Tech Tools for Financial Advisors
by Jim Palumbo
Hey y’all, this is Jim Palumbo, from Dynamic Advisor Solutions and today’s blog is about what tech tools for financial advisors you need to adopt as an independent financial advisor. What is the typical technology stack and what FinTech do you really need?
So, I’m going to tell you something shocking. Are you ready?
The answer is nothing, nil, nada, zip, zero. You really shouldn’t and don’t need to adopt, learn, program, or synchronize any tech tools for financial advisors.
Your platform provider should be the ones doing the adopting, integrating, setup, creating work-flows and creating databases while you focus on deepening client relationships and developing new business.
Look, I grew a RIA firm from zero to over $100mm for nearly a quarter of a century. I focused on profitability and operated at an 80% gross profit margin or better (40% after IAR comp) the entire time.
Here’s why you shouldn’t be the one to spend your time trying to figure out which tech tools for financial advisors are the best, which financial planning software is the best one, or which billing system to use.
Your job is not Chief Technology Officer. It does not say CTO after your name in your email signature. The nameplate on your desk does not say IT Guy or IT Gal. You are the CEO my friend. You are Chairman of the board, your client’s trusted advisor, and captain of your destiny! You want somebody else unraveling the 800 lb ball of string that is FINTECH today.
Here’s the main question I want you to consider. Do you want to be a technology executive or a financial advisor?
You’re a financial advisor and trust me, I’ve been around for decades: people desperately want more of what you have to offer and more out of you now, than ever before.
Now, keep in mind that whatever technology vendors you’re talking to aren’t going to tell you this. They want you to buy their products.
But look at the facts:
A study by Michael Kitces in 2019 revealed that advisors spend 20% of their time on clients and the rest on running the business of the business. The software alone, interestingly has no impact on advisor productivity. There is a huge opportunity here for you to gain an advantage over your competitors if you are willing to let go of being an administrator. If you are willing to let go of the trivia of administration, what Jim Cannon calls ADMINISTRIVIA, you will be 80% more engaged with clients and prospects than the competitors in your community.
Do you realize that?
If clients are only getting 20% of your competitor’s time and you can give them maybe 40%, 60%, maybe even 80% of your time, think about how dramatically better the client experience, outcomes, and deliverables will be with you.
Just look at the difference!
Let’s look at cost. If you’re an independent financial advisor, think about what little bargaining power you have with the big, reputable technology companies that clients love and trust.
Wouldn’t you rather have names like eMoney, MoneyGuidePro, Salesforce, Orion, etc., behind you? By the way, if you’re looking for a summary of all the resources you’ll need, email me at firstname.lastname@example.org and I’ll send you my top 10 tech tools for financial advisors.
But as a small firm you’re going to pay full price. That’s right! The tech firms love doing business with people like you. You will be paying a much higher percentage of your gross income than a company that has the size and scale to provide those tech tools for financial advisors efficiently and at a reasonable cost.
Instead, why not work with a platform, one that has bargaining power and buys licenses at a volume discount? Also, they’ve already done the vetting for you.
How long does it take to evaluate, adopt, learn, and integrate multiple providers? The time and opportunity cost are huge and it is precisely the thing that is holding you back from growing your business at the rate you want to!
This brings me back to my original question – do you want to be a technology executive or a financial advisor?
Let’s map it out from a cost standpoint.
Cost of Tech Tools for Financial Advisors
A typical stack of technology tools for financial advisors includes buying those things that are essential, at a minimum, to a growing contemporary practice: a CRM (Customer Relationship Management) program, performance reporting, and billing. Oh, and we haven’t included compliance yet, which is another tech stack in and of itself.
What does each one cost?
Example: Orion will cost you $15k at a minimum; plus thousands more for the CRM; compliance searchable email with encrypted archiving and double-redundant off-site backup; social media archiving, website archiving, and one or two staff members to do all of that at $60,000 per year all in. You now have to count yourself as an administrator with a time opportunity cost of over $200,000 per year, but let’s just use another $60,000.
One Staff member………………………………………………………………$60,000
All tech subscriptions $20-30,000, we’ll use………………………..$25,000
That is a total of…………………………………………………………………$145,000
Now, let’s say that you were to work with a firm like mine, Dynamic’s Advisor Solutions. We take care of all this for you, bundle it up, set it up, program it, integrate it, and support it forever, for a fee of few hundred bucks a month, and 6 to 26 bps?
Let’s say you’ve got $80 million in AUM, at the average fee we are seeing of 155 bps. That is $1.2 million of gross revenue.
So, let’s compare the cost of these tech tools for financial advisors on your own versus with a platform like Dynamic. Wrestling with your own tech stack and staff, you would spend approximately $145,000 or 12% of gross revenue
With Dynamic you might spend about $85,000 for the same package as an RIA responsible for your own compliance, about 7% of gross. This would be about $95,000 as an IAR receiving complete compliance outsourcing. It’s approximately 40% less expensive to outsource. 40%!
But it’s not just about the numbers, the most important thing is that now the handcuffs are off, the ball and chain is gone, and you are able to do what you do best—be a wealth manager and watch your business grow exponentially.
You’ll be doing better work for your existing clients, deepening relationships, improving the outcomes and deliverables in which you are now loosed to represent their best interests. You will also be set-free to build your wealth management practice organically and strategically.
Here’s the crazy thing. You could also outsource your entire investment management program, 100% TAMP services with Dynamic, and still spend less than the $145,000 total cost you have today trying to do it on your own but still failing to execute efficiently!
I’ve tried to do this stuff in house, and I can tell you, I never got the tech and asset management where I wanted it. I never succeeded in achieving full integration of my systems. They were just tech subscriptions making money for the software vendors and not for me.
I mean, it’s pretty obvious what’s the better way to go, right?
So, I’d love for you to send me an email – my email is below. I’ll send you my list of the top ten tech tools for financial advisors you need as an independent wealth manager, or give me a call at the number below and we’ll figure it out over the phone.
I’m happy to share with you, the experience and insight we’ve gathered over the years. We know what it takes to make a successful wealth management practice. I’d love to help you improve your client’s experience and grow your firm.
So here it is again: email@example.com, or give me a call at the number below. I look forward to hearing from you.
Dynamic is recognized as a premier provider of essential resources to professional wealth management practices. Its turnkey practice platform and staff support includes asset management and enables wealth advisors to save money and focus on clients while positioning themselves for success and growth. With myVirtualPractice™, a suite of wealth management practice solutions, Dynamic hands the professional wealth advisor the keys to a comprehensive, custom-built virtual office and practice complete with staff, back/middle office, accounting/billing, compliance and even a Virtual Assistant. The wealth advisor need only add clients and a laptop, and they are up-and-running instantly. For many breakaways and independent wealth advisors, being part of a nationwide community of like-minded professionals is one of the most valuable components of their affiliation with Dynamic.
Dynamic Advisor Solutions, LLC d/b/a Dynamic Wealth Advisors is an SEC registered investment advisor. Investment advisory services are offered through Dynamic.
Kitces, Michael. (2019, March 18th). How Do Financial Advisors Actually Spend Their Time And The Limitations Of Productivity? Retrieved from https://www.kitces.com/blog/how-do-financial-advisors-spend-time-research-study-productivity-capacity-efficiency/