Financial Advisor recently sat down with Roger Kiger, founder of Visionary Horizons Wealth Management, a Knoxville, Tenn.-based SEC-registered investment advisory firm, and Smart RIA, a software company that makes an RIA firm’s compliance management and back office operations easier, less expensive and more efficient. We asked him to share his journey from RIA to tech entrepreneur.
Hortz: Managing compliance and business requirements of a small-to-midsized RIA is a challenge for most advisors. What went through your mind that motivated you to take it upon yourself to create a new solution, to become an innovator?
Kiger: When I started Smart RIA and began developing the software, it was really born out of necessity. We needed a solution for internal compliance challenges for our RIA, and as a business owner, I felt like it was important to find a long-term solution. Given that no long-term solution was available at the time, I decided it might be easier to create a system to address this problem. My thoughts were that developing a system might be cheaper and more efficient for us as our RIA firm began to grow.
Hortz: Please share with us the decisions you made to tackle this problem and what you learned along this process of building an innovative, first-to-market solution for frustrating industry problems?
Kiger: The first decision was whether or not I wanted to take on building a solution. That one was relatively easy to make, because I really didn’t know what I was facing. Regarding building a software program to tackle compliance issues, one of the most frustrating parts of that process was learning how to develop software when I am not from the software industry. As an entrepreneur, I firmly believe that if you can't find a solution to a problem, you should build a solution to a problem. But it was really much more time consuming and expensive than I expected, and it took me away from my core business, even when I wasn’t working on it.
The next decision that I had to make over and over again was, “Do I keep going?” Even though the product works very well now, five years after we got started it wasn’t the most efficient solution that I thought it would be back in 2010. Starting a business in the software industry is much more difficult than just having a great idea. Now, the software is very functional and effective. It just took a few years longer than we anticipated and required a whole lot of persistence and general bullheadedness not to give up. There were a lot of times along the way when I was very tempted to quit, but now I’m glad I stuck with it!
Hortz: What best advice would you pass on to other advisors from your experiences?
Kiger: Running an RIA is much more difficult today than it was 10, five or even just two years ago. So we have to find new ways to be efficient. The best way to do that is through the use of technology. The best advice I could pass on to other advisors from my experience as both a registered investment advisor and from a start-up founder perspective is to be on the lookout for ways to utilize technology to solve issues and challenges that used to be done in the past by simply performing manual labor tasks.
Hortz: Smart RIA is considered a “software as a service” (SAAS) product. Can you explain exactly what that means and what the benefits are for this particular kind of product?
Kiger: This might be a question for our CEO, Mac Bartine. He leads the technology charge, so I don’t have to … which is another thing I would advise readers of this article to learn from me: Don’t try to become a tech expert if you don’t know how to solve a specific problem with technology. Hire people who already have that expertise.
Bartine: Essentially, software as a service is just what it sounds like. We license our software solution to our customers on a subscription basis. SaaS is also referred to as “on demand software,” which I think is a better short description. In Smart RIA’s case, we host our solution in the cloud to meet the “on demand” part, and that’s typically the case in SaaS companies.
Hortz: Can you quickly review the problems Smart RIA addresses for advisors?
Kiger: To address compliance problems for advisors, the software automates a lot of the compliance tasks that people normally do by hand, and it organizes and locks down the results to make you more audit-ready. Smart RIA runs in the background to look for compliance deficiencies, and alerts you to them as they occur. These are things that typically just take a lot of time from a compliance officer perspective to find. And from an advisor perspective, you just don’t want advisors spending their time looking for compliance deficiencies. You want them building their book of business and taking care of their clients.
Smart RIA can really save a lot of time and theoretically it would save a lot of money from a compliance perspective in the event of an audit. I know that having gone through an audit and what the software did for us in that audit was pretty awesome. The audit only took eight hours where it should have taken five days, and we had no deficiencies—all due to the software. Moreover, I’ve gone from spending a quarter of my time on compliance as CCO for my firm to less than a half hour a day on an average day. Ultimately, that was the goal I was trying to achieve when I created the software: I’m prepared for an audit, and it doesn’t take me much time, thought or effort to maintain that status. I hesitate to think what it would take if we did not have the software—especially now that we’re spread across three states. I suspect it would relate to a full-time employee doing some of these things that the software specifically does by itself.
Hortz: Can you explain the valuation benefits for an RIA in using your cloud-based software solution?
Kiger: More importantly than just the compliance costs savings, we are able to help people get a whole picture view of their practice. We have all the compliance data, the client data, all of the fee data, and for our most advanced version of the software, all of the investment allocations for each advisor's practice. Because that's all in one place, it makes that practice completely transferable and transparent for a potential buyer, which quite frankly makes the practice itself more valuable; it actually adds value to a practice.
Hortz: What trends do you see going forward in the regulatory environment for advisors?
Kiger: This is a question that we look at every day from an RIA’s perspective and from a software perspective. The trend is just not really good for advisors. Between fee compression from robo-advisors and the constantly increasing regulatory environment, I believe it will be much more difficult for smaller RIAs unless they make a core commitment to strategically use technology to streamline and automate all of the functional areas of their business. Without technology solutions, it will be very challenging to stay in business from a regulatory perspective.
Because Smart RIA is a modern, nimble company, with deep pockets of industry knowledge through our founding and our board of directors, we are well positioned to continually spot and stay ahead of the problems that our advisor clients will face now, and in the future.
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