When you think about it, we have been living in a hybrid world for quite some time now. No longer limiting ourselves to hybrid cars, we have hybrid advisors, hybrid cloud solutions, hybrid work environments and—every parent-of-a-school-age-kid and their teacher’s favorite—hybrid learning.
Consider the operational technology advisors rely upon in running their businesses. That fintech coexists in the hybrid world, even for firms accessing their tech stack from a single vendor. You might not think you run a hybrid firm, but does your TAMP or all-in-one platform include your email, calendar and on-line scheduling? Does it contain your spreadsheets, your entire web site along with hosting? Does it allow you to conduct online meetings, embed all the functionality of all your custodian web sites or applications? Even when a solution contains a CRM, financial planning, trading and rebalancing, client portal, risk assessment, performance reporting, billing, and more, how well do those components really work together?
Chances are your all-in-one vendor purchased at least some modules by buying a specialty toolset and integrated that outside element into their main product line—sometimes holding them together with rudimentary approaches and clunky workflows. Regardless, that’s still using hybrid technology. In our industry, the debate often comes down to a choice between “best of breed” and “all-in-one.” Materially, they are both hybrid solutions. It’s simply a matter of how much control a single vendor has. In a best of breed scenario, the answer is not much; whilst with an all-in-one the answer is a lot.
Ultimately, advisors depend upon the hybrid technology model, even as hybrid emerges as the buzzword of the month. As a result, advisors must examine their top needs and select the solution(s) that best meet those needs. Is number one in your business your CRM? Your financial planning tools? Client billing? Performance reporting? Risk assessment? Once you rank these needs, the question then becomes is it best to attempt to obtain all that from a single vendor, or are you best served by looking at specialists for more features and deeper support than may be available from a single solution?
Ask any experienced advisor and they will tell you that there is never a one size fits all solution for anything. Vastly different business models, advice approaches and service delivery methodologies drive technology choices in divergent directions. As an example, wire houses, broker dealers and RIAs require different aspects from a trading platform, a planning solution and even a CRM. Particularly when you compare size and style, a large investment firm wants different things from their billing system than a small financial planning operation. Thus, as a result, specialization becomes a requirement, favoring a best in breed specialist for that part of your hybrid solution. At the same time, managing multiple vendors —each with its own interfaces, inter-product data exchanges, and the like—presents its own set of challenges; intrinsically resulting in some form of a tradeoff.
Add to this the complexity that the typical advisor technology firm rarely starts out as an all-in-one system. Their platform evolution often starts as a specialty in one or two things, integrating with others to forge a best of breed tech stack. From there, they then build out their offerings—either by acquiring it and munging the products together or via internal development until they “have it all” and complete a metamorphosis and begin to brand themselves as an all-in-one—with all the price increases one might expect, adding in another 20% along the way.
We see examples of this in the fintech news nearly every week. Company X buys Company Y while Company Z enters an entirely new product space in an effort to expand their market share. Why is it so difficult for technology providers to stay in their own lane? Why can’t the various best in class technology companies simply stick to doing what they do best, nothing more, and provide 100% seamless integration points to every other provider of every kind? They can, and some do, but it seems that growth mandates require them to add in additional functionality over time.
Many of us are familiar with the Pareto Principal—80% of the consequences result from 20% of the causes. There is a similar 80/20 aphorism in software development that states that 80% of users engage only 20% of the features. With specialty software, because of its focus on a small number of functions, there is much higher engagement with the entire feature set, optimizing your investment in your technology.
Hybrids emanate as problem solvers for the challenges and tradeoffs present in all aspects of our personal and professional lives. In the wealth space, a hybrid technology product can make perfect sense: offer best in class for core functionality, layer in tight integrations with other specialist products for advisors with clients who need them, along with a “lighter weight” set of features that are “adequate enough” for the majority of users. This hybrid model creates the most cost-effective and flexible approach to advisor technology that brings the scale, efficiencies and productivity advisors need to delight their clients while profitably growing their businesses.
Chris Hastings is the CEO of Panoramix for Financial Advisors, a full-feature multi-custodial client billing and performance reporting system.