Several years ago, I made a visit to the home office of a new independent broker-dealer client. While there, members of the executive leadership team were excited to show me a new e-signature tool the firm had built in-house.

While the tool itself wasn't bad, a crucial problem was that it didn’t integrate effectively with the rest of the firm's technology platforms. Even worse, this e-signature tool was neither a differentiator for advisors and end-clients, nor a competitive advantage for the firm. In fact, a third-party technology vendor could have delivered a similar tool much quicker and at a fraction of the cost. 

As third-party tech providers continue to proliferate our space, most IBDs and RIA firms have come to the realization that—save for a few special circumstance—it’s senseless to spend time and money in an effort to construct proprietary technology tools, when an outsourced solution is more effective from both a functionality and cost standpoint.

But with that said, all too often, technology spending continues to be erroneously viewed as a cost center, versus a launchpad to drive profitable growth through savvy investing in the right resources and platforms.

The most successful IBD and RIA firms today have cracked this code, and in most instances winning technology investing strategies that drive greater long-term value and revenue creation can be distilled to the following top four guiding principles:

1) Know when it’s time to retire a platform. If automation, convenience and mobility define the end-client experience today, these very same attributes should color an advisors’ relationship with their IBD or RIA as well. Therefore, anything that is not web-based, mobile and otherwise digital-friendly needs to be eliminated and replaced as soon as possible. Given the technology evolutions that have occurred in our space over the last few years, firms that continue to use outdated solutions are already well behind the curve. The longer such firms hesitate to update their technology systems, the greater their enterprise risk will be.

For instance, when tech platforms are not entirely integrated, this will stanch the flow of data from portal to portal—meaning there could be a disparity between what data an advisor has access to versus an end-client. In turn, this inevitably creates confusion and a poor client experience. Also, consider hard copy financial statements. While this practice gives older clients peace of mind, the millennial clients of the future will find this approach inconvenient, inherently risky and a signal their advisor isn’t wholly invested in his or her business.

2) Seek out tech partners who are flexible in being able to deliver "a la carte" solutions. Ideally, IBDs and RIA firms looking to revamp their technology offerings could simply scrap everything, including legacy systems or existing third-party subscriptions, and have a fresh slate of platforms built from the ground up. But for a variety of reasons, including economics and continuity of service, firms typically choose to work with existing platforms and make incremental additions and improvements over time.

This is why it’s important to avoid potential partners that offer an "all or nothing" approach in offering their solutions. Aside from being incompatible with most businesses in our industry, this posture suggests a tech provider is too lumbering, lacking both the flexibility and innovation required to provide the customized tools and services firms need to best help advisors and their end-clients. 

3) Beware of the ‘repackagers.’ Be wary of potential partners who, short of developing their own technologies, merely buy several standalone offerings and attempt to repackage them as if they represent one consolidated, interconnected brand. This is a business model that rarely, if ever, produces good results for firms and advisors. The problem with this approach, as I've witnessed all too frequently when hired to fix legacy technology issues, is that it creates data inconsistencies across each of the solutions that are cobbled together, as each portion of the platform tends to rely on different sources of data, with a resultant lack of cohesion and a need to constantly reconcile these data inconsistencies. 

Again, because the future of our business lies in becoming an expert at integrating multiple solutions into one well-working platform, partnering with a service that simply glues together a series of unconnected technologies will only further imperil such efforts.

4) Ongoing support. Choosing the right technology provider is obviously a big decision that requires a significant long-term investment. For this reason, firms need to know that this tech provider is making commensurate investments into their own business to maintain and boost their levels operational efficiency. Ultimately, this means having a support infrastructure that can, among other things, seamlessly introduce updates, troubleshoot problems in real time and serve as a facilitating partner to firms as they seek to grow their businesses.

Every year, tech providers unleash a range of innovative products and services on the industry. And every year some IBDs and RIA firms ignore those innovations and continue to do business the way they always have. Firms like this will soon be dinosaurs. 

Tech has to be more than just an unseen back office function. Technology is front and center in delivering a second-to-none advisor and end-client experience, and these days, it is perhaps the biggest variable that will drive the bottom line now and in future for firms in our industry.

Joseph Mrak is the chairman and CEO of FolioDynamix, a provider of wealth management technology platforms and solutions.