A Guide to Wealth Management Technology Costs: How to be a Savvy Buyer
Brad Frey

By: Brad Frey on July 2nd, 2019

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A Guide to Wealth Management Technology Costs: How to be a Savvy Buyer

Financial Advisors  |  Technology  |  Wealth Management  |  AdvisorEngine

You know that you want to modernize your firm’s technology. But how much does wealth management technology cost? Knowledge is power: after reading this guide, you’ll be a smart buyer – and understand the true ‘all-in’ cost of advisor technology.

10 Factors to Consider Beyond ‘Standard Pricing’

By considering the following ten factors, you’ll make your next technology purchase with your eyes wide open:

1. Pricing models

There are three basic pricing models across wealth management technology. No pricing model is intrinsically better or worse than the other – what matters is the all-in cost you are paying compared to the tech functionality and client services you will receive. These models are:

  • Flat fee
  • Per user fee
  • Basis points on AUM

2. One-time costs

To get up-and-running, you may need to pay a one-time fee.

For point solutions - it’s often free to get started.

For platforms - you can expect to pay an initial implementation fee to cover startup and onboarding costs. For RIAs, this initial fee often range from $5,000 to $30,000, depending on your needs. For larger financial institutions with more complex requirements, one-time implementation fees have a very large range, from $50,000 to $1 million or even higher.

3. Add-on functionality

Be careful about ‘nickel-and-dime’ charges. These costs can actually become bigger than your ‘core functionality’ costs. Unfortunately, it’s common for people to get hit with unexpected charges. Ironically, some low-cost providers end up being more expensive after add-on features than the premium providers.

4. Customer Service

Some firms charge a higher price based on the access that you have to their client service support team. Make sure you ask questions about your software’s support model – everyone needs help sometimes, so you want to make sure you can get it. Especially if you have colleagues who are not particularly tech-savvy.

5. Training and consulting

Consider working with a provider that offers on-boarding, training and consulting. Many FinTech providers claim to provide these services, but make sure to dig in before accepting these claims as facts. The providers that provide quality value-added services can become a true thought leadership partner to your firm.

Remember: the ‘true cost’ of any technology includes the person-hours you spend internally. Most times, those costs dwarf the cost that you pay a third-party provider. Your firm type and personnel will determine how much training/consulting you need. You can expect to pay on an hourly-basis or project-basis.

6. Integrations and 'pass-through' costs

As the wealth management industry has developed, many providers have decided to team up and integrate. Some of these integrations are free – others require additional costs. Before you finalize a contract with a vendor, make sure you are crystal clear on which third party services are free, versus those that cost money.

7. Customization

Some providers do not customize their software at all, while others provide a place for users to submit suggestions on new functionalities. Sometimes a process is in place for ‘statement of work’ requests, where you can pay to fund a special project that fits your firm’s needs.

8. Billing frequency

Some FinTech providers bill annually, while other firms bill monthly. One tactic to use - ask if you can reduce the cost if you pay upfront.

9. Contract length

Many FinTech providers price on an annual basis. Some price out multi-year contracts. Others use shorter contracts, where you can give a 30-day notice and stop paying. During the sales process, make sure to ask about price breaks if you sign a longer contract.

10. Timing

It is a known fact that some technology companies pay their sales representatives based on monthly or quarterly sales. If you’re buying at the end of the month, sales reps may be more likely to give you a good deal.

11. Scaling

Vendors give ‘enterprise pricing’ or ‘scale benefits’ – meaning that your cost per user becomes lower the larger your firm is. These scale benefits can be based on users or assets under management. When speaking with a sales rep, ask about how pricing scales as your firm grows.

Module Pricing

Cost varies significantly based on what functionality or ‘module’ that you are looking at. 

For example: basic CRMs that only provide ‘rolodex’ functionality are cheap; holistic CRMs that bring together your entire office are more expensive. The same holds for client portals, portfolio rebalancing software, performance reporting, etc. The main thing to consider in this category is your ‘all-in’ cost across all modules.

 

Things to consider

Low-end

High-end

CRM

This is the heartbeat of an organization’s tech related priorities. Make sure to look at pricing add ons such as email, document storage, etc.

$420 annually

$500K annually or higher for enterprise solution for custom development

Performance Reporting

Usually bundled with billing - fee structure is determined by accounts + AUM

$35 annually/per account

$50 annually/per account

Fee-Billing

Usually bundled with performance reporting - fee structure is determined by accounts + AUM

$24 annually/per account

$50 annually/per account

Trading, rebalancing, and portfolio management

Varies greatly based on a firm’s philosophy and investment strategy - some firms take a very active role in model management (trade multiple times a day) while some are extremely passive (rebalance once a year)

Included as part of custodian relationship

8-10bps

Digital onboarding and account opening

There are not any full digital onboarding services available other than AdvisorEngine. 

Although there are some services which ‘offer’ digital onboarding, no services offer the complete package: from a digital questionnaire to automated investment selection and a digitized account application with e-signatures

Included as part of broader platform for 5bps annually

Included as part of broader platform for 10bps annually

Client portal

Client Portal is a very broad module and can vary from a document vault to an intuitive, client-driven portal like AdvisorEngine

Unbranded, uncustomizable version free through custodian

Can be as high as $25,000 annually

Compliance functionality

This is offered through many providers as an add on with no additional charge

Included as part of custodian relationship

Included as part of 40-60bps platform

Turnkey Asset Management Program (TAMP) services

Varies based on services offered - some TAMPs push the button to rebalance models, while others automate entire client relationship (billing, reporting, account opening and transfers, compliance, etc)

6bps-15bps

40-60bps

Financial Planning Software

Not all firms create plans for their clients - some take an investment focus approach

$1,300 - $1,500

$1,800 - $3,600

Account Aggregation

Account aggregation functionality should be robust with different client account types fully supported. Price is affected by the amount of households you service

$150 - $350 annually

$350 - $10,000 annually

Platform Pricing

There are some major benefits going the full platform route, including data management, simplified vendor management and creating a unified experience for your clients and your colleagues. It’s also common for platforms to give pricing breaks if you use most or all of one firm’s functionality to run your business. 

 

Things to consider

Low-end

High-end

Traditional TAMP (turnkey asset management platform)

Based on level of AUM running through TAMP

15 bps

60 bps

Modern platform

A turnkey wealth management platform

By adopting a full platform you will gain major economic benefits as you scale

10 bps or modular pricing

20 bps or modular pricing

Advisor Solutions

Are you supporting tomorrow’s wealth management with yesterday’s technology? Technology may be the answer to accelerate your transformation with an advanced wealth management platform.

Now that you are educated on the costs related to wealth management technologies, we are here to help. AdvisorEngine operates at the forefront of wealth management – reimagining how technology can serve financial advisors, make sure to schedule your demo today with one of our professional consultants. 

Alternatively, if you’d like an introduction to an industry leader such as Joel Bruckenstein we would gladly connect you, simply reach out. Bruckenstein publishes Technology Tools for Today (T3) and an expert on applied technology for financial professionals.

Let us be a resource in the process of choosing a provider that offers first-class consulting and training - saving money and dwarfing your technology costs. We know what the TRUE COST of financial technology can be. 

This blog is sponsored by AdvisorEngine Inc. (“AdvisorEngine”) The information, data and opinions in this commentary are as of the publication date, unless otherwise noted, and subject to change. This material is provided for informational purposes only and should not be considered a recommendation to use AdvisorEngine or deemed to be a specific offer to sell or provide, or a specific invitation to apply for, any financial product, instrument or service that may be mentioned. AdvisorEngine makes no representations as to the accuracy, completeness and validity of any statements made and will not be liable for any errors, omissions or representations. As a technology company, AdvisorEngine provides access to award-winning tools and will be compensated for providing such access. AdvisorEngine does not provide broker-dealer, custodian, investment advice or related investment services. 

About Brad Frey

A veteran sales executive, Brad Frey holds a strong track record of boosting significant revenue for major fintech companies, including eMoney Advisor. He is responsible for growing business and servicing clients in the Midwest.