As the advisor fintech universe has grown, financial advisors are debating about what kind of technology they should be building. Should they adopt an all-in-one technology platform that does everything? Or should they piece together a tech stack built of their favorite, disparate software offerings that they can then blend into what they are already doing?
A new slate of firms has arrived to help, now that it seems the latter approach is winning out.
“Advisors did warm to the all-in-one approach because of the ease of adoption, because advisors were tired of having to deal with five or six systems,” says Damon Deru, CEO of AdvisorPeak, a portfolio rebalancing fintech. “But there’s been a transition: Advisors don’t want to be limited to technology provided by a broker-dealer, custodian, or all-in-one platform. They want to combine the platform with best-of-breed plug-in-play software to better serve their niche.”
That transition hasn’t stopped a seemingly never-ending stream of mergers and acquisitions among technology providers—especially as large technology platforms like Orion and Envestnet have endeavored to create “end-to-end” platforms on which an advisor can manage the entirety of their practice—but it has created new problems for RIAs and broker-dealers, large and small.
Perhaps the most persistent of these problems is how to make all of a business’s myriad technologies work together—from old platforms originally developed by enterprise firms, maybe as far back as two decades ago, to newfangled AI-driven software that promises to drastically cut down on back-office expenses and menial tasks common to every advisor.
“We try to look at where we need to be best in class to help advisors serve clients,” says Ann Senne, head of U.S. advice and solutions for RBC Wealth Management. “There are so many new tools that can be brought to bear, but a new tool that isn’t integrated into the way you deploy services becomes technology that just sits on the shelf.”
Yet legacy technology and purported all-in-one platforms often fail to play nice with the latest and greatest fintech. These platforms usually lack the ability to create deep integrations to share data and functionality across different pieces of software, says Deru.
He says there are three layers of integration. The most shallow is basic data-sharing between software, which is “pretty common.” If you go one layer deeper, you can allow advisors to have a single sign-on that launches multiple applications.
The deepest integrations, however, involve directly building and embedding capabilities across different systems, he says.
Until now, both enterprises and small advisors often haven’t had the information technology manpower to custom-build all of their integrations in depth. Their resources might have been better spent just creating their own solutions.
“When I first started in the industry, everything was independent and unbundled,” Deru says, “but over the last decade, we’ve seen a bundling of software and a rise of the all-in-ones, and they’ve been successful.
“We’ve also seen custodians and broker-dealers continue to build out their own technology to offer to advisors for free. That doesn’t kill innovation, but it does make it hard for independent fintech to compete. Everyone needs to continue to have open architecture and updated integrations.”
That doesn’t quite solve the problem of integrating the new software with pre-existing platforms, but there are solutions to address this problem for firms of all sizes, many of which use cutting-edge technology.