American Portfolios' Lon Dolber and Cambridge's Amy Webber at the 2017 Broker-Dealer of the Year roundtable (Photo: Tom McKenzie)

Discussions about technology tend to revolve around the systems and strategies firms have adopted to stay ahead. At the 2017 Broker-Dealer of the Year roundtable in August, we asked the leaders of the winning firms to share what technologies are overhyped or not worth the investment. 

Find all of our 2017 Broker-Dealer of the Year coverage here. 

Janet Levaux, Investment Advisor: In deciding how you’re moving to new technology, what have you decided not to do?

Lon Dolber, American Portfolios Financial Services: I’m not going to live in somebody else’s technology vessel. The way we built our systems they’re custodianagnostic, particularly when it comes to the advisory side.

I think at some point we’re not going to be moving assets from one custodian to the next. We’ll leave assets where they are, and our systems will be able to get the data, manage the data, model, bill, execute.

(Related: Firms Announce Tech Plans; One Strikes a Deal)

If a client says, “I want to work with this trusted advisor, but I’m not moving my account,” wherever that account is, they’ll say to that custodian, “You got to send the data to my trusted advisor.”

We’re building a store, like the Apple Store. Any advisor, any place will be able to tie into our store and use our systems, whether they’re distribution systems [or] modeling systems.

Right now the only advisors to tie into my store are those who are registered with me, but at some point maybe that won’t be the case.

Amy Webber, Cambridge Investment Research: One of our core values is flexibility. There is no clear winner in any technology category and this is at the advisor level, let alone the investor level aggregation, performance reporting, CRM, financial planning.

We’ve got over 3,000 advisors and there’s no clear winner in any of those categories, which tells us that it would be a very heavy lift to try to pick one and attach ourselves to only that one.

In an ideal world, we wouldn’t be dealing with the cost of integration. I think I said it earlier, but we spend $20 million a year on technology, and a significant amount of that is simply integrating with the various third parties that our advisors are using. It’s terrible.

Dolber: Integration is quite an art.

Webber: If it’s not good, they won’t use it.

John Burmeister, Lion Street Financial: We haven’t put a halt to allowing our advisors to go out and use other systems. They’re independent advisors. If they want to use Riskalyze or some other company, we allow them to do that, even if we have to go through the due diligence process.

That’s allowed us to keep expenses very minimal, especially when you’re looking at new regulations, like DOL.

Ryan Diachok, Geneos Wealth Management: Being custodianagnostic with your technology is critical, so we’re doing a lot of the same things [as American Portfolios]. We build and create technology to use on our platforms that we use internally under our RIA and our brokerdealer. We then make those technologies available on the brokerdealer side, through our technology company, to other brokerdealers.

On the RIA side, though, that translates into where can we help not only brokerdealer-affiliated RIAs, but our standalone RIAs in the industry.

Dolber: The thing that’s interesting about that is that our RIA is [making] $50 million, $60 million in fees. When you think about the size of any of our individual RIAs, they’re large. That’s a sustainable RIA. You look at some of these small RIAs, and I ask the question, “Are they really sustainable?”

Diachok: The magic number used to be $100 million in AUM. [Today,] that number is $300 million to $500 million in AUM, because the tools that are pitched by RIA in a Box or TD Ameritrade, they don’t cover everything, especially from a compliance standpoint or a cybersecurity standpoint.

Dolber: They get away with it because they don’t get audited enough. The SEC doesn’t get around to auditing them.

Diachok: For a while, the trend was advisors breaking off, forming their own RIAs. We’ve had in the past two years probably 12 to 15 come underneath the corporate RIA. They say, “You know what? I’m going to rely on what you guys are doing, rely on your compliance.”

Dolber: TD can give you a trading system. You know what they won’t do? They’re not going to give you a client portal where your client can log in to something that we give them, and they can see all the things you want them to see in a portal.

Webber: The custodians want to avoid the liability at all cost. DOL may offer a real opportunity there as well, and increase that AUM because somebody’s got to be the financial institution. The independent RIA who may already be struggling with meeting its compliance obligations because of its size, when the states or the SEC comes in to take a look at things, they’re going to potentially have to sit down and identify a conflicts officer for DOL and all of those things.

The independent RIAs, especially the smaller ones we’re talking about right now, they don’t realize that.

Burmeister: Especially when they’re dually registered. When they’re dually registered, we still, as a brokerdealer, have an obligation to supervise that independent RIA.

Nine times out of 10, once they come to understand that you’re still going to be supervising their business, … they step away from that because they think that they’re getting away from regulations by going independent, which is not the case.

Webber: 82% of our advisors right now are using our corporate RIA. Five years ago, it was the exact opposite.The No. 1 reason is usually what we’re talking about here: “I don’t want to go it alone. I went through my first SEC audit all by myself, and it was a nightmare.”

Burmeister: I build primarily the branch structure so I wouldn’t have to take any more paperwork to the home office, and I built our advisory structure because I didn’t want to have anybody else in my pocket, like some of the other firms that we would have to use.

Diachok: You have to be able to integrate with the leaders in certain aspects of third-party technology. You have to be able to take the Redtails and the eMoneys. If you can provide integration into your systems that your advisors are using on a daily basis, that’s the best of both worlds.

— Read Apex, InvestCloud Partner on Robo, Custody Integration on ThinkAdvisor.