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Despite what headlines say, expensive M&A isn’t the only way to grow a firm. Tech-savvy registered investment advisors (RIAs) can lean on innovations in operations, investing and client reporting to supercharge their businesses.
Technology can be pricey. In a market focused on fees and costs, RIAs must thoughtfully invest in innovation while delivering a premium service experience to clients.
So where to begin?
Embrace automation
Today’s technology-driven landscape makes it easier than ever for RIAs to automate. Advisors can save time and minimize errors by using trading and rebalancing tools, portfolio management and CRM systems to manage accounts. Automation in data analysis also frees up time to provide more personalized advice or pursue new business.
One practical approach to lowering operational costs is to find custodians and technology providers with competitive pricing and automated tools and support. This strategy increases profit margins for the RIA, which can offer better pricing to clients. Not all providers are alike, so RIAs will need to research and negotiate to find one that aligns with their business model and client needs.
Differentiate with diversified investments
Advisors are drawn to independence because they gain freedom to manage clients the way they want to, as fiduciaries. Still, many find themselves adrift in a sea of domestic sameness, sorting through supermarkets of similar investments to build portfolios and asset-allocation strategies.
A global view presents an opportunity to diversify client portfolios and benefit from growth opportunities worldwide. By offering investments in emerging markets, international equities, global fixed income products, and even alternatives, RIAs can serve clients seeking exposure to different economies, sectors and currencies.
To do this, advisors must possess or develop expertise in various international markets and understand the associated risks and regulatory considerations – just as they would educate themselves on any asset class, trend, market dynamic or regulatory change.
Consolidate with comprehensive reports
Providing clients with a consolidated view of all their investments and assets, including those held outside of the RIA’s purview, is a service differentiator. Comprehensive reporting is a significant value-add for clients, leading to higher satisfaction and retention rates. Advisors who can take a holistic approach can help clients see the big picture of their financial status more clearly and provide more informed guidance.
Comprehensive, consolidated reporting enables the advisor to be a central figure in the client's financial life, fostering trust and dependability and deepening the client’s connection to the firm. To take on this role, RIAs need robust reporting tools that can collect and integrate data from various sources and present it in an easy-to-understand format.
Embracing innovation is critical to building a more resilient, client-focused and successful RIA. Advisors gain additional capacity to do desired, higher value work – i.e., client-facing activities or new business – using tools that help them be more productive and drive client engagement. Clients gain by having advisors who are more engaged and can make more informed decisions about their investments and financial goals. And as a result, everybody wins.
Steve Sanders is executive vice president of marketing and product development at Interactive Brokers and was instrumental in establishing the company’s RIA offering. Interactive Brokers provides turnkey custody solutions to help advisors build a competitive advantage, efficiently manage their business and serve clients at lower cost.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
