The road to RIA growth runs through technology

RIA firms are at a crossroads. Though this market experienced impressive growth over the last few years, some conditions are threatening to change the trend.

As generational wealth transfer increases the risk of losing assets and a consolidation trend puts some firms in danger, RIAs are stuck between a rock and a hard place. Add to this the fee contraction caused by the move to passive investing, and one could understand why RIAs would need to invest in growth. In many cases, that growth is driven by technology.

After realizing robust growth in 2015, RIAs expect to build on their recent success, according to a TD Ameritrade survey published earlier this year. Top management priorities, according to the survey, include improving their firm’s efficiency, enhancing client service and delivery, and investing in new technology.

When it comes to technology, RIAs say cybersecurity is their top priority, followed by implementing Customer Relationship Management systems that can help fuel growth by giving firms deeper insights into their clients, as well as helping them identify prospects.

“We rely a lot on technology,” said Duncan Rolph of Miracle Mile Advisors, an RIA firm from California that prides itself in leveraging technology to offer personalized service to clients.

There are three main prongs to an RIA’s software stack, explained Rolph. The first is the core offering of portfolio management. The second is financial planning software which allows advisors to better incorporate their clients’ personal situations and goals. Last is a good CRM solution that allows the firm to send targeted communications to existing and potential clients.

In an industry where the average professional is over 50 years old, there is naturally some resistance when it comes to technology adoption. Even after moving beyond the price hurdle, designing a workflow that makes the most of the new tools is essential. Many of the older advisors might feel like an old dog trying to learn new tricks.

For Miracle Mile Advisors, the way to overcome these challenges was to go back to the drawing board and build their business from scratch. “It does not bear fruit right away,” Rolph said. ”Some want a quick fix, but it is a longer road.”

Others agree that the industry needs to embrace technology. “We are moving to a digital age, and advisors need to move that way,” added Tony Stich, director of global marketing at Advicent, a financial advice software provider.

There have been some attempts to create a unified all-in-one software solution for financial advisors, but a clear market leader has yet to emerge. Combining the different platforms into one should save data redundancies and enable advisors to better leverage the data they already have.

“When using one platform. you will get efficiencies, compliance, and increased security,” said Stich. “When using multiple platforms, you have less security.”

Both Stich and Rolph predict that portfolio management will become even more commoditized in the near future, which will force advisors to differentiate themselves through additional services like financial planning.

“In three to five years, roboadvice will be ubiquitous. We are going to see more self directed planning. It will get to a point everyone will provide roboadvice,” Stich said. “One thing remains clear. The advisors will be the core of the relationship. Technology will not change that.”

Looking to make a Mint in financial planning

So, top-dog personal finance website,, just announced a further step into financial planning with some goals-based tools to help users plan financially for the future.

From the release:

Mint’s new Goals feature seeks to take the difficulty out of both setting goals and regularly tracking your progress towards those goals. With a few clicks of the mouse, you can set up a savings goal, and then use to help you achieve that goal.

Using Goals for Saving for the Future

So, if a Mint user wanted to save for something like home improvements, they’d use Goals to:

  1. Set funding source
  2. Set goal dollar amount
  3. Blend in financing options
  4. Establish target date
  5. Specify monthly savings target

Makes perfect sense, right?

So, the move from helping people track to helping them plan is an obvious one and a good move for Mint.

And Mint’s revenue model/value proposition work well for this foray into planning.  I assume Mint will begin to gain referral fees as they recommend loans, travel services — anything that helps assist in the savings and planning process.

According to the NY Times:

The new feature comes as is facing increasing competition in the online financial software space. New entrants like HelloWallet have started attacking’s business model and have emphasized how they offer more financial planning advice services.

The trend

We’ve seen investment platforms begin to automate professional grade services to their client in an effort to round out their offering and attract full-service clients (see my review of E*Trade’s Online Adviser).  Now, we’re seeing personal finance sites begin to creep into the financial planning/investing/future-oriented space.

What get’s me juiced is that sites like Mint have a TON of information about their users — the type of information the investment portals and online brokers drool over.  This positions them better for a move into investing — much like the much ballyhooed-TechCrunch Disrupt-winner Betterment is focused on.

Additional Resources

  • Expands Into Financial Planning Tools (NY Times)
  • How To Set and Track Financial Goals With Mint (Mint blog)
  • Goal Keeping Gets Easier at (All Things Digital)

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