How Bots Are Creating Next-Gen Funds

(Image: Shutterstock)

Kensho Technologies was focused on analyzing North Korean missile launches, earthquakes and elections when John van Moyland joined in 2014. The Central Intelligence Agency was among its early backers.

Now, its focus has shifted to finance. S&P Global Inc. bought the firm last year and the artificial-intelligence startup lasered in on another technical challenge: developing the next generation of indexed funds.

According to van Moyland, machines are ready to design better indexes to underpin investment vehicles passively managing $7.3 trillion in the U.S.

“We’re doing what a lot of research shops have done with humans in the past — and doing it at scale, in a highly predictable, highly automated, efficient way,” van Moyland, managing director and global head of S&P Kensho Indices, said in an interview. “Why would you ever limit yourself to aged financial data when there’s a sea of information out there?”

The race is on to create robotic ETFs — a bet that human investors would rather trust investment vehicles designed with far-flung data digested with natural-language processing, machine learning and AI.

Goldman Sachs Group Inc. — which along with Google Ventures also backed Kensho in its early years — launched a series of exchange-traded funds that track indexes designed by machines. BlackRock Inc. also offers some bot-built products.

With more than 2,000 ETFs in the U.S. alone, managers must battle to stand out from the crowd. More urgently, fund issuers and indexers need specialized products that can yield higher fees as passive investing takes a bite out of revenue.

While a broad-market stock ETF generates fees of as little as 20 cents for every $1,000 invested, AI-designed ETFs range from $1.80 to $8.

Kensho’s machines are helping S&P develop indexes with advanced methods that identify relevant stocks. The bots capture all the ways an industry is described — searching for references to self-driving cars as well as automated vehicles, for example — while adding related industries such as lithium batteries in this instance.

Among its creations is the Final Frontiers Index of companies involved in exploration of deep space and the ocean depths.

Once programmers have a universe of securities, they use natural-language processing to understand context, confirming that references are to new products or services rather than risks, for example. That lets them weight the index accordingly.

But as the buzz grows, it risks becoming more marketing than substance. Van Moyland warned that the bots require “expertise and discipline if you’re going to produce a quality product.” And Peter Zangari, MSCI’s global head of research and product development, said there’s no substitute for human analysis.

“None of this stuff is, you hand it over to a machine and you’re done with it,” Zangari said. “But increasingly you will see this machine learning, AI, whatever we call it, play an increasingly important role in the investment process.

Robots are the ideal data miners — thorough, persistent, and capable of processing huge quantities of information in the blink of an eye.

At least 20 funds now explicitly claim to use artificial intelligence as a building block, to the chagrin of some early proponents who fear its meaning is being watered down. Already one AI-driven ETF has shuttered after failing to attract assets.

“A lot of times, institutions are saying that they’re using AI and really all they’ve done is automate some process,” said Art Amador, co-founder of EquBot, which  runs two ETFs that use IBM’s Watson platform. “It takes away from everything we’re doing.”

Hedge funds and money managers have used AI-like tools for some time, but the rise of robo-advisers is what caught the attention of indexers and ETF issuers.

From the get-go, robos like Betterment LLC and Wealthfront Inc. used technology to undercut more-established rivals. Firms are following their lead to unleash a new wave of ETFs on the market.

BlackRock, the world’s largest asset manager, offers AI-powered funds known as “ iShares Evolved.” State Street Corp.’s ETFs — which use Kensho’s “New Economies” indexes — and Goldman Sachs’s Motif-branded funds also owe a debt to machines.

And EquBot’s Amador said his company aims to be the “Google of finance,” and is working with asset managers to build two indexes for release this year.

“It’s an extraordinary and exciting time,” said Jeff Shen, co-chief investment officer of active equity and co-head of systematic active equity at BlackRock. “Nobody really has completely figured it out yet,” he said. “The time is now.”

Copyright 2019 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

How to Build Trust & Deepen the Conversation with Investor Clients

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One of your main goals is likely to help clients realize their financial dreams. But do your clients truly believe in your ability to do that? Is your client experience (both online and off) translating into improved business growth, loyalty and retention? If not – or if you want to take your business to the next level – you need to learn what to do (and what to avoid doing) when defining business strategies and selecting tools for your business.

Join this complimentary webcast to learn how to best develop a strategy for your client experience that results in a tailored approach – ultimately building trust and deepening your conversations with clients. You will also discover:

• Why a focus that encompasses empathy, key topics of interest for clients (like retirement) and demographic differentiation can strengthen your experience and brand

• The role personalization (via AI and other technology) can play in the delivery of a powerful client experience

Register Now!

Speakers 

Angie Herbers, Managing Director and Senior Consultant, Herbers & Company

Angie Herbers is Managing Director and Senior Consultant at Herbers & Company (www.HerbersCo.com). She brings over 17 years of experience in human capital, leadership and management strategies to advisory firms. Angie has been named by Investment Advisor as one of the “Top 25 Most Influential People in the Advisory Industry” in 2007, 2013, 2015, 2018 and 2019.

Jarrod Upton, COO and Senior Consultant, Herbers & Company

Jarrod Upton is COO and Senior Consultant at Herbers & Company. He brings over 16 years of experience in management strategy, client experience and operations consulting to advisory firms. At Herbers & Co.’s Dallas office, he works with start-ups to multi-location/multi-billion advisory firms to provide solutions that impact growth.

Marissa Herr, Vice President, Technology Client Engagement, BNY Mellon Pershing Technology

Marissa Herr brings over eleven years of experience in the financial services industry. She rejoined the BNY Mellon enterprise in September 2017 as a Vice President, Senior Specialist Product Manager for BNY Mellon Pershing Technology, responsible for representing and communicating Pershing’s digital wealth strategy, acting as a subject matter expert on all of our technology solutions for firms, advisors, investors, and home office users.

She previously worked for BNY Mellon Albridge from 2011 to 2015 as a Vice President, Product Manager supporting the utilization, adoption, and product marketing efforts for Albridge Wealth Reporting. Prior to rejoining the enterprise, she also worked as a Senior Portfolio Consultant for Fiserv, responsible for deepening Card Services relationships by executing on various growth strategies for their portfolios, as well as supporting the adoption and growth initiatives for their leading fraud mitigation app CardValet

 

 

Is Your Firm's Legacy Technology a Ticking Bomb?

One of the technology decisions you make every day — and one of the biggest challenges — is how to deal with legacy systems. A legacy technology solution could be software, hardware, or even a hybrid of both, such as an old server running old software.

The challenge is legacy technology easily can become ticking time bombs. You may not even realize there is an expiration date until you are forced to make a change. Therefore, let’s do a deeper evaluation of technology solutions that may be in the legacy category.

Keep in mind, it is not necessarily a negative if a technology solution is considered legacy. Your office and home might have a number of items that fall under the legacy category. The key is to understand the variables that influence and impact either the continued success or failure with using the product.

For example, you might have a legacy computer, server and/or other hardware device that’s being used for a specific process or need. Even though the device is well beyond its years (from a warranty and technology perspective), you still need to make sure that the operating system and programs are up to date with the latest patches and security updates.

Also, certain functional areas, such as contact management or performance reporting systems, face higher risk when legacy technology is used. The longer legacy technology is in production, the potential effort, costs and time increase until you finally retire and replace the system.

You also need to review how these legacy systems fit within your existing technology stack (overall technology products and infrastructure). Hopefully you have only one or two systems, if any, that fall under the legacy category. If there are more, then you have some work to do. Review the connections and dependencies of the legacy technology with the rest of your systems. The last thing you want is for a legacy system to be a critical component for the successful operation of a newer solution or system.

One of the more significant challenges with a legacy technology solution is the entire effort of transitioning to a newer system. I’ve heard countless stories of firms trying to replace legacy systems and the overwhelming effort required to accomplish this goal. Frequently, a firm will get “stuck” due to not finding the perfect replacement solution. Or worse, they start a transition and cancel the effort after several months of trying and failing to make it work.

The reality is it can be hard to replace legacy technology. Your firm has years of familiarity with the product, it might actually be adequately meeting your needs, and the switching and operational costs likely are much higher with a newer technology solution. Given these variables, and realizing a new solution is the right objective for the long-term, it’s critical to have perseverance through the entire transition effort.

Finally, there can be several stages of “condition” for legacy technology that can influence the sense of urgency in finding a replacement solution. For example, if the technology is no longer supported by the developer or manufacturer, then you are on borrowed time.

Another condition stage would be if the technology is still supported and receiving regular maintenance updates. This is certainly a better situation to be in, but the question is, for how long?

Even if a legacy solution is receiving incremental feature improvements, this isn’t adequate for today’s technology environment. Therefore, this condition stage is more about being left behind and not being competitive versus the solution’s peer group. The longer this goes on, the greater the chance that the technology becomes obsolete or no longer supported.

Bottom line, most firms already have a good idea which of their technology solutions fall under the legacy category. The real work is figuring out what you are going to do about it.

Dan Skiles is the president of Shareholders Service Group in San Diego. He can be reached at dskiles@ssginstitutional.com.

Tech Execs Warn of 'Consumer-ification of Wealth Business'

Just as thousands of college students gathered recently in Florida for spring break, leaders of top wealth management firms assembled in the Sunshine State for SS&C Advent’s Black Diamond Executive Forum and the Pershing Elite Advisor Summit.

Staged by technology and custodian leaders in mid-March, these two executive conferences brought together staff from growth-minded firms for networking, industry content, professional development and technology demonstrations.

One benefits of hanging out at these events is the chance to learn from visionaries, see the impact of emerging trends close up and gain powerful ideas on how to run a better business in a world of change.

Kicking off the Black Diamond Executive Forum was SVP and business unit leader Steve Leivent, who welcomed attendees by detailing the amazing growth story of the firm’s wealth management platform. “Black Diamond now serves over 1,400 firms, representing over $1 trillion in assets on the platform,” he said, describing the evolution of the technology that processes over 1.8 million end-client accounts daily.

“Because of the massive amount of data that we have, we will be able to extend Black Diamond into the world of big data, AI and machine learning to help advisors better manage their businesses and client relationships,” he added.

Some of this data is focused on peer benchmarking, he says, so advisors can see how they stack up against similar firms in terms of pricing, fees, AUM flows and more — all in real time, so they can make better decisions in managing their firms.

This talk was complemented by a demonstration of Black Diamond platform enhancements and new product launches, including an updated billing platform, new features for the rebalancer and expanded integrations with custodians and other tech partners — like a streamlined account-opening application.

Plus, Black Diamond added an environmental component that can save hundreds of trees every year; advisors share 1.5 million PDF reports on the Black Diamond Client Experience portal, and it eliminates the need for printing and mailing.

Being a tech company, Black Diamond has keen perspectives on how technology is affecting the advice business. Top among them, according to Senior Directors Eli George and Bjorn Widerstedt, is the “consumer-ification of wealth management,” such as the digital transformation that is happening across industries as people become more comfortable with a digital experience. As a result, advisors need to increase the adoption of these tools and approaches with clients across the board to remain relevant.

The duo also highlighted other trends: the growing outsourcing of investment-management services, as robos continue to commoditize investing; the declining profitability of advisory firms due to increasing regulatory costs; and an aging population of both advisors and clients.

The result, Widerstedt says, is the growing movement of advisors to seek out “one platform” that combines all of the technology apps and investing services they use to create the key efficiencies needed to manage their workflows in a more complex environment.

“These trends also explain why so many asset managers and annuity companies are now racing to become technology providers and consultants to keep up,” he wryly noted.

Future Generations Continuing the future-forward theme was Dani Fava, director of innovation at TD Ameritrade Institutional. Fava spends her days researching the latest emerging technologies to help advisors read the tea leaves on how their businesses will change, while also looking to “productize” these technologies on the TD Ameritrade platform to help advisors work better with their future clients.

According to Fava, the best place to look for future technology applications is in science fiction. “Science fiction has been extremely good at predicting the future,” she said, providing examples from sci-fi movies like the Tom Cruise/Steven Spielberg classic “Minority Report.”

Made in 2002, the film previewed new technologies, such as “gesture-based computing,” holograms and personalized advertising based on facial and optical recognition, which are now becoming realities.

To help advisors get a sense of how their future clients will be looking to interact with them, Fava pointed out that “Gen Z never had a desktop computer and grew up streaming content on mobile devices — not on cable or on TV.” As a result, this future generation will demand video interactions and alternative communication methods via holograms vs. face-to-face meetings.

On Fava’s list of items that will quickly become obsolete from tech innovation are keyboards and computer monitors, along with steering wheels and garages — as autonomous vehicles and ride sharing become pervasive; also, remote controls and thermostats are going the way of the buggy whip due to smart homes.

Human Capital Meanwhile, at the Pershing Elite Summit conference, organizers took a different approach to helping advisors better manage their businesses by focusing on human capital issues.

Pershing Advisor Solutions CEO Mark Tibergien shared his considerable wisdom on helping advisors attract and retain top talent by becoming “an employer of choice.”

“The ability to create career paths in advisory firms is the missing link in hiring practices in order to truly create an enduring business,” he said. “The past success of the industry means that for the first time, there are now more employees than owners. However, over one-third of advisors will either retire or sell their businesses in the next 10 years.” Thus, after a decade, over two-thirds of the industry should be millennials, though the industry currently is not set up to attract and retain this demographic, he said.

This is why he and the CFP Board of Standards’ Center for Financial Planning are developing a white paper to propose solutions to this looming demographic crisis. “According to our research, the reasons people don’t come to our industry are that they did not study finance in school, so they don’t think they are a fit; the industry has a bad reputation; and the pervasive perception that being an advisor is a sales job and that the industry doesn’t develop people — there is no career path,” he explained.

To solve these problems, Tibergien suggests, firms should create new roles that can provide staff with professional development and increasing responsibilities. But firms must be the right size to pull this off. “When new people join firms, they need to be allowed to be high impact learners, not high impact workers, so they can gradually evolve to become the future leaders.”

Bringing this point home in person was Rianka Dorsainville, a highly acclaimed and award-winning innovator in financial planning of the virtual practice Your Greatest Contribution. “I’m what is known as a ‘triple minority’ — young, of color and female. I didn’t set out to be an entrepreneur and didn’t want to own my own business, but I had to in order to work with my target client segment,” she said during her presentation.

Dorsainville has successfully set up her business to offer virtual fee-based advice by only meeting clients via video and charging an annual retainer fee. Today, she has a growing wait list.

She also is active in educating the industry about how to best attract and retain a younger, more diverse workforce by sharing her personal story and journey, as well as by being an advocate and role model for minority and female leaders through her podcast series, “2050 Trailblazers.”

She and other speakers at these two recent conferences provided actionable information and deep insights into the key inputs that will drive the advisory firm of the future — a unique combination of technology and human talent.

To learn more about what went on at these executive events, check out the many tweets on the #BlackDiamond and #EliteAdvisor hashtags on Twitter.

Timothy D. Welsh, CFP® is president, CEO and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.

Wells Fargo Launch; Kestra Finds Buyer; Moore Leaves Cetera: BD Roundup

To boost its retention and recruiting efforts, Wells Fargo is rolling out a succession program that can bring retiring advisors as much as 225% of their trailing 12-month fees and commissions to be paid for over a 10-year period — or earlier if they chose to take payments via a loan.

The program includes a new retirement loyalty award representing 25% of the retiring rep’s yearly production. Advisors taking on the retirees’ client base will be eligible for a new book acquisition award of up to 100% of the retiree’s trailing 12-month fees and commissions.

“This program is a category killer in the space. It’s about investing 100% in the next generation to take on more clients,” said John Alexander, head of advisor-led business for Wells Fargo. “No one else is doing this.”

Starting April 1, the Summit Program will be available to employee advisors in the Private Client Group and Wealth Brokerage Services (which are being merged), but not those in the Financial Network, or FiNet program for independent advisors, or the bank’s new affiliation program for RIAs.

Recruiting, Retention Woes When asked if the program is aimed more at retention or recruiting, Alexander said it is “attractive to all our advisors and to those who are the best in the business who are not yet here.”

In light of negative headlines its parent company continues to make, Wells Fargo Advisors could use a boost. The group had 13,968 advisors, down nearly 600 from a year ago and about 100 from the prior quarter, as of Dec. 31, 2018.

Since the bank’s fake-accounts scandal erupted in fall 2016, when it had 15,086 registered reps, the bank’s wealth unit has lost 1,118 reps.

Total assets for WFA also are declining. They stand at $1.7 trillion, down 10% from last year due to lower market valuations and net outflows, the bank says. Average loan balances of $75 billion, however, rose 3% from last year, mainly thanks to growth in nonconforming mortgage loans.

“It’s really a smart investment in the future. No one could be more excited about this than we are,” Alexander said. “It’s a huge step for us.”

Long Time Coming The Wells Fargo executive says he and others “have been talking about this for years.” He points to Kim Ta, director of Teaming and Succession Planning, as the individual who “figured out how to make it happen.”

Succession planning and retirement issues are serious matters for the industry, Alexander said: “We know the demographics of the next five to 10 years involve a massive transfer of books of business.”

“We have been thinking about … how to invest in where it makes the most sense,” he explained. “This program supports all of our advisors transitioning out of the business over the next few years and those advisors who are still in growth mode. All of them should be a buyer or seller.”

Kestra News Meanwhile, independent broker-dealer Kestra Financial is being bought by the private equity group Warburg Pincus. Its prior owner, Stone Point Capital, will keep a minority stake in it, as will its management and possibly some of Kestra’s roughly 2,000 affiliated advisors.

Warburg Pincus comes with some fairly deep pockets — $43 billion in assets in under management invested in about 180 companies. Stone Point works with $19 billion in assets.

“Warburg is a savvy PE firm in the space, with an investment in Facet Wealth and prior investments in The Mutual Fund Store and Financial Engines,” said Chip Roame, head of the consulting firm Tiburon Strategic Advisors. “This move continues a trend of PE firms acquiring IBDs.”

Plus, given questions over how long stocks can stay at their current level, Kestra’s timing at finding such a partner is quite good, according to recruiter Jon Henschen of Henschen Associates.

“Warburg entering into a purchase at this point of the market cycle is an indicator that they will be a longer-term player, weathering through any market downturn,” he said. “In market downturns, when capital is in short supply, PE firms are your best friend.”

Other industry watchers, like Nexus Strategy’s Tim Welsh, agree. “For Kestra, this is very good news to have a growth buyer in their camp, a firm that will invest in the business, particularly now that the Department of Labor’s [proposed] fiduciary rules are way in the rearview mirror,” he said.

Kestra President & CEO James Poer is pleased, as well. “The transaction came up faster than we anticipated and is the right thing for us to do,” he explained.

Transaction Details The Kestra deal has been estimated at between $600 million and $800 million (or 8-10 times earnings before interest, taxes, depreciation and appreciation). That compares with Genstar Capital’s recent purchase of Cetera Financial — which has over 8,000 affiliated advisors — for $1.7 billion.

“Stone Point more than doubled their investment in three years and are keeping a minority interest, which will most likely be the 20% minority stake that NFP still maintained,” according to Henschen.

“In spite of this being the third majority PE ownership change at Kestra, every change that has occurred has been a nonevent for the advisors, with no re-papering [of accounts], same management, same impressive staffing levels and technology.”

In addition, Henschen says that he’s heard some advisors and employees could be given access to company shares, namely producers of more than $500,000 in yearly fees and commissions. (Kestra will not confirm any details on the announced deal.)

As for what Kestra intends to do with the backing of its new owner, Poer says the firm — which has about $100 billion in assets — will continue to improve its technology platform, build out its investment management research division (including its advice engine), and acquire more wealth management businesses as part of its succession-planning work.

Kestra History The firm started out as Partners Financial and then did business as NFP Securities, with is roots in insurance producers, Roame points out. “It evolved to be NFP Advisory Services Group, showing an early recognition that the IBD model would be challenged as IBD reps moved more to managed accounts, and IBDs needed to add more value,” he explained.

The firm adopted a new brand after its sale to Stone Point in 2016. About three years before, NFP — formerly named National Financial Partners — was bought by the private equity group Madison Dearborn Partners for about $1.3 billion (including NFP’s convertible debt).

As for Poer, who Roame says is a “successful” leader for Kestra, he’s been with the firm throughout these changes. He led NFP Securities’ Advisory and Investments group from 2003 to 2008, then was president of NFP Advisory Services Group until being tapped for his current post.

“Kestra Financial has proven more successful than other IBDs at moving its FAs to managed accounts,” Roame said.

According to Poer, about 60% of the firm’s revenue is tied to its RIA, and about 80% of its revenue is recurring.

M&A Pace The firm announced plans to buy H. Beck from Securian Financial Group in 2017. At the time, H. Beck had about 600 advisors and $2.5 billion of AUM. A year later, Kestra said it would purchase Reliance Trust Co. of Delaware from financial services technology firm FIS. At the time, Reliance had some $7 billion in assets.

Turning to future acquisitions, Poer said Kestra has “a pretty opportunistic tilt.” It aims to expand distribution as it did with the H. Beck purchase, build on its wealth management strategy and advisory-practice businesses, and broaden its capabilities, as was the case with the Reliance Trust deal.

The Reliance purchase, according to Poer, is a good example of how Kestra likes to “deepen its value proposition for its sophisticated advisors and their sophisticated clients.”

Other Developments In March, Cetera Financial Group said CEO Robert “RJ” Moore would step down for health reasons. The news came less than four months after the private-equity firm Genstar Capital acquired a majority stake in Cetera, which has more than 7,000 affiliated independent advisors.

“Who will they bring in?” asked Henschen. “You need a visionary, charismatic leader who is good at building consensus and rallying advisors together.”

According to the IBD, Moore does not have a terminal illness. Chairman Ben Brigeman is taking the reins from Moore on an interim basis, while the executive search firm Heidrick & Struggles helps the independent broker-dealer group permanently fill the position.

The IBD group is not disclosing further details about its CEO search. In an e-mail, Brigeman said Genstar had “full confidence in Cetera’s strategy and the strength of its management team,” citing 2018 performance that exceeded expectations and “record recruiting” in early 2019.

Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at jlevaux@alm.com.

New Tool Helps Retirement Savers Change Their Behavior

In the latest move in automated retirement income planning, TIAA has enhanced its Retirement Profile tool to analyze a client’s real-time account data and other information and then provide various scenarios to their monthly retirement income, also taking into consideration other income streams such as pensions or social security.

The tool offers three scenarios, according to TIAA. The first provides whether a client’s portfolio is “on track” to provide enough monthly income in retirement. The second is a TIAA-proposed strategy that will help clients work toward their retirement goals, such as adding annuities. The third is a custom strategy that provides the client an interactive area to adjust inputs and change monthly retirement income.

Each scenario includes a “probability of success” indicator to show the likelihood of them reaching those goals.

“Too many people live in fear of outliving their savings in retirement,” Lori Dickerson Fouché, senior executive vice president and CEO of TIAA Financial Solutions, said in a statement. She added that the Retirement Profile tool helps clients “build confidence in their decisions and knowing they are on track to work toward their financial needs through retirement.”

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7 Questions to Ask When Reviewing Technology

There’s a mansion in San Jose, California, with a backstory that can teach advisors a lesson about technology. Once the personal residence of Sarah Winchester, the widow of firearm magnate William Wirt Winchester, the mansion today is an architectural marvel — but not in a good way.

The mansion began as a simple farmhouse before Winchester turned it into a seven-story mansion — without the help of an architect. As a result, the mansion was constructed without any real plan and has oddities, such as stairways that lead to nowhere, windows that overlook other rooms, and doors that open to the outside instead of another room.

What does a mansion with no construction plan have to do with advisor technology? As firms age, they often add tech without a real plan for how it fits in with their existing solutions. Many firms add new software for just a few clients, or only halfway implement the hot new product from the conference circuit.

The result is a firm can be left with a tangled mess of technology instead of a tightly integrated and cohesive system.

To understand how the firm’s technology works together to benefit growth, ask these seven questions as you review your tech stack to determine its value.

1. Why Do I Have This Piece of Tech?

Begin your analysis with an if/then statement: Do we need this specific software? If yes, then why?

Here’s an easy way to identify why you have a certain software. Determine how much revenue you tie to each piece of software; this will provide its value and reason for existence. If the software is revenue-positive, it has to be clear why.

2. How Does This Tech Help Me Grow?

In addition to understanding profitability, you need to be able to attach real growth numbers to your tech. There are two ways tech can help with growth. It can either add scale and efficiency, or it can be a tool to help win new business.

Good tech is not always about adding more clients. Operational efficiency is the backbone of your end-client support — both need to be addressed in growth plans. By helping your internal team with added scale, you can increase profitability.

3. Do I Get the Right Support?

Imagine going to a three-star Michelin-rated restaurant; you can’t wait to get in and try the chef’s latest creation. But then you wait four hours for your food, and the waitstaff completely ignores you. Even the best food in the world won’t taste as good when you receive poor treatment to go with it.

The same is true for technology partners.

Rolling out new tech to your team with no support behind it will negatively impact your firm. Eventually that experience will trickle down to your clients.

When reviewing your tech or looking to add a new solution, be sure you completely understand the resources each vendor offers your firm for training and support over time.

4. Will My Software Be Updated Over Time?

You also need to ask vendors about their development road map. The technology you use should be enhanced the longer you use it.

Knowing what’s coming can save you from purchasing tech that duplicates functionality with another solution you already own. Know what each offers before you can take advantage of all its features.

In tandem with ensuring that your tech stays up-to-date is the need to keep your team trained and current with those new solutions and enhancements as they come out. You want to be using as close to 100% of your tech solution’s features as possible for the most return on your money.

5. Do I Have a Backup Plan?

There are a few certainties in life. Death, taxes, and delays during a technology implementation. The fact is, no matter how good your onboarding team, unforeseen circumstances can alter your tech rollout.

If your implementation takes an additional quarter to finish, do you have a solution for how to keep your firm operating smoothly in the interim?

Knowing all your choices, and having the information at hand to compare them, can make all the difference in this scenario.

6. Have My Needs Changed?

As time goes on, your client base may lean older or younger as you add — or don’t — new clients. How your clients’ needs change will affect how the tech you need changes as well.

Identify the most common needs of your clients to inform your tech decisions. For instance, if clients are trending older, you may need to look at adding estate planning technology.

7. Will an Acquisition Alter My Tech?

The fintech space is nothing if not ever-evolving, as the recent acquisition of PortfolioCenter by Envestnet makes clear.

It’s a fact that M&A activity can affect the technology you use. If a tech solution you use gets purchased, be upfront. You have a right to know how you’ll be supported over the long-term, so don’t be afraid to ask.

Often, companies will put out webinars and extensive information on transitions. But if you don’t get the answers you need, don’t be afraid to look elsewhere.

Technology Review Action Plan

The technology you use has the capability to enhance your team’s operational experience and client service, but it also has the ability to drag you down with bloat and inefficiency if implemented poorly.

Review your tech annually by going through these seven questions.

If you can’t answer why you need a piece of technology anymore, or it doesn’t make sense from a profitability standpoint, it may be time to trim back.

Jarrod Upton, MBA, MS, CFP, is Chief Operations and Senior Consultant at Herbers & Company, an independent growth consultancy for financial advisory firms. He can be reached at jarrod.upton@herbersco.com.

SEC to Hold Second Fintech Forum

The forum will focus on distributed ledger technology. (Image: Shutterstock)

The Securities and Exchange Commission said Friday that it plans to host a public forum at its Washington headquarters on May 31 focusing on distributed ledger technology (DLT) and digital assets.

The forum, organized by the agency’s Strategic Hub for Innovation and Financial Technology (FinHub), is the second such forum to be hosted by the agency, and is designed “to foster greater communication and understanding around issues involving DLT and digital assets.”

Panelists from industry and academia will tackle such topics as initial coin offerings, digital asset platforms, DLT innovations, and how these technologies affect investors and the markets, the SEC said.

The SEC’s Division of Investment Management said Wednesday that it’s soliciting input on custody of digital assets by registered investment advisors.

The IM division wants feedback on the regulatory status of investment advisor and custodial trading practices that are not processed or settled on a delivery versus payment, or non-DVP, basis.

IM staff said the unit also welcomes engagement from advisors, other market participants and the public on these issues, as well as on questions regarding the application of the Custody Rule to digital assets, and whether revisions to the Custody Rule could be helpful in addressing the issues cited in the notice.