4 Questions Advisors Must Answer to Survive

If you want to get a view into what is driving the RIA industry, then all you have to do is hang out for a few days at the SS&C Deliver Conference, which was held earlier this fall in steamy Orlando, Florida.

SS&C is a global behemoth of financial technology, having grown rapidly through acquisitions, most notably of the popular Black Diamond and Advent Software portfolio management systems — used by thousands of RIAs on a daily basis to run their businesses.

Accordingly, SS&C attracts a diverse group of advisors, vendors, executives and industry experts all focused on how to leverage technology to enhance the client experience that advisors deliver, as well as drive operational efficiencies, productivity and scale so that RIAs can continue on their impressive growth curves.

Some compelling sessions were led by the Black Diamond team, including one featuring Bjorn Widerstedt, VP, Product Strategy and Design. Widerstedt is known for his thought-provoking sessions, and he delivered again this year with his hour of content focused on how to “Embrace the Future of Wealth Management.”

His research of investor perspectives revealed some compelling takeaways for how advisors need to re-architect their businesses to ensure firms will be delivering in the right way in the future.

Summarized into a number of categorical statements/questions, these profound perceptions from investors show how far advisors need to go to remain paramount in their clients’ lives.

1. “I need a financial life coach, but it is hard to find one” — so what should I do?

Investors are more often looking beyond just investing and planning services from their advisor to a broader set of services and deliverables as advisor value propositions are shifting in this new direction, according to Widerstedt.

2. “Why am I paying for this, when I only want that?”

This is the classic mis-pricing that comes with basis points on AUM fees facing investors, forcing them into a trade-off of accepting a bundle they don’t necessarily want.

Investors want value financial planning, yet that service offering and support is bundled into an investment management service, which rapidly is becoming commoditized.

This disconnect is becoming even more pronounced in today’s increasingly digital world, meaning that advisors will need to bifurcate these services, price them differently, and perhaps consider subscription models or discrete fee-based planning engagements in the future.

3. “If Google can be fast and connected, why can’t my financial apps be as easy to use?”

Widerstedt says this question illustrates the slow pace of change in investor technology that is becoming more pronounced as client expectations for a better digital experience rapidly increase.

4. “Don’t make me go looking for stuff, just tell me what I need to do.” This statement laments the fact that there’s just too much information in financial services; investors want direct feedback and guidance that (only) advisors can provide through an elegant client portal and a better digital experience.

The good news for advisors is that Black Diamond is actively investing in new capabilities to provide answers for many of these investor concerns such as new integrations for the Black Diamond Client Experience Portal and tying into clients’ timelines through SS&C Salentica, RightCapital, SMartX, Redtail, Asset Map, Riskalyze and Life Yield.

Other platform news was the integration of Hidden Levers, and new capabilities from SS&C Salentica in the form of Engage, a CRM platform for Microsoft Dynamics along with its automated workflow platform “Flow.”

These tightly integrated platforms aim to work together and create a robust digital onboarding capability, which was energetically demonstrated in an impressive, live session by Dave Ireland, co-general manager of SS&C Salentica.

RIA Growth Streak

As RIAs are fueling their growth through inorganic channels, such as mergers and acquisitions, a number of panelists discussed the state of the market, valuations, deal structures and strategies for becoming “better buyers.”

Sharing some compelling statistics that show the direction of deal-making, Francine Miltenberger, managing director for DeVoe &Co., explained that the industry is on pace for a record number of deals, as advisor demographics are driving consolidation.

Aging advisors create both a challenge and an opportunity in the industry, particularly for the thorny topic of succession planning.

“At the lower end of the market, smaller advisors do not have anyone internally that they can sell the business to, while at the top end of the market, valuations are so high that the next generation of advisor simply can’t afford to buy out the founders,” she noted.

This situation is creating powerful momentum for the external sale of businesses, in which retiring founders pass the baton to new owners, and is leading to record deal volumes and high valuations in what everyone agrees is “a seller’s market.”

This frenzied pace is being led by RIAs acquiring each other, as 55% of recent buyers of RIAs have been other RIAs, and over half of RIAs now expect to make an acquisition in the next few years.

Agreeing with this assessment, Jim Kacic, CFO for MAI Capital, is positioning his firm to capitalize on these transitions by becoming an active buyer. Kacic’s advice to the crowd on how to become a buyer of choice was: have a compelling value proposition for transitioning advisors, understand the nuances of due diligence and stay disciplined by not paying too much.

Rounding out the panel was Jill Young, executive director of LourdMurray, an RIA in Beverly Hills, California. Young’s back-office focus is particularly important for post-deal integrations.

Currently, she is managing a couple of transactions, which she says brings added complexity if they involve different tech systems. “The work really begins once the documents are signed,” she said, adding that she is leveraging her Black Diamond system to onboard the firms they acquire.

Better Decision-Making

Rounding out the agenda were some non-traditional sessions on a variety of practice and client management issues, including a very thought-provoking deep dive into behavioral finance, not so much tied to economic theory but rather to the make-up of our brains.

According to Eric Bennet, CIO for Tolleson Wealth Management, the study of neuroscience can provide fantastic insight into how to make the most of the best part of our brains, including achieving better decision making and removing cognitive biases that plague investing decisions, both for advisors as well as clients.

Apparently, just like our bodies and muscles, we can train our brains to function at higher levels by increasing the blood flow to the frontal lobes, the part of the brain that controls important cognitive skills, such as emotional expression, problem solving, memory, language and judgment. It is, in essence, the “control panel” of our personality and our ability to communicate, he says.

“What is good for the heart is good for the brain,” Bennet said, extoling the benefits of exercise, eating right and most importantly getting enough sleep.

Bennet also suggested that we all take at least five five-minute breaks throughout the day, because the brain shouldn’t work for more than 90 minutes straight. “Multi-tasking is bad for you,” he added.

SS&C Deliver also is known for its networking opportunities, and this year didn’t disappoint with multiple receptions in the exhibit hall, meals outside under the Florida skies and a final night gala event at the nearby Universal City Walk in Orlando.

Additionally, a keynote chat with former Chicago Blackhawk star, Stanley Cup winner and Olympic Gold medal champ, Patrick Sharp, gave the event an inspirational feel.

To learn more about what went on at the 2019 SS&C Deliver Conference, check out the many tweets on the #SSCDeliver hashtag on Twitter.

Timothy D. Welsh, CFP, is President, CEO and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.