As the battle for the advisor desktop continues to heat up among RIA asset custodians, there is a growing trend to attempt to capture market and mindshare by bundling in “free” software that can help advisors run their businesses and manage their client portfolios. On the surface, this seems to be a reasonable way for custodians to strategically acquire new business, while at the same time increase retention by locking advisors and their clients down onto their platform as advisors adopt those tools and technologies into their daily workflows.

When examined under a different lens, however, this custodial trend to bundle in free software is troubling on a number of fronts, most notably, shaking the very foundation of what it means to be a fiduciary. The RIA-client relationship is supposed to be conflict free, and in fact, regulations mandate that it is. However, by accepting free software from custodians, one could argue that advisors who do so are in fact violating their fiduciary duty. Regardless, there are other problems that arise by using free software.  

The age-old adage "Buyer Beware" is often associated with purchases, but it is equally applicable when considering free offerings, especially in the realm of portfolio management software. At first glance, the cost savings appear significant, and the integrated features of custodian-provided tools may seem sufficient. However, "free" doesn't always equate to "value." These free tools often come with hidden costs, such as limited functionalities, infrequent updates, lackluster support, and the need for workarounds that lead to inefficiency.

Moreover, they often lack advanced features and customization, crucial for delivering personalized service and maintaining a competitive edge. RIAs must determine the actual value offered by these free tools, just as they would cautiously approach an investment for their clients. The allure of zero upfront cost should not distract from a thorough evaluation of potential long-term implications for their practice, efficiency and client satisfaction.

One of the standout benefits of using a comprehensive, independent platform is the ability to aggregate accounts from multiple custodians. In contrast, custodian-provided software can only offer visibility into their own accounts, limiting the breadth of information available to advisors. Aggregation capability provides a holistic view of a client's entire portfolio across different custodians, asset classes, and investment types. This 360-degree view is essential for RIAs who need a comprehensive understanding of their clients' financial position to provide effective, tailored advice. With aggregated accounts, RIAs can analyze performance, risk, and allocation across the entire portfolio, enabling better-informed decision-making and more streamlined and efficient client reporting.

Every RIA operates with unique attributes, ranging from their approach to portfolio management, to the diversity of their clientele, to their business growth strategies. This uniqueness forms the basis of their competitive edge and is often a driving factor in their client relationships and market standing. Generic custodian software, with its “one-size-fits-all' approach, often fails to accommodate this diversity. While these tools may offer basic functionalities, they lack the flexibility and customization options required to adapt to an RIA's unique needs and strategies. For instance, they may not provide extensive support for complex asset classes, advanced performance analysis, or robust client reporting—all of which may be integral to an RIA's operation. The lack of customization restricts RIAs from fully expressing their distinct methodologies, which can ultimately impact their client service and competitive positioning. Adopting a more specialized, feature-rich platform can empower RIAs to harness their uniqueness effectively, driving better outcomes for their clients and their business.

In the world of financial management, as in most things, specialization is the key to exceptional service. While custodians excel in their primary role of holding and safeguarding assets, they may not have the deep expertise required to offer state-of-the-art software. Their free tools often mirror this reality, featuring basic functionalities that lack the sophistication necessary for most RIAs. In contrast, fintech companies are designed with the sole focus of enhancing RIAs' capabilities. They excel in providing the tools, analytics and customization options that meet the diverse needs of RIAs, backed by continuous feature development and strong customer support. By allowing custodians to focus on their primary responsibilities and leveraging third party software for things like portfolio management, RIAs can get the best of both worlds, ensuring high-quality asset protection and optimal fintech tools. This division of roles allows each to play to their strengths, culminating in a superior service experience for clients.

Ultimately, advisors are independent for a reason, oftentimes coming down to the ability to provide the client experience they desire and having the freedom, flexibility and fiduciary approach to work with whomever they want. As a result, so should their software. Similar to how no self-respecting eye-doctor would use a free laser to perform Lasik surgery on their patients, so should advisors in their trusted role leverage robust, independent software to ensure the best outcomes not only for their clients, but also for their businesses.

Chris Hastings is CEO of Panoramix, an independent performance reporting and billing technology platform.