Just because two custodians integrate with a CRM provider does not ensure that those integrations are equal. In one case, the data might only flow one way, while in another the data flows two ways, or is synchronized in near real time. In one case, the number of data points integrated may be very limited, while in another case much more data is synchronized across the two systems.
There’s also a question of what you can do with that data. Can the data in one platform be used to populate forms on another platform or to initiate a work flow across platforms? In some cases, the answer is yes, in others it is no. These are legitimate areas that advisors should explore while performing their due diligence, but many today fail to do so.
One of the most egregious failings of many major custodians today is in the area of digital client on-boarding. Every advisory firm wants, or should want, to provide a seamless digital on-boarding option to its clients. After all, robo-advisors offer it. For that matter, so do many of the custodians for their retail accounts.
When it comes to their RIA clients, however, custodians only provide a portion of what is needed for seamless digital on-boarding. Many custodians allow an advisor to process the custodian’s paperwork using digital forms and a digital signature, but with the exception of TD Ameritrade, I know of no major custodian that allows RIA firms to process their own investment advisory agreement in the same digital package. For cutting-edge firms that want to digitize and automate their processes to the greatest extent possible, this is a frustration, as it is for the vendors that serve them.
Another similar frustration is funding those new accounts that have been opened digitally, or in the case above, partially digitally. If I choose to open an account with the retail division of many major financial services firms today, or if I open an account with a robo-advisor, I can fund the account digitally. That’s usually not the case on the RIA side of the business. Furthermore, if a client sends an advisor a check for deposit with the custodian, the advisor, in almost all cases, must overnight the check to the custodian and can’t deposit digitally. On the other hand, if the client is a retail client of the custodian, the check can be deposited digitally.
In fairness to most RIA custodians, there can be legitimate reasons that the process of providing some of these services can take longer on the institutional side than they do on the retail side. But in the case of digital on-boarding and check deposit, that time has passed. Advisors have a right today to expect these services so that they can compete effectively in the marketplace, and they should demand these services of their providers.
Yet another area where the industry is lacking is the “client portal.” There are a few providers (eMoney, Orion and Wealth Access among them) that offer an integrated client portal today, but too many are still closed systems with limited if any integration. That’s not what advisors need, and it is not the experience that their end clients want.
Although I’ve been quick to beat up on custodians and third-party technology vendors for some of their failings, advisors have some shortcomings as well. Perhaps the greatest one is that they have rising technology expectations without regard to the costs.
In their desire to serve their advisors and help them become more efficient, custodians and third-party vendors have invested considerable resources in creating integrations across platforms. Initially, early movers providing integrations to advisors had a competitive advantage, but at some point these providers reached a point of diminishing returns. For example, if they already integrate with five CRM providers, how much of a return will they get by adding a sixth that a particular firm wants? If the firm making the request is big enough, maybe it makes business sense to absorb the cost. If that CRM has a big enough client base in common, perhaps they do the integration.
At some point, however, advisors might have to shoulder a portion of these costs. There may come a time in the not-too-distant future where providers will either have to raise prices for all their users, or perhaps charge a modest fee per user per month of integrations that are not part of their current network, just as some portfolio management systems charge a fee for each custodial feed they provide.