The ongoing success of registered investment advisory (RIA) businesses depends on providing clients with personalized touch points and fast, thorough responses.
An InvestmentNews Research study reveals that “elite” firms with at least $250 million in AUM are significantly more likely to acquire another advisory firm, add another adviser and his/her clients, open an office in a new region, and enhance client acquisition strategies.
To meet such aspirations, here are five crucial success factors for scaling to growth and meeting client expectations and how the right investment management technology can help.
1. Providing Holistic Advice
With margin compression still a real threat to growth amid uncertainty, RIAs are seeking to bolster their ability to provide truly holistic and superior advice to ultra-high-net-worth and high-net-worth clients. Top advisors have shifted from account-based portfolio modeling to householding to gain a more holistic view of the client, from an individual with multiple account types, to one consisting of family relationships and intergenerational wealth. Data aggregation combined with rebalancing and integrated trading are vital to shift effectively to householding.
2. Automating Personalization
Today’s investors want tailored models that fit their specific preferences. Therefore, advisors must be adaptable to personalize and tailor models to the client’s situations. That means using a rebalancing solution that provides rules, parameters, exceptions, opportunities to gain tax efficiencies, and what-if scenarios to better position clients for the future.
3. Supporting M&A Transitions
Some RIAs look to mergers and acquisitions (M&A) to add new products or bolster their existing product portfolio. They may even see the M&A as an opportunity to enhance processes or upgrade technology, and improve operational efficiency. But this is often easier said than done. Firms must be able to scale to this near-instant growth once the deal is done. Crucially important is being able to quickly consolidate trading and effectively transition and support their new advisors. With dynamic, flexible technology platforms, new advisors can hit the ground running and continue to increase their productivity while empowering them to compete on a more advanced level.
4. Streamlining Operations
As investment advisory (RIA) businesses look to increase growth and profitability, gaining operational efficiencies throughout the investment management process becomes paramount. Automated workflows should enable firms to trade more and manage more money, increase margins, and grow the business while decreasing operational costs. For example, trade order management that is tightly integrated with portfolio rebalancing and trading processes will save the firm time, effort, and risk of errors or delays. FIX connectivity, direct interfaces with various brokers’ proprietary trading algorithms and strategies, and live order status notifications can help to further amplify trading and operational efficiencies.
5. Flexible Portfolio Rebalancing
Continued market volatility underscores the need for advisors and asset managers to quickly monitor and make tactical decisions across their investment portfolios. Having the right rebalancing technology is a must in this environment, and will continue to be a must in the post-COVID world. This is the case regardless of how often portfolios are rebalanced. Advisors who coach clients through buy-and-hold strategies will still need to assure them of the choices made, while quickly aligning portfolios to changing risk tolerances and preferences.
The Path Forward
As firms pursue new growth avenues, dynamic and adaptable investment management technology platforms can help to simplify increasing complexity of investment portfolios, client relationships and operations – while maintaining their ability to implement their unique investment management approach and manage it efficiently, accurately and reliably.
In a recent TD Ameritrade Institutional study, 43% of independent RIAs said their assets under management had increased by 8% on average, and 40% had seen revenue increase at a similar rate. While 89% of elite firms surveyed in the InvestmentNews Research study said their firm’s technology was prepared to cope with the demands of the pandemic, 26% said their firm also needed new or additional technology.
With the right wealth technology platform, RIAs can effectively scale to growth and gain greater flexibility to meet on-demand requests of sophisticated clients across multiple segments, accounts and households.