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Charles Paikert

Charles Paikert has been writing about the financial advisory industry since 2004. Paikert has been an editor for Investment News and Financial Planning and currently contributes to Family Wealth Report, RIABiz and Barron’s. He has also written about the industry for The New York Times and Reuters and has moderated panels at numerous industry conferences, including Schwab IMPACT and Invest. Paikert is the co-author of Madness: The Ten Most Memorable NCAA Basketball Finals.

Blog Feature

Breakaway Advisor  |  Financial Advisors  |  Financial Technology  |  Fintech  |  Technology Adoption  |  Wealth Management

Tech stack decisions for breakaway advisors: Where to start, and big mistakes to avoid

You’ve decided to break away and launch a new RIA firm. Congratulations! I’m sure it’s been a major undertaking to get to this point.  As you begin to work through the details and navigate your path forward, there’s one decision that will lay the foundations of your business for years to come – your technology stack.  It’s imperative to make the right decision when it comes to your tech stack. But there are such a vast array of choices; it can be daunting.  In this first of a three-part series, I’ll examine the tech stack decisions that breakaway advisors face and the best way to tackle them successfully.  First – take a deep breath.  Second – exhale slowly. Now, close your eyes. Think about the firm you’re launching.  Who is your target market? Your ideal client? How big do you want the firm to be? What kind of growth do you anticipate over the next five years? Two resources will be necessary to achieve those goals – good people and the right tech stack. Both will be your biggest expenses. You’ve got a good team. Now you need to get the tech in place. “Look internally first,” says industry consultant Matt Sonnen, CEO of PFI Advisors. “What type of clients are you serving? What types of investments are in their portfolios? How big is your firm? Advisors ask us what’s the best tool, the best provider, the best system.” That’s not the right question, according to Sonnen.  “What RIAs need to do is have a clear idea of what kind of firm they are now and what they want to be in the future,” he says. “Then they can decide what the most appropriate tech stack for their needs is.” To help determine those needs, look for a partner with experience and resources. A custodian is a logical place to start since you’ll be working closely with a custodian from the beginning. What kind of tech do they provide? What firms do they work closely with? What kind of requirements do they have for integration into their platforms? What kind of help can they give you? Other partners include PFI Advisors, F2 Strategy, Wealth Advisor Growth Network (WAGN), or platform providers specializing in helping breakaways such as Dynasty Financial Partners or Sanctuary Wealth. Smaller firms may consider an M&A partner. Some hybrid firms may prefer a broker-dealer.  “Think of it like building or renovating a house,” says Dynasty COO Ed Swenson. “You’re probably not going to put on a roof, install the plumbing, or do the painting yourself. You don’t have the expertise and you don’t have the time. You want to hire a contractor.” To carry the analogy further, just as you would tell the contractor what you want to be able to do in the house, advisors need to determine what they want their tech stack to do for their firm. “We ask clients to consider how much time tech can save them,” says WAGN co-founder John Phoenix. “The more time a tech stack saves them, the more time they can spend with their clients.” An RIA’s tech stack is also an essential part of its value proposition and a critical means of differentiation from the competition. “Firms with less than $2 billion in AUM can’t be great at everything and should think about tech as a means of differentiation,” says F2 Strategy president Doug Fritz. “What do you want to be great at? Do you want to give clients a white gloves experience? Then you might want the best CRM out there. Do you specialize in alternative assets? The look for a portfolio manager who is best in class for that category.” After breaking away from UBS late last year, Tom Stadum launched his firm, Fargo, North Dakota-based Fjell Capital. Stadum, who is only 31, works with a young team and wants to attract young clients. Working with Sanctuary Wealth, Stadum sought out “bleeding edge” technology so Fjell could build “customized solutions tailor-made for our client base. Catering to younger, tech-savvy clients made a state-of-the-art portal a priority for Stadum.  Paul Strid’s firm, Concentus Wealth Advisors, partners with Dynasty and targets high and ultra-high-net-worth clients. As a result, a high-end CRM was important for him.  Other firms may care more about data, direct indexing, planning, separately managed accounts (SMA), or a different value proposition. The point is to know thyself, then proceed accordingly. Advisors must also think of their new tech stack as a foundation that will support future growth. “You want to build the firm from day one with scale,” says Swenson. “Begin with the end in mind. Build a strong foundation because you don’t want to start switching things around in year three, which will be very painful and costly.” Indeed, vendors will charge for data conversion and implementation; advisors will have to re-train their staff and become familiar with new software, which could mean decreased productivity and lost business opportunities. “RIAs need to think about the projected needs of their clients and how tech can service them,” says tech-consultant George Fischer, founder of Optimal Growth Technologies. “You want capabilities that will meet these demands into the future.” What a breakaway advisor shouldn’t do, says PFI Advisors’ Sonnen, is ask a friend or a colleague what kind of tech stack they use. “It’s the biggest mistake we see,” Sonnen says. “Someone starting a firm will ask an established RIA what they use. But suppose one RIA uses SMA accounts for an older client base in a decumulation phase. In that case, their software will be completely inappropriate for a new firm targeting younger clients accumulating assets!”  Swenson cautions new RIAs to “not let the tech tail wag the enterprise dog. Tech is the accelerant to execute a firm’s vision and strategy, not the driver of the strategy.” Remember, a tech stack’s job is to make a firm better, not to make a particular function run faster or have more bells and whistles. And before going shopping for technology, advisors should remember the software purchase is only the beginning, with training, implementation and integration to follow. “Think of it like buying a puppy,” says Paul Strid. “Paying for the dog is one thing. You also have to feed it, train it and walk it every day.”

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Blog Feature

Community conversation: Kristen Bauer, CEO Laird Norton Wealth Management

Introducing AdvisorEngine's community conversation initiative. We're excited to bring you interviews with wealth management professionals from across the industry. We hope you find inspiration and insights from the life lessons they've learned and the business practice challenges they've faced. If you’d like to participate or know someone who we should profile, please reach out to us here. 

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Blog Feature

Client Segmentation  |  Financial Advisors  |  Financial Technology  |  Wealth Management

Client segmentation for financial advisors: The challenges

Client segmentation has become increasingly important as an RIA growth driver, but it can’t be an afterthought.  What’s more, the discipline may not be suitable for every firm.  This third and final installment of our AdvisorEngine® series examining the challenges of implementing client segmentation and some fundamental dos and don’ts for firms ready to take the plunge.

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Blog Feature

Client Segmentation  |  Financial Advisors  |  Investment Advisors  |  Wealth Management

Client segmentation for financial advisors: How to implement

Advisory firms are moving beyond the traditional classification of clients by their assets and the revenue they generate. In this second part of our AdvisorEngine Learning Center’s series, client segmentation for financial advisors, I’ll explore how clients can be segmented beyond assets under management. I will also look at how (or should) an RIA widen or ‘soften’ its target market to a younger, less affluent demographic, taking advantage of cost-efficient digital technology.

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Blog Feature

CRM  |  Financial Advisors  |  Investment Advisors  |  Wealth Management

Client segmentation for financial advisors

Client segmentation can dramatically enhance an RIA’s efficiency, profitability, growth and client satisfaction. In this first of a three-part series, I examine why firms should consider segmenting clients into different tiers and how to implement this discipline. In part two, I will explore the criteria used to segment clients and how the practice can broaden an RIA’s target market. And part three will include the challenges the practice poses and some practical Dos and Don’ts for optimal execution.

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Blog Feature

Financial Advisors  |  Leadership in Wealth Management  |  Wealth Management

Best business books for financial advisors

One quality of financial advisors that I admire is that they are avid readers, always looking for the next bit of inspiration and insight to benefit their practices. So when thinking about which books would most benefit financial advisors, I tried to mix best practices, aspirational goals, and issues that impact the industry but also transcend it.

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