The Rise Of Technology
The fee-based technology offerings of custodians and broker-dealers have in some ways become commoditized. Chip Roame, managing principal of Tiburon Strategic Advisors, notes that custodians are quick to copy one another when it comes to new technologies. Many independent broker-dealers, he adds, rely on technologies provided by Envestnet.

But when you get past basic portfolio and client relationship management tools, things start to change. Observers note that technology is increasing in importance among fee-based advisors, particularly when it comes to streamlining business operations and implementing services for clients. That means technology could become an even more important differentiator in the fee-based services industry.

"There are other components to technology, including contact management software, financial planning technology and rebalancing software," Roame says. "Some firms include these items and/or have better technology than others."

The tricky part about improving a business operation with technology is making sure that the technology is incorporated into the firm's activities after it is installed, Hathi says. That's where good consulting from a custodian or broker-dealer comes into play, she says.

As an example, she says, an RIA with $500 million or more in assets under management could easily spend hundreds of thousands of dollars a year for a portfolio management platform and up to another $30,000 to $40,000 per year for client relationship management software. With that as a foundation, the firm could spend thousands more per year for things such as a rebalancing software package.

Yet that capital investment doesn't provide the proper payoff unless the office uses it properly, she says. That means the firm should be able to bring on another 30 accounts without having to hire additional staff. Or the person who spent three weeks at the end of each quarter doing performance reporting can now do the same job in three days.

Not all are successful at pulling this off. Hathi worked with one advisor that had six different software applications in the office, but was only taking advantage of a fraction of the functionality the technology had to offer.

It was situations like these that led Schwab to recently start a program called Intelligent Integration, which is designed to help advisors get all the different technologies in their operations to "talk" to each other.
"It requires discipline in how you embed technology and measure the success. That is the tricky part," she says.
Pershing released its new technology platform, NetX360, partly because of the key role it expects technology to play as fee-based advisors focus on enhancing their business operations, Tibergien says.

One issue advisors will be facing over the next several years is securing the capital investments that are sometimes necessary to take full advantage of technology, he says.

"The capital is a bit of an issue in some cases, particularly because a large number of advisors don't maintain a balance sheet," he says. "They really have not created a funding mechanism for their business."