monitor for fraud, maintain digital paper trails in the event of audits, and keep records to assure compliance. A dashboard full of client engagement reminders, call notes, and financial plan overviews may be invaluable to a financial advisor, but much of that information is just clutter to a compliance team that already has a lot on its plate.
CRMs are almost unique in the central role they play in a RIA’s tech stack. Portfolio management tools or marketing tech solutions don’t have a similar burden of responsibility to be the command center for everyone in a firm. What I see emerging, though, is the idea that the CRM isn’t a single pane of glass to view the entire business. Effective CRMs aremore like prisms, where the viewer’s role determines what they see, and what information leaps to their fingertips.
Building and using that prismatic viewpoint is easier said than done. There are always tradeoffs. A very large RIA may build in-house customizations that are 100 percent dialed into the individual needs of that firm. But if you build it, you must maintain it. Home-grown CRM customizations need specialists to maintain them and keep them current. Big enterprise firms have done the math and know what they’re getting into. This road may make less sense for a growing RIA, especially one that measures its own productivity by keeping headcount down.
Another option is to accept that a one-size-fits-all advisor CRM will be awkward and that you will need to work around its limitations as best as you can. It’s a cheaper move at first glance, but the approach comes with costs that don’t always show up on your business’s balance sheets. The inevitable workarounds and low adoption rates mean the data in your CRM may not truly reflect reality, with consequences to your business strategy, risk management, and data integrity.
Advisors want better solutions
RIAs do not seem pleased with either of these options. The 2024 T3/Inside Information Advisor Software Survey found that anywhere from a quarter to a half of its respondents were evaluating new CRMs, depending on the platform they currently use. CRMs are one of the most well-represented software solutions among respondents, with an overall 92.6 percent adoption rate, so I feel the survey accurately captures the discontent with many of the prevailing, out-of-the-box solutions.
Every CRM will need some customization to sync with an individual RIA’s needs. Look for providers that are honest about what that entails. A CRM built specifically for complex RIAs won’t need as much customization and in-house work as a generic offering, or a CRM built with smaller shops in mind.
If you’re evaluating your options or trying to make better use of the platform your firm has already purchased, consider how much effort it would take for the CRM to create that “prism” viewpoint of the firm. Document the role-specific processes that you want a CRM to enable and compare those against the cost of making a tailored user experience for each of those roles. What does day one look like? How much tinkering is necessary to create a dashboard that reflects the daily work of your firm’s most important roles?
The answers matter because more work is demanded from everyone in our industry. Ask an advisor how easy it is to smoothly integrate all the support services their clients demand into a unified experience. Ask a compliance professional how easy it is to plan for the regulatory future in a tightly contested election year. In this environment, I don’t think it is too much to ask that RIA technology reflects the goals of its users.
Adrian Johnstone is the CEO of Practifi.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our podcasts.
Read more articles by Adrian Johnstone
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
