Running Leaner And Meaner With Tech


By Eric Rasmussen, FA-mag.com

Philip Kessler, the founder and managing partner of SWS Partners in Columbus, Ohio, is quick to remind people that technology is not a business strategy. It’s not going to build your firm for you or make you grow.

What he likes about technology, however, is that it allows the robots to do what they do best while planners are doing what they do best. With a team of only five, his two-year-old firm has grown to $200 million from $80 million in assets in two and a half years. He says he could add a zero to that figure while adding only two new employees.

“We knew from day one that we were going to have a heavy reliance on technology and a much smaller reliance on humans,” Kessler says of his firm, launched in late 2015.

A veteran of AllianceBernstein and Merrill Lynch, he struck out on his own with a partner when robo-advisors arrived on the scene a few years ago. Kessler saw the writing on the wall. The investment management part of the financial advice business has been commoditized, he says. Companies of the future will have no need for receptionists (his firm doesn’t have one). They can meet the clients on video, sign them up with e-signatures. Large firms with 35 staffers could today conceivably use technology to cut two-thirds of them, he declares. He thought it was time for him to join the revolution or die.

The revolution in fintech has allowed advisors to now do in minutes what it used to take them all day to do. In many ways, the clients are the ones doing the busywork advisors used to do—updating their own metrics on the cloud or blasting their spending behavior from Mint into the advisors’ portals. Robo-advisors are no longer thought of as threats, but advisors’ right arms, allowing the technology to handle the asset allocation. It’s not that humans have no role, but the roles are changing: They now must offer judgment, insight on the future, a sympathetic assessment of client psychology. In many ways, says Kessler, the tech revolution has forced advisors to show exactly what their value is: It’s the subjective part, not the calculating.

Secure Document Sharing

Firms can now offer clients landing pages, securely share documents from the cloud with both the clients and other professionals, see up-to-date account values, post quarterly reports instantly to the portals, aggregate outside accounts so people can see their entire net worth. They can use software like Calendly or ScheduleOnce to book meetings.

Rick Adkins’ firm Arkansas Financial Group in Little Rock has $490 million in AUM and over 300 clients, which it runs with a staff of six, including four planners. After he and an ex-partner split more than a decade ago, he cut expensive tax compliance work out of his practice and was allowed to re-envision his firm, locating its inefficiencies. “Frankly, back then there were three planners and seven staff members. Kristina [Bolhouse, his current partner] and I said the first thing we have to start doing is outsourcing everything we can. … I’m kind of a dinosaur in the profession and most of my peers were like me … you kind of get into a mode that you did everything yourself.” So they pushed books and payroll chores out the door, cutting seven staff people down to two.

“While [software] appears expensive on the surface,” he says, “if it allows you to reduce having a staff member who is doing the mindless, repetitive, rote work, then I believe human beings were not designed for and let technology do that, you’ve kind of got a win-win.”

Portfolio management systems are pricy, however, and RIA In A Box even wrote in 2015 that almost half of emerging firms didn’t use the systems at all (not until they reached a certain asset level of $30 million or so in assets). Orion, Envestnet Tamarac, Addepar and Advent Black Diamond are popular portfolio management systems for larger RIAs, but smaller players have emerged to keep things functional without forcing advisors to shell out for systems with too many bells and whistles, things that require consultants to run.

Legacy systems and brand loyalty are also important things to software users. Adkins had been a user of software dbCams since 1990 (it was absorbed into Morningstar in 2008). One of the most important tools he uses now is AssetBook, a portfolio management software that started out as a smaller player in 2008. Adkins had years of data in dbCams. Rob Major, AssetBook’s founder, worked with him to convert all the dbCams data that Arkansas Financial Partners was still using. Major won Adkins over to the new system, converting one longtime client over to the new software in 48 hours, Adkins says.

Adkins knew his software costs were going to go up, however. AssetBook costs him about $3,500 a month, he says (it’s based on the number of accounts he has) whereas dbCams was only $300. But he did a cost benefit analysis. “We have one staff member that was literally having to spend most of her day doing a reconciliation and corrections on the downloads, and the more I looked at all this, I realized that the true cost of Cams was not the fee that we paid. If you really looked at the entire cost, it was way more than that. Once I realized that even though AssetBook looked more expensive, we would actually see an immediate savings costwise between the two. Now, we ended up letting an employee go, but I can’t imagine she liked what she was doing anyway.”

Rebalancing Software Saves Time, Money

Rob Siegmann, the principal and COO of Total Wealth Planning in Cincinnati, says that his firm has also scaled up, running $500 million for 375 families with a staff of eight to 10 people. The firm uses Calendly for scheduling; Junxure for CRM; and Orion’s portfolio management, reporting and billing software to become much more efficient with firm operations. He says rebalancing software Trade Warrior has made the biggest dent since it replaced a highly manual process. “That’s the easy ROI investment, the rebalancer.” His firm uses Schwab’s white-labeled Intelligent Portfolios robo-advisor platform, with the idea that it’s for the kids of clients and new prospects who may not yet have the $250,000 minimum in assets. Those systems change the type of staff you have, says Siegmann, since employees with tech savvy replace those without it.

Bill Winterberg, a software consultant to RIAs and vendors with FPPad in Atlanta, says there are advisory firms he’s worked with over the past five years that have moved to Orion or Envestnet/Tamarac or Addepar but have not had to increase their portfolio management staff or investment management staff. (He has consulting relationships with Tamarac and Orion.) “In some cases, they’ve actually repurposed staff,” he says, “and put them on a more full-time planning role and removed their back office operation duties because they are able to trade efficiently, they are able to open accounts and close accounts and maintain accounts much more efficiently.”

Orion and Tamarac also have outsource services available where Tamarac will add the accounts to their system and reconcile trades from the prior day to make sure the databases are accurate and they match the holdings and positions in the custodial record-keeping file. “Those are services that advisors used to do internally,” Winterberg says, “now they pay on an account-based fee for, maybe assets under management, 10 basis points or 15 basis points. They pay these providers to do what it used to take a full-time employee who was at $75,000 or $60,000. Now the firm pays less and they’re getting twice as many or three times as many accounts and holdings processed with the outsourced solutions.”

Ayasha Jones is the director of operations at BlueSky Wealth Advisors in New Bern, N.C., an almost 20-year-old firm that manages $406 million with 11 staffers. Besides her, there are two client service specialists and everyone else at the firm is an advisor. She says founder David Blain has tried to leverage technology since launching in 1999. “We are using Orion for our portfolio accounting software … so that handles all of our portfolio reporting, that has our client portal, we do all of our trading and rebalancing in there. All of our account aggregations in there.”

Quarterly reporting especially was a very manual process before the firm started using Orion two and a half years ago. The firm also uses Junxure Cloud for its CRM for correspondence and work flows. The firm was using the desktop version before that; it was kind of clunky, she says, and all they could use it for was to share documents. “We try to be as automated as possible so we can invest in our advisors,” says Jones. “So all of our back office stuff is our technology. I think that’s helped.”

RIA’s Own Robo-Advisors

For other firms, robo-advisors have been the best way to ramp up new business and are the wave of the future. “We set up a robo-esque subsidiary RIA in 2010 to address smaller accounts,” says Jessica Searcy-Maldonado, vice president of Searcy Financial Services Inc. “As it turns out, that’s where we’re seeing the bulk of our growth these days. We built the firm to be as technology-leveraged and scalable as possible. That firm still utilizes less than one-fourth of one staff person’s time for all operations, investment management and client service/on-boarding.”

The tech revolution is helping smaller advisors in other ways. Justin Harvey launched his own firm in Philadelphia, Quantifi Planning, in 2017, through the XY Planning Network, which has tech discounts he uses as part of his membership. It includes some two dozen different platforms, he says, everything from CRM, calendar to video conferencing, portfolio management, financial planning and compliance. “It’s a pretty deep tech set.”

He’s currently working with 15 clients and about a million in assets, doing flat-fee planning based on income and net worth, for young physicians in their 30s. They often make a lot of money, but don’t have a lot of assets to manage yet. Student loan planning is one of his niche areas of expertise. He serves clients nationally, so he uses Zoom as a video conferencing and screen sharing platform in order to collaborate with clients he hasn’t met. He’s also prospecting for clients on LinkedIn and Facebook with a consultant. Facebook prospecting is complex, he says, but he’s thinking of offering student loan analysis services locally and using that as a gateway market to financial planning for young physicians.

He used Salesforce at his old firm but currently uses Wealthbox as his CRM, which he says is easy for young firms like his—fewer bells and whistles, but it’s easier to ramp up. He calls Salesforce “a heavy lift on the front end.”

The 35-year-old firm Plancorp, notable for ministering to high-net-worth clients, decided to attack the tech issue head on when it struck a partnership with advice technology platform BrightPlan. The firms hoped to serve younger, mass affluent clients with $100,000 to $400,000 to invest, people who are more likely to use a digital advice solution, says BrightPlan’s CEO Marthin De Beer. “BrightPlan is attracting lots and lots of those clients.” The solution can put them in touch with Plancorp advisors. Existing Plancorp clients, meanwhile, can use the platform to come in and check their goals and progress.

“From a traditional RIA standpoint,” says Plancorp’s CEO Chris Kerckhoff, “the role that technology has largely played to date has been to help firms grow and achieve scale at an earlier stage of growth or lower AUM point. So most of that technology implementation has been around the issue of scale, and the investment side of that is the easiest place to see it, whether you look at Tamarac rebalancer or iRebal or other rebalancing tools in the marketplace today. It’s allowed firms to handle or completely outsource to some of the robo-platforms. They’ve been able to grow the business with fewer staff to make things more efficient and leaner in terms of head count at the firms. But that’s really been very focused on the investment side of the business. … We wanted something that went a step further and focused on the user experience. And the client engagement. Our belief and our experience is that what clients truly value is the comprehensive financial planning aspect of what we do. And that’s what’s been sorely missing in the digital landscape.”