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8 Practice Areas Where Advisors Can Save Big With Tech

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“You’re the only group of people in Vegas who understand that when I say Monte Carlo, I’m not talking about the casino down the street,” Jim Dario joked at the opening of his lunchtime keynote at the NAPFA Spring Conference 2013 in Las Vegas on Wednesday.

Jim DarioDario (left), managing director of product management for TD Ameritrade Institutional, tried to get as specific as possible in the time allotted about the role of technology in boosting the advisor’s business.

“We are now four and a half years since the economic crisis began, and May 2013 feels very different from May 2009,” he said. “Clients feel more confident, but they’re essentially asking you to hold their hands as we move from crisis to crisis. The AP wire service gets hacked, and the markets plunge. They’re looking to you to explain that.”

Challenges he noted in the independent space include the coming regulatory changes, the fact that Wall Street is looking to reinvent itself in the fee model, and the “war for talent.”

“In the next 10 years, there will be an estimated 250,000 shortfall of people in this industry,” Dario said. “It mainly comes from the fact that wirehouse training classes, which were a feeder for our industry, are diminishing.

“The opportunities, however, are just as great,” he added.

Dario argued the independent channel is the fastest growing channel in financial services, and has experienced 68% growth since 2005.

“One group’s pain is another group’s gain,” he said, before noting the $4 trillion still held at wirehouses. “But [advisor] Ric Edelman shows in his research that big banks come in dead last in consumer trust, and this is the third year in a row that’s happened.”

Moving on to a discussion of technology in the advisor practice, Dario noted it’s the fourth decade since the move to independence began, but the independent channel never set up the necessary tech infrastructure.

Citing the research and consulting firm FA Insight, he said between 40% and 45% of revenue goes to overhead, and the number—or spread—isn’t changing as it should with the firms’ growth.

“As they starkly observed, too many firms are simply not sustainable.”

He then listed eight areas of a firm in which technology can significantly increase productivity.

1. Back office—“This area by far offers the most opportunity for improvement in efficiency and scalability. Integration is key with such services as e-sign, online libraries, document imaging and CRMs. 2. Quarterly reports/billing information—“This is another area that is ripe for gaining efficiencies. Electronic production of these reports produces no paper; clients receive them in a timelier, and green, fashion.” Dario says the average firm saves $30,000 annually.  

3). Client service delivery—Dario argued firms should deliver a Starbucks-like client service experience. “From the moment you walk into a Starbucks, everything has been planned, from the music playing to the décor to the way the cup feels in your hand. The baristas are facing the door so they never turn their back to you.” This disciplined process equals a superior and consistent client experience. CRMs can help advisors systematize their processes to help them do the same.

4). Sales and marketing—FA insight also notes that referrals accounts for 80% of new business. “That’s amazing,” Dario said. “Yet so many firms don’t have a constant and repeatable process for dealing with referrals. Something as simple as a CRM pipeline and dashboard works wonders. Once the data is organized, it can then be mined for new opportunities.”

5). Reaching out to the next generation—“Echo boomers expect online relationships. They will track you down online before ever picking up the phone. Part of this is that they were latchkey kids that are more self-reliant than their parents.”

6). Compliance—There is a clear mandate to apply technology to reduce the cost of compliance, Dario said. Paper is one glaringly obvious area. “Fully 70% of RIAs do not use a document management system, even though it saves 9% of revenue each year, on average. Document management systems store documents, but also emails, IM and other mediums. They are searchable and can be retrieved in real time.”

7). People—Associates of the firm consume 60% of the P&L, by far the largest single item, Dario said. “Provide your associates with the latest hardware, software and mobile devices to get them to be as productive as possible.”

8). Succession planning—The average RIA spends 3% to 5% on technology. Business value is directly linked to lowering costs. Increased efficiency equals a higher valuation once the partner exits.

“Think of a $1 million, medium-size firm that save $100,000 each year by automating its processes,” he concluded. “That $100,000 flows through to the bottom. The going rate for the average firm, on the low end, is 10 times annual revenue. You just increased the value of your firm by $1 million.”


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