FinTech continues to be a hot topic in independent financial advisory circles. Advances in consumer technology have raised clients’ expectations about the user experience in financial services. Digital platform providers from outside traditional financial services circles have served as both disruptors and agents of change within our industry. Technologies such as artificial intelligence, big data and virtual reality are poised to further change the traditional business model in 2016 and beyond.
One often overlooked player in advisor technology is the RIA custodian. Over the last decade, custodians have evolved from firms that strictly supply back office support into firms supplying much more in the way of technology and technological support to advisors. For example, almost all custodians provide at least some application programming interfaces (APIs) that allow third-party software providers and in some cases advisory firms to integrate their software directly with the custodians’ systems. Almost all offer some front office software (e.g., rebalancing software) that they have developed, or that has been developed for them by a third party and white-labeled for them. Almost all offer a host of other technologies that are capable of enhancing an advisor’s productivity, and almost all have technology consultants on staff who can provide guidance on technology selection and implementation.
While there are commonalities among the custodians with regard to technology, there are differences as well. Each one takes a somewhat different approach that differentiates it from peers. In this, the first of a series, we explore some of the latest technology developments at a number of RIA custodians.
Fidelity
According to Ed O’Brien, the senior vice president of technology product management at Fidelity Investments, Fidelity will continue to invest heavily in technology to support its advisor clients in 2016 and beyond. O’Brien highlighted a few initiatives that Fidelity is currently working on.
The first is a significant investment to bring all of the capabilities of Streetscape and WealthCentral together in a single platform. This is important to independent broker-dealers and other enterprise clients because it will allow advisors to have access to any capability offered by the combined platforms through a single interface. The new platform will be device-agnostic. HTML5, responsive design technology will ensure that the platform is smart enough to know what device is accessing it, so it can provide the proper screen layout, as well as touch capabilities if the device supports it.
Fidelity is also focused on creating a much deeper integration between its custodial platform and eMoney. “If an advisor is in the planning mode with a client and working in eMoney, they should be able to go from planning to action,” said O’Brien. He added that Fidelity will deeply integrate many of eMoney’s technologies, ultimately providing an enhanced investor/advisor experience to those advisors or firms who custody or clear with Fidelity and utilize eMoney.
He also said that his firm wants to make it easy for both advisors and their clients to engage with Fidelity and eMoney through technology.
Fidelity currently offers digital on-boarding, but the scope will be expanded. Though advisors can right now open only a single account at a time, in 2016 Fidelity will introduce the ability to bulk-process digital account opening requests. The company will also expand the account types eligible for digital account opening.
Data analytics is another area that Fidelity is investing in. By the time you read this, Fidelity will be offering “regulatory early warnings.” It will bring together data across all of an advisor’s holdings and send out alerts about corporate actions, updates on securities and other information that may be of interest to COOs. This is just the first of what Fidelity says will be many data analytics enhancements it intends to provide to help advisors make better business and investment decisions. The plan is to present much of this data in a very visual way so that advisors can digest it at a glance.
Fidelity is also developing its own digital advice platform for advisors, one that is separate and distinct from the Fidelity Go offering targeting retail investors. Although there are few details now public, O’Brien said the platform was being designed so that advisors could use it as an extension of their existing business. We take that to mean that it will allow the advisor to drive product selection, asset allocation, models and the like, as do some other advisor-focused digital platforms. We also take it to mean that the solution will be compatible with third-party software that advisors currently use in conjunction with the Fidelity platform.
O’Brien made it clear that Fidelity has much more in store for 2016 but that the discussion of other developments will have to wait for another month or so. We expect further disclosures of the 2016 technology road map by the end of the first quarter of 2016.
LPL
Although LPL is usually thought of first and foremost as the largest independent B-D, the company was quick to remind me that it is also the fifth-largest independent RIA custodian. According to Victor Fetter, chief information officer at LPL, much of the work his team is engaged in supports the transition of advisors to the RIA model.
LPL’s next-generation advisor platform, ClientWorks, which is in the process of being rolled out, supports an advisor’s transition to the independent RIA model. There is an increased emphasis on integration with third-party software products. For CRM, LPL now offers integration with Salesforce and Redtail CRM. For portfolio management, LPL now offers integration with the three most requested providers: Albridge, Morningstar and Orion. LPL has long offered integrations with eMoney, the most requested financial planning software provider.
In addition, at this past year’s annual conference, LPL announced its affinity program, a curated list of providers that LPL believes offers products and services that can be beneficial to advisors. LPL believes that firms participating in the affinity program are priced attractively and have the scale to service an organization of LPL’s size. Not all firms on the list are technology firms, but a good number are. Fetter has hinted that going forward LPL will be looking to the affinity list first for future integration partners.
Fetter also suggested that LPL will be looking to add value as third-party integrations progress. For example, when integrating a new offering into the platform, the company will look at how to best integrate in order to offer the best core platform experience. This might mean providing additional functionality not available in the off-the-shelf versions of a product, or it might be a somewhat different user experience that is unique to LPL.
On the data analytics front, LPL will roll out a practice management dashboard in the first half of 2016. The dashboard will provide key metrics such as assets under management, inflows and outflows, commissions/fees and profitability—and more. There will be different dashboards for different roles at the firm. Advisors will see advisor-level data and principals will see firm-level data that includes all of the above on a consolidated basis, with the ability to drill down to look at activity at the advisor or account level. In addition, institutions will have the ability to view analytics by geographic region and by branch.
Cybersecurity is a topic on everyone’s mind, and LPL is investing to ensure their defenses remain strong. While the firm cannot provide details for obvious reasons, the investment is significant and ongoing.
Fetter says that LPL is closely following the Department of Labor’s rule-making process regarding potential changes to retirement plan regulations. He says that if it becomes necessary, LPL will invest in order to support the technology needs of advisors who deal with retirement accounts and retirement plans.
LPL will have a digital advice offering for advisors. The firm is currently engaged with a number of LPL advisors who are helping to design that offering. While he declined to provide many details, Fetter did say that the digital advice platform would be complementary to LPL’s core technology offering and that it would integrate with the core platform.
TD Ameritrade
Like its peers, TD Ameritrade has been busy on the technology front. Perhaps the biggest news is that TD Ameritrade is currently beta testing Veo One, its next-generation advisor workstation. Currently, there are 12 Veo One integration partners: Orion, Laser App, MoneyGuidePro, Redtail, DocuSign, Black Diamond, eMoney, Finance Logix, iRebal, Morningstar, Salesforce and Thinkpipes. Two more, Junxure and Laserfiche, should be integrated by the end of this month. Eventually, we expect the approximately 90 vendors currently on the Veo platform to transition to the new Veo One platform.
Some highlights of the new platform include its simplified work flows, its more efficient design, the ability it gives users to launch all apps from the Veo One platform and its business intelligence. Work flows are enhanced through your ability to manage your day from one platform with information from different Veo integrated applications together in one view. Veo One enables you to update information once and have it automatically apply to other integrated systems. In addition, the platform adapts to you and how you work by analyzing your activity patterns and presenting relevant information to help you work smarter. For example, when you open a new client account, the platform will offer next steps to minimize the number of clicks necessary to complete a task.
Veo One is designed with tabs and windows that provide a comprehensive view of all the data you need to run your business more efficiently. You can launch all of your integrated applications right from within the Veo One platform. Each module can be minimized to save screen real estate and expanded when needed.
The platform provides useful analytics to help you identify where you need to take action to stay on the path of continued growth. These analytics include: client count growth, asset growth and bill tracking so you can analyze trends in fee income over time.
TD Ameritrade continues to on-board clients to the cloud-based, tax-sensitive, household-level rebalancing version of iRebal that is free to its advisors. Since the launch of this tool, more than 1,500 advisors have used it in their business. Currently, it can only rebalance accounts that are custodied at TD Ameritrade, but according to Jon Patullo, managing director of technology product management at the firm, the plan is to increase iRebal’s scope in 2016 to begin accepting outside assets. There are also plans in 2016 to make APIs available so that the many third-party software vendors on the TD Ameritrade platform for advisors can use it. How might this work? To cite just one example, a digital advice provider that is currently integrated with TD Ameritrade could use the iRebal API to rebalance all the accounts on a digital platform, freeing the platform developers from having to create their own rebalancing solution.
Last month, TD Ameritrade started a “going green” initiative. It allows the clients of advisors to set themselves up for electronic statements and for e-delivery of other documents.
Another major technology initiative is the rollout of AdvisorClient.com, the web portal for end clients of TD Ameritrade advisors. This portal leverages the technology of the TD Ameritrade retail site, but customizes the experience for advisor clients. An initial rollout began last May, but TD Ameritrade continues to add features and customization options to make the portal more robust and more user friendly.
Closing Thoughts
As technology prowess plays an increasingly important role in the success of advisory firms, RIA custodians are striving to supply the necessary tools that empower advisors to take their businesses to the next level. They are also competing with one another to provide superior technology so that they can differentiate themselves from the competition. In next month’s issue, we’ll explore what some of the other leading RIA custodians are working on.