Like most business owners, registered investment advisors (RIAs) can hardly remember the day when technology was not available to help them maintain and grow their businesses. Digital technology, from the internet to software that runs from centralized servers instead of computers, has revolutionized investment professions. Thanks to technology, RIAs can now operate independently of more traditional brokerage houses and investment firms, though these larger entities have also benefited from technological advances. Below is an overview of some of the more popular technology services.
Managing the Assets
Many RIAs, especially those that remain independent from an outside broker-dealer will lament that the need to maintain relationships with existing clients, network to find new ones, and take care of regulatory matters as well as the numerous responsibilities that go with running a small business, usually take precedence over important portfolio management functions. These functions include buying and selling securities, rebalancing portfolios and attending to the needs of clients concerning growth, income and cash disbursements.
Thanks to continued advances in investment software and research packages, advisors can take back control of the portfolios they manage. The top selling products deal directly with financial planning; two of the most popular are MoneyGuide Pro and MoneyTree.
A recent survey conducted by financial-planning.com in December 2012, detailed that MoneyGuidePro is very popular among independent RIAs that might not have sophisticated systems provided by their primary broker-dealer or employer. The cloud-based version, launched in 2012, makes usage much easier than having to download software directly to a computer and wait for major upgrades every couple of years.
Money Tree has been offered in various incarnations since 1981 and remains a popular offering. Its Silver Financial Planner is marketed as providing "complete financial plans in minutes" and is also intended to help advisors manage, rebalance and handle cash management activities for client portfolios.
Top research systems included PortfolioCenter, which is maintained by a technology division of Charles Schwab, one of the largest custodians for independent RIAs. Morningstar Office also continues to rank highly in annual surveys and has a reputation for offering affordable and robust research capabilities for RIAs.
Managing the Business
Managing an RIA business obviously entails successfully protecting and growing client assets according to customized investment policy statements (IPS), which is covered above. But managing a business also includes more mundane tasks such as handling payroll, renting office space, maintaining records, ensuring regulatory compliance and leading employees.
Just this month, Charles Schwab announced enhancements to its Portfolio Center product that included document management capabilities.
In its press release, it touted that its "NetDocuments [brings] advisors the means to easily save, retrieve, and edit client files from within their CRM. This capability allows for quick search and retrieval of key documents while on the road and helps advisors run a paperless office."
Regulatory compliance is somewhat unique to the RIA business and has become much more important since the financial crisis. Popular technology systems help advisors tackle the compliance requirements from regulatory bodies such as the Securities And Exchange Commission (SEC) and FINRA. A Google search will bring up literally hundreds of systems that offer RIA assistance for maintaining regulatory compliance. Popular systems continue to include ComplianceMax, ProTracker Software, and Protegent Surveillance.
Growing the Business
Successful RIAs have mastered the art of meeting new clients and growing their business. A high-powered CRM system can be instrumental in helping them manage this process. Redtail Technology offers a popular CRM system and maintained a 14% market share, according to the financial-planning.com survey.
Redtail could appeal to users that like to bundle products and utilize its document management capabilities.
Salesforce.com is one of the most popular cloud computing offerings in existence today and remains a popular CRM system among RIAs and sales professionals in nearly every industry. Otherwise, a straightforward Microsoft Excel file can do a great job for advisors not interested in paying up for a more specialized CRM system.
The Bottom Line
Technology should continue advancing, which will benefit RIAs going forward. These days, there is a compelling combination of sophisticated software and internet-based systems that are available for reasonable prices. Larger RIAs may have the resources for customized offerings to fit their specific needs. Smaller advisors may be perfectly happy purchasing off-the-shelf systems that are more standardized, but also much more cost effective.