Technology is a hot topic in financial services today as the variety of robust, dynamic, and scalable solutions available are changing the industry in every facet. No longer do the large wirehouse firms run the board of the financial services chess game as technology has leveled the field where RIA, Independent, and Hybrid firms have the ability to provide services on a comparable scale and with equitable results.
The benefits of technology evolution in financial services has wide ranging implications that not only have the ability to positively impact a firm today, but present the opportunity of sustainable growth long into the future. At surface level, open architecture technology platforms offer advisors a necessary strategic advantage, allowing them to efficiently plan and manage their client’s portfolios while generating positive results and simultaneously freeing up time to steadily grow their firm’s business. Now, scratch the surface and envision what technology could mean to the long-term valuation of a firm and its client base.
One of the biggest issues that must be confronted by an RIA, Hybrid, or Independent firm is client succession planning which is key to a firm’s valuation in the case of a retiring advisor or sale of a practice. In these situations, RIA, Hybrid, and Independent firms often confront client thinking along the lines of ‘why should I stick around – if you are retiring, my portfolio is retiring too’. A firm which has successfully built a client base that does not need a specific advisor to service the account poses a stronger market valuation than one where client’s rely strictly on their advisor relationship in order to feel a sense of stability and opportunity for growth when it comes to their wealth management needs.
Here enters today’s open architecture technology platforms, which present a revolutionary opportunity for RIAs, Hybrids, and Independents to rethink their current valuation model and position themselves for prosperity in the event of a future sale.
Financial services technology platforms function in such a way that the advisor alone is not the only one who buys and sells an asset allocation. Various functions that traditionally have been managed strictly by the advisor themselves can now be outsourced to third parties resulting in a more predictable performance record. Add in the constant improvements being made in the technology space and the prospect of long-term results becomes documentable and thus supremely relevant to overall firm valuation.
Further, model portfolio marketplaces allow advisors to maintain a certain level of control over their client asset management activities. This opens the door to opportunities for more strategic thinking on how to structure and build a firm in such a way that your client base and service set are optimally aligned for future sale and ease of transfer to the successor.
All to often, when it comes to technology, conversation within the financial services industry turns to the topic of advisors not paying enough attention to technology importance or its long-term implications. By learning how to incorporate technology advances into their practices now, advisors shore themselves up and prevent either getting left behind, or its an even more troubling alternative of spending a career building a practice of no asset value. It’s important for advisors to think beyond today when considering technology platforms as the solutions on the market present themselves as a way to create a long-term sustainable business model that is lucrative in its valuation and boasts a lifespan that extends for generations.
