Financial advisors at independent RIA practices with some degree of technology integration earn approximately 20 percent more in annual income than advisors at independent RIA practices with no technology integration, according to a white paper released today by wealth management technology provider Envestnet|Tamarac.
The study found that RIAs with some level of integration have almost twice the amount of assets under management as RIAs with the same size staff but with no integration — approximately $90 million more in client assets on average. Practices with integrated technology also produce an average of $100,000 more in annual revenue than their counterparts with no integration.
In addition, the study revealed that the staffs of firms with at least some technology integration spend 32 percent less time on operation processes than the staffs at firms with no integration at all, freeing up approximately 40 weekdays each year for every employee to engage in more revenue-generating activities, including client management and prospecting.
Aite Group conducted the study, RIA Productivity and Profitability: Integration Pays, in March 2012 to examine the impact of technology integration on the profitability of independent RIA practices. It is based on the results of an online survey of 201 financial advisors at independent RIAs.
For Etesian Wealth Advisors in Lake Oswego, Ore., in the three years since they adopted a fully integrated technology solution from Tamarac, their client assets have grown by almost 400 percent, yet their staff has only increased by 20 percent.
“Although independent RIAs do not possess the large technology budgets and staffs of larger firms, choosing integrated technology quickly levels the playing field,” said Alois Pirker, research director at Aite Group.
According to the study, advisors at independent RIA firms are at an inherent disadvantage with regard to sourcing technology compared to large firms that are supported by substantial technology budgets and expertise. The vast majority of RIAs are small, with 70 percent of RIAs employing fewer than 10 people.
“Since independent RIAs are small shops that have been built from the ground up, there is often a tendency to source technology components from vendors or acquire them from custodians, which often leads to systems that do not integrate well with one another,” said Stuart DePina, group president, Envestnet|Tamarac.
Despite the benefits of technology integration, only 7 percent of advisors surveyed stated that their firms’ business applications have deep and meaningful cross-product functionality. More than 30 percent, on the other hand, said their firms have no technology integration.