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‘Latest and Greatest’ Tech Not Always Best for RIAs

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What separates high-performing RIA firms from their competition? One factor: a pragmatic approach to technology, according to the 2013 Fidelity RIA Benchmarking Study.

The annual study aims to tease out the drivers of RIA outperformance, separating the top quartile of RIAs, which it calls high-performing firms, from the rest. The top firms saw 1.5 times the growth, 1.3 times the profitability and 1.5 times the productivity of other firms in 2013.

“High-performing firms are focusing on more effectively harnessing the technology they have instead of chasing the very latest innovations,” David Canter, executive vice president and head of practice management and consulting at Fidelity Institutional Wealth Services, said in a statement.

According to the study, high-performing firms were focused on creating strong technology environments by investing in their current systems. Seventy-four percent of them described their tech environment as strong, not cutting edge. While nearly half considered investing in technology a strategic priority, only 12% invested in the “latest and greatest” technology. A big majority, 67%, said one of their top three tech opportunities was integrating existing systems.

Fidelity said this pragmatic approach may be rooted in high-performing firms’ concern about disrupting their business and compromising client service in order to integrate the latest technology.

High performers were more likely than all other eligible firms (60% versus 43%) to say disruption to their business was their biggest challenge when integrating systems, and were less likely to cite cost or staff skill set.

They were also likelier to cite improving their clients’ experience and satisfaction as a top technology goal (77% vs. 61% for all other firms).

“When it comes to smart technology adoption, it’s no longer just about improving efficiency,” Carter said.

He said RIAs need to ask whether adoption is helping grow their business and enhancing clients’ experience. “As new technologies come to market, RIA firms that see technology as a vehicle for success — not a measure of success — will rise to the top.”

The study suggested several strategies that could help advisors adopt technology in a smart and efficient way:

  • Initiatives that streamline their technology environment, such as shifting to cloud-based solutions, implementing mobile technologies and creating process workflows and automation
  • Overcoming staff-related barriers to technology optimization in order to get more out of their existing technology
  • Utilizing more functionality of current systems
  • Leveraging vendor-hosted systems in order to relieve the burden of supporting locally installed systems
  • Outsourcing, particularly for key processes, such as data reconciliation and client reporting

Fidelity cautioned that these strategies may have legal and compliance considerations to take into account.

The 2013 Fidelity study, which was administered by an independent third-party research firm from May 1 to June 8, encompassed 325 RIAs.


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