With all of the great advances we’ve seen in advisor technology over the last several years, you’d think that some of the basic technology problems that have plagued advisors for years would have been addressed by now. Unfortunately, that’s not the case. 

Broadly speaking, when we think about the technology challenges that advisors face, it is useful to divide them into two camps: problems that advisors can easily control internally, and external technology challenges. Many of the internal challenges I see in advisor offices are firm-specific, but in this article let’s focus on some of the challenges that are beyond the control of most advisory firms. 

Before we begin, a few qualifications are in order. The majority of RIA firms I meet with today do not have their own internal IT staff. That makes them more reliant on external providers. Those that do have quality technologists internally can address many of the issues outlined below, but often at significant cost.

One perennial technology problem that still exists today is the problem of integration. Although the situation seems to improve marginally each year, the level of integration, particularly on the independent RIA side, leaves much to be desired. In putting together their technology configuration, advisors have a number of paths to choose from. For simplicity’s sake, they can try to find an “all-in-one provider.” 

For example, you can get CRM, portfolio management and reporting, a portal, rebalancing software and more today from Envestnet /Tamarac. They currently do not offer financial planning software as part of the bundle, but Finance Logix can be purchased from Envestnet as well, and further integration work is ongoing. In addition, Envestnet now owns Yodlee and a robo platform, so it is not difficult to envision an even more comprehensive offering from the firm soon.

The problem with this approach is you’ve got to be at least reasonably comfortable with all of the components of the package. For example, if you love the rebalancer and the portfolio management, but like the CRM and the portal much less, the total package might not be right for you. On the other hand, you can purchase just the components you like, but then you don’t get the deeply integrated all-in-one solution. Not every firm is a candidate for a comprehensive platform, but many of those who are gravitate to Envestnet/Tamarac.

Another approach is to choose one of the independent broker-dealer platforms. Some of these are quite robust, and the IBD offerings often include additional services such as marketing and compliance support. But they also entail compromises. For example, these platforms sometimes involve additional compliance oversight. Some advisors welcome this approach; others do not. Some platforms offer a wide choice of technology providers, but a more common arrangement is to offer fewer. As is the case with custodians serving independent RIAs, the level of integration and automation varies greatly. It is incumbent upon the advisor to perform the due diligence to ensure that the technology platform meets his or her needs. 

For independent RIA firms, a popular choice is the best-of-breed approach. This can be the most beneficial in theory for a number of reasons. First, in principle, it provides the advisor with the widest possible selection of vendors to choose from. They can choose the best CRM software for their needs, the best portfolio management and reporting provider for their needs, the best financial planning software for their needs, etc. Second, it provides flexibility. If a better product in a given category comes along, or if the needs of your firm change, you can more easily find a suitable replacement for a single application such as a CRM than you can for an all-in-one solution.

Unfortunately, the best-of-breed approach entails its own unique set of challenges. The first is the capabilities and the integration partners of your current custodian. On the one hand, custodians have the potential to be a great enabler of technology for advisors, but on the other hand they often fall short in critical areas. 

For any number of reasons, not all custodians integrate equally well with all third-party technology providers. In some cases, a custodian may not integrate at all with a third-party provider of interest to the advisory firm. In other cases, they may integrate, but not all that well. 

Just because two custodians integrate with a CRM provider does not ensure that those integrations are equal. In one case, the data might only flow one way, while in another the data flows two ways, or is synchronized in near real time. In one case, the number of data points integrated may be very limited, while in another case much more data is synchronized across the two systems. 

There’s also a question of what you can do with that data. Can the data in one platform be used to populate forms on another platform or to initiate a work flow across platforms? In some cases, the answer is yes, in others it is no. These are legitimate areas that advisors should explore while performing their due diligence, but many today fail to do so.

One of the most egregious failings of many major custodians today is in the area of digital client on-boarding. Every advisory firm wants, or should want, to provide a seamless digital on-boarding option to its clients. After all, robo-advisors offer it. For that matter, so do many of the custodians for their retail accounts. 

When it comes to their RIA clients, however, custodians only provide a portion of what is needed for seamless digital on-boarding. Many custodians allow an advisor to process the custodian’s paperwork using digital forms and a digital signature, but with the exception of TD Ameritrade, I know of no major custodian that allows RIA firms to process their own investment advisory agreement in the same digital package. For cutting-edge firms that want to digitize and automate their processes to the greatest extent possible, this is a frustration, as it is for the vendors that serve them. 

Another similar frustration is funding those new accounts that have been opened digitally, or in the case above, partially digitally. If I choose to open an account with the retail division of many major financial services firms today, or if I open an account with a robo-advisor, I can fund the account digitally. That’s usually not the case on the RIA side of the business. Furthermore, if a client sends an advisor a check for deposit with the custodian, the advisor, in almost all cases, must overnight the check to the custodian and can’t deposit digitally. On the other hand, if the client is a retail client of the custodian, the check can be deposited digitally. 

In fairness to most RIA custodians, there can be legitimate reasons that the process of providing some of these services can take longer on the institutional side than they do on the retail side. But in the case of digital on-boarding and check deposit, that time has passed. Advisors have a right today to expect these services so that they can compete effectively in the marketplace, and they should demand these services of their providers. 

Yet another area where the industry is lacking is the “client portal.” There are a few providers (eMoney, Orion and Wealth Access among them) that offer an integrated client portal today, but too many are still closed systems with limited if any integration. That’s not what advisors need, and it is not the experience that their end clients want. 

Although I’ve been quick to beat up on custodians and third-party technology vendors for some of their failings, advisors have some shortcomings as well. Perhaps the greatest one is that they have rising technology expectations without regard to the costs.

In their desire to serve their advisors and help them become more efficient, custodians and third-party vendors have invested considerable resources in creating integrations across platforms. Initially, early movers providing integrations to advisors had a competitive advantage, but at some point these providers reached a point of diminishing returns. For example, if they already integrate with five CRM providers, how much of a return will they get by adding a sixth that a particular firm wants? If the firm making the request is big enough, maybe it makes business sense to absorb the cost. If that CRM has a big enough client base in common, perhaps they do the integration. 

At some point, however, advisors might have to shoulder a portion of these costs. There may come a time in the not-too-distant future where providers will either have to raise prices for all their users, or perhaps charge a modest fee per user per month of integrations that are not part of their current network, just as some portfolio management systems charge a fee for each custodial feed they provide. 

Let me be clear here: I’m not advocating that providers raise fees for advisors across the board. What I am saying is that there is a need for further work on integrations, the digital on-boarding process and other technology challenges that face advisors. As an industry, we’ve struggled for years with a similar set of problems, and the solutions in many cases fall far below reasonable expectations. Advisors should no longer accept the status quo. In order to compete effectively in the future, we need to push the envelope on integration, digital on-boarding and the client experience.

It is time for advisors, custodians and third-party technology providers to begin the dialogue necessary to further advance the profession’s technology tool set. Those who embrace the challenge early on are likely to benefit the most.