Technology continues to be a pressing issue for advisors and the RIA custodians who serve them. Advisors face a host of challenges today. They face cybersecurity problems, complying with the DOL’s fiduciary rule and competition from robo-advisors. At the same time, they must improve their clients’ experience, improve their own efficiency, integrate technology into their business and scale for growth. Every single one of these issues is either directly or indirectly linked to technology.
But most firms, unfortunately, are not well equipped to deal with these issues. All but the largest firms lack in-house cybersecurity defense experts, yet regulators expect all firms to be prepared nonetheless. The DOL rule will require firms to make changes in policy and procedures, as well as update work-flow software. But not all firms have the expertise to evaluate what changes will be required of their staff or how to make the software changes.
Given those challenges, RIA firms are increasingly turning to their custodians for help. Here, we look at what a few of the major custodians are doing in technology to support their advisory clients.
TD Ameritrade
According to Jon Patullo, managing director of technology product management at TD Ameritrade, much of his firm’s focus in 2016 has been related to the client experience, and that will continue next year. Perhaps the firm’s biggest initiative is the rollout of its “VEO One” platform, the successor to its highly successful advisor VEO workstation. (That rollout should be under way by the time you read this.)
Patullo says the initial version of VEO One will include all the core functionality of its predecessor, if not all the ancillary functions. Those will appear later, as will a resource center, and the original VEO will still have all the old functions until the new version incorporates it all in 2017. The plan is to train advisors to use the new features and functionality as they come on board.
Data analytics is another area of focus for 2017 after TD Ameritrade’s purchase of FA Insight earlier this year. The deal will offer TD Ameritrade advisors the ability to benchmark their firms against their peers. “Advisors want to know how they stack up with other advisors,” says Patullo.
TD Ameritrade’s tools will also help advisors segment their business to boost growth and productivity. There are other enhancements on the way. For example, a new status tracker will allow advisors to monitor the status of new account openings, asset transfers and the like without having to call a service representative. Also on the way is an improved account wizard to capture and store all the information, whether it’s manually entered or obtained through third party applications. The wizard will also facilitate near real-time digital account openings.
TD Ameritrade is creating a native Salesforce app. The app is designed primarily for advisors who already have Salesforce installed when they come to TD Ameritrade, or for those TD advisors using their own version. The app will let them view VEO data, get TD Ameritrade alerts and take advantage of the new account opening process.
The company continues to bring advisors on to the free iRebal platform—more than 2,200 firms have been trained and put on the platform.
Finally, there is good news for the advisors on the Scottrade platform who transition to TD Ameritrade’s. It should be obvious that TD’s technology far exceeds Scottrade’s, so advisors making the transition are in for a far superior technology experience.
Schwab
There were no major blockbuster tech announcements at this year’s Schwab IMPACT Conference, which is often the venue for them, but there were interesting developments.
For instance, Schwab announced a number of enhancements to its Schwab Intelligent Institutional Portfolio offering, the automated investment platform designed for independent advisors who custody with the company. The initial upgrade to the platform allows more portfolio customization. Schwab now offers more than 950 ETFs on the platform, more than double the number available at its launch last year. By the time you read this, all advisors will be able to create up to 45 advisor-defined asset classes in each portfolio and offer multiple ETFs in each asset class.
There’s another welcome change: Previously, each firm could only have one firmwide Institutional Intelligent Portfolio program. Now, different offices of individual advisors within a firm can establish their own programs targeting a specific audience.
A new, streamlined account-opening process makes opening accounts easier, faster and more intuitive. Schwab has also expanded account funding options. Previously, only cash was accepted. Now, accounts can be opened with stocks, mutual funds and ETFs. Assets can be moved by transfers from other institutions or by journaling from an existing Schwab account. In many cases, the assets will be liquidated upon delivery to Schwab, but the sales will be done at no charge. If an ETF transferred in is appropriate for the new Institutional Intelligent Portfolio model, it will not be liquidated.
Schwab has also improved rebalancing. Previously, the cash threshold for rebalancing was believed by many to be too high. The algorithm has been modified to address that criticism.
Schwab has more enhancements planned for 2017. A new client-facing app for smartphones and tablets will be released. It will continue to be advisor-branded, and will feature improved navigation and an improved user interface. Schwab will allow advisors to upload up to five advisor agreements to Schwab so that clients can digitally sign them, as well as sign Schwab agreements.
One current frustration for many advisors is the process required to convert an existing Schwab account into an Institutional Intelligent Portfolio account. One advisor I spoke with called the current process “painful.” Schwab plans to streamline the process in 2017.
But advisors say the program also needs a few enhancements that are not now in development. One is tax optimization. Currently, it is done at the account level. Most advisors would like to see it at the household level. Also, the program doesn’t currently support SEP or SIMPLE IRA accounts. (The hope is that it will sometime in 2017.) Most advisors would also like to see automated billing offered.
Overall, the advisor feedback on Schwab Institutional Intelligent Portfolios has been positive, and the coming enhancement announcements were well received by advisors. Schwab Portfolio Connect, the company’s next-generation portfolio management and accounting tool, was originally scheduled for release in 2016, but that has been pushed back to 2017. According to Ed Obuchowski, the senior vice president of advisor technology solutions, the delay was necessary to ensure that the platform met all of Schwab’s objectives.
“This is one of the largest technology investments Schwab has made in years,” he says. “This is the technology that will serve us for the next decade.” He adds that the new platform underlying Schwab Portfolio Connect will be infinitely scalable.
Schwab is moving to make the on-boarding process totally digital. The program is now in pilot. Obuchowski says Schwab is working to make all firms e-signable. Advisors will be able to incorporate their forms into the process. “Through a guided digital work flow, we aim to make the complex simple,” he says.
Finally, Schwab recently rolled out a comprehensive suite of cybersecurity resources to help advisors safeguard their firms and their clients. The suite includes resources to help advisors understand the current regulatory and fraud environment; develop a cybersecurity action plan; educate employees on roles and responsibilities for protecting firm and client information; and educate clients on the best practices for protecting their own digital assets.
Fidelity
Fidelity recently announced the initial rollout of its new total advisor platform, beginning a multi-year effort that will continue through at least 2018. The goal of the new platform is to enable the digital financial advisory practice. There are a number of important aspects to this rollout.
The new total advisor platform combines all the capabilities of the current Fidelity Streetscape and WealthCentral workstations into a common infrastructure called “Wealthscape.” The transition to this will be complete by year’s end. All existing functionality will continue, but with added capabilities.
This upgrade is significant for a number of reasons. First, it creates technology scale and efficiencies for Fidelity. Going forward, the company will need to maintain only one technology platform, and its employees will be required to service, maintain and upgrade only one platform. By extension, the institutions that clear or custody with Fidelity will have a single point of access. Previously, dually registered advisors, for example, might have had to conduct a portion of their business on each system. This meant that the institution needed to maintain two systems—with all the inefficiencies that entails. Now, only one is required.
One enticing aspect of the new total advisor platform is the deep communication between Wealthscape and the eMoney “emX” suite of products. This has the potential to enhance the investor-advisor experience, enabling advisors who use both Wealthscape and eMoney to move swiftly from planning into areas requiring brokerage integration, such as account opening, funding and trading. The integration between Wealthscape and the emX suite includes a collaborative vault that investors can use to automatically access copies of their Fidelity brokerage account documents. It also includes investor self-service tools like eDelivery enrollment and integrations with the Fidelity brokerage platform for account maintenance—as well as the integrated advisor work flows that link the two platforms together.
Perhaps the most exciting portion of the new Fidelity/eMoney offering is the digital advice solution for advisors and their clients. Fidelity Clearing & Custody Solutions is launching “Wealthscape Digital Advice Solutions,” which includes a custom-built digital advice offering for advisors, as well as connections to other third-party digital solutions through deep integrations or APIs built for digital solutions.
The custom-built digital advice solution, Fidelity Automated Managed Platform (AMP), co-developed with eMoney, will begin its pilot run late in the first quarter of 2017. It is the first fully integrated planning-centric digital financial advice platform delivered through financial advisors. Unlike many competing products, AMP is focused on financial goals. AMP will provide a streamlined and fully digital experience for investor on-boarding, goal setting and monitoring powered by eMoney, with straight-through account opening and funding through Fidelity’s brokerage capabilities. Advisors will also be able to evolve clients, when ready, from an automated experience to a collaborative experience with an advisor—without changing their technology platforms.
AMP will offer flexibility, allowing firms to craft their own investment profile questionnaires, select from a range of investment portfolios created by sub-advisor Geode Capital Management, and then serve as the investment advisor on the portfolio. Fidelity AMP will also allow advisors to manage their automated and traditionally advised portfolios side by side. Investors working with advisors will be able to access self-service tools, like an automated on-boarding work flow and a dynamic financial fact-finding process, through a totally digital, intuitive interface. As these clients’ financial lives become more complex, advisors will have the opportunity to create a path toward a more collaborative, traditionally advised experience.
Fidelity will offer an integrated suite of portfolio management tools, Wealthscape Portfolio Tools, to help clients more efficiently manage portfolios from beginning to end, fueled by a new consolidated data platform. Wealthscape Portfolio Tools is a modular suite and includes tools for proposal generation, modeling, advanced rebalancing, performance measurement and fee billing, and it will be delivered separately and in waves starting in 2016 and throughout 2018.
The competition among RIA custodians to provide superior technology to their advisors shows no indication of abating. Clearly, these firms believe that better technology is essential to keeping their firms, and the advisors they serve, competitive in an increasingly challenging environment. We’ll be examining what some of the other custodians are doing in a future issue.