Dan Skiles, SSG’s Tech Guru: The 2014 IA 25 Profile

Technology, yes, but in his new role at Shareholders Service Group Skiles offers insights into more than just the latest software

Dan Skiles says 'size doesn’t matter anymore' for small firms. Dan Skiles says 'size doesn’t matter anymore' for small firms.

Dan Skiles’ profile in the advisory world was raised last December when he was named president of Shareholders Service Group, the San Diego-based RIA custodian that he joined in 2009. But for many advisors, Skiles was already well-known from his work at two other custodians Jack White & Co., and Charles Schwab & Co. He’s also among that elite coterie of advisor partners who thoroughly understand advisor technology and how it can best be used to improve an advisory firm’s business operations (Disclosure: He writes on that topic in Investment Advisor’s monthly Technology Coach column).

What many advisors may not know is that Skiles also has an entrepreneurial streak: In his youth, he owned a rock-climbing gym, but as he said in an April interview, he realized it was not for him. “I wasn’t passionate about it,” and realizing that “you have to be passionate to be successful,” he began to search around for another profession. That’s when he used an approach he’s honed ever since: He put his network of contacts to work. A “friend of mine, a mentor” told him that whatever he chose to do, he should “surround yourself with smart, honest, passionate people; I’ve done that ever since and that’s made all the difference.”

When he was considering leaving Schwab’s custodian unit where he was a vice president of advisor technology, Skiles said he asked several advisor friends for their advice. They recommended, he said in an interview last December, that he “get involved with all aspects of the business,” not just technology. He has done just that.

Skiles is passionate about employee-owned SSG, which was founded by Chairman and CEO Peter Mangan and Robert Reed and has grown rapidly since Skiles joined the firm in 2009 from less than 400 RIAs on its platform to more than 1,200. Part of his passion for the firm, he said, revolves around working with RIAs. “It’s rewarding to help advisors achieve their goals,” but it also presented an “opportunity to get back to my entrepreneurial roots.”

SSG’s advisors are mostly smaller RIA firms, but Skiles argues that “size doesn’t matter anymore” for small firms, including those “transitioning” from another business model. “It used to be different,” he recalled, because larger firms had access to investment products and technology that smaller firms couldn’t get. However, “with the world of outsourcing, cloud-based systems” and the competition among technology and investment product manufacturers, he said that “in some cases, firms with only $50 million in AUM can run and leverage better technology than even much bigger firms,” partly because those larger firms must use “legacy platforms, which they have to maintain.”

He doesn’t downplay the challenges that “newer, younger firms” face. “Yes, there’s a lot of work to get established,” but if you begin as a true partnership without silos from the beginning, “you have more consistency; you minimize the variables.” That can benefit a smaller firm not just in technology, but in compliance as well, whereas an “older firm’s [compliance operations] might be based on compliance rules put into place 15 to 20 years ago.”

When asked about two topics that are top of mind for many advisor firm partners like SSG—the demographics of the advisor universe and the possible threat posed by ‘robo-advisors’—Skiles has a unique take on both based on his technology and business chops. “Succession planning will change” in the near future, he suggested. “Many advisors say, ‘I still love the business, still want to be in the profession,’” but as new technology is constantly rolled out that is accepted—or even demanded—by clients, the older advisor may be able to stay in the business for a much longer time without sacrificing clients’ needs.

Leaving out those advisors who want a “liquidity event,” Skiles used the traditional office conference room as an example of how client needs and aging advisor needs might coalesce. The need for an advisory firm to have “a conference room is diminishing every year” because of how clients want to communicate with their advisors. “It doesn’t take much time to learn how to use FaceTime,” Skiles pointed out, and as broadband access increases, “those clients may well say, ‘Why do I need to come down to your office to talk to you?’”

So what about robo-advisors: challenge or opportunity? Skiles began by speaking about “the consistency of the service experience and how personal it is” for end clients. Most of them have complex lives, he said. “Life is not consistent; questions come up throughout the year that you never anticipated.” Human advisors “are there for those questions,” especially for delegator clients, which Skiles thinks “there will be more of.” By contrast, the robo-advisors “revolve around investing. There’s nothing personal about it, and the consistency only relates to the technology used.”

What will remain consistent is that to “be successful in this business,” you need to provide personal service as “an advisor or someone who serves advisors.” Technology, Skiles said, “is a commodity, so as you go through your life stages, having that consistent personal experience increases the value of that relationship.” Robo-advisors may well serve as a transition stage for the self-directed client whose financial life becomes more complex, but as he ticked off some issues that advisors help solve for their clients—staying knowledgeable about cost-basis legislation, or how to pay for health care, or whether the timing is right to do a Roth IRA rollover—he concluded, “Can a robo-advisor answer those?”

Yes, if an advisor’s practice is “all about investments, maybe you should be concerned,” he said about robo-advisors. However, having a cost-effective way to serve clients who may not meet your firm’s minimums is a valuable strategy. “I’d encourage advisors who’ve been raising their minimums year after year to think about a different offering that allows them to serve people with less money,” Skiles said. “I’ve seen a lot of our clients getting into that. Those younger people have simpler lives, so you have to do less for them” now, but getting experience in serving less affluent clients will yield another benefit. “When mom and dad die, how often do you retain a relationship with the beneficiaries? The more experience you have with people like that, the better chance you’ll have to show [those beneficiaries of your current clients] that you’re not only familiar with their needs, but that you already have a channel that serves” such clients.

(Check out Investment Advisor's full IA 25 for 2014 list on ThinkAdvisor.)

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