Touch the future (Image: Shutterstock)

As data technology takes its place at the heart of advisory firms, a critical question is: “Are we working with the right clearing firm?”

The year is 2045. Everything that can be automated has been. It’s a one-click world.

Fully connected between functions, with underlying data integrated between applications, the 25 separate apps that resided on my phone in 2020 are now a distant memory. Through their smart devices, people’s needs have converged, making life easier and reshaping how we think about delivering products and services across the board.

In 2045, the financial services industry is automated and technologically connected, with the nexus of the client experience in the hands of clients where it belongs.

Digital wealth management isn’t even a thing anymore; it’s a given. Legacy platforms and high-friction processes have long since faded into obsolescence.

How do I know all of this? I’ve spent the last two decades on the front lines of the digital revolution where I’ve been implementing the disruptive technological architecture of the future, instigating a real-time revolution in financial services.

I’ve seen firsthand that consumers, attuned to the benefits of speed, customization and convenience regardless of age or net worth, want service on demand. And not just to handle day-to-day finances but also to open new avenues for investment — providing access to a world that might otherwise seem too complex and time consuming.

Convergence has made some important advances, with signs of more to come. Tech-savvy providers are using digital technology to make siloed products more interoperable, creating intuitive and ergonomic customer experiences.

For example, a checking account may hold excess cash that can be automatically swept to an investment account based on rules established by the customer. Likewise, a paycheck can be divided between accounts and routine bill pay can be fully automated.

The demand for one-click, real-time solutions will only intensify over the next 25 years. The implications for financial services are huge and should influence how we think about priorities today.

Getting Real About Real-Time

Let’s start by distinguishing between real real-time and faux real-time.

Faux: What we’re told is “real time” is typically nothing more than an approximation; client data cleverly designed to appear real-time on the screen. What is it really? It’s real time, give or take.

By contrast, real real-time is relentlessly, reliably now. Its data is instantaneous; timed to anticipate an event, or coincide with it, and pulled the moment relevance fades.

For this reason, real-time processes are immune to the friction that typically hampers client management especially at the start, where a fitful approach to account opening can sour a new relationship before it begins.

And “fitful” is apt: In legacy settings, time is sluggish and paperwork plays a part. There is a role for yellow “stickies,” FedEx makes an appearance, and money must be wired to fund the account.

It takes a minimum of two days, which begs the question, why? What is happening in those 48 hours?

In true real-time, data flows dynamically as events occur, pushed to all client touchpoints. And because it’s driven by bespoke business rules and not generic IT parameters, its applications adapt automatically to client behavior.

Equally important, real-time data is driven not by what clients have done but by what they’re doing now and are likely to do tomorrow.

In financial services, this spells the end of latent work like batch processing, multi-day and overnight processes, and even same-day settlement. And it heralds a new relationship between advisory firms and their clients — a transformation unfolding across the board, from mobile-banking apps to digital advice to peer-to-peer lending.

To achieve real-time service levels, we need — and clients will demand — new architecture for our industry’s foundational systems; architecture that will antiquate inefficient processes like ACH, ACAT, and all things paper-based, allowing financial transactions to become instantaneous and substantially less expensive.

In this new environment, real-time workflow replaces data retrieval with continuous data flow, providing information when and where it will be the most useful.

The Modern Custodian

Custodians are well positioned to be data creators because they are holders of a vast data lake that equips clients to refine trading strategies, gauge investor appetites, understand market structures, and strengthen operational inefficiencies.

New and nimble and built on API technology, allergic to the mere mention of mainframes, the modern custodian is a technology-led entity that uses data not just to answer questions but to reveal interrelated insights across banking, investing and lending.

Who better to make real time real for RIAs, credit unions and community banks, enabling them to offer customers the kinds of advantages now reserved for clients of big banks?

At a time when technology comes first, the modern custodian, although smaller than its traditional counterpart, represents clearing and custody as they ought to be: functions that contribute materially to growing AUM and burnishing a firm’s market value.

With real-time capabilities, modern custodians can use new technology and information to empower advisors. Instead of a financial plan built from static data and assumptions, advisors can track what’s really happening in each client’s life and create customized plans based on that data.

Being able to see in real-time, for example, when retirees are spending more than their planned budget, or when a young couple is struggling with debt service, can help advisors address their clients’ issues before the problems get out of hand.

Think about banking, investing and lending. If wealth managers have insights into those three parts of a client’s life, they’re able to send relevant and timely alerts about developments their client needs to know. Like a water bill that’s abnormally high. Or perhaps some extra cash that was deposited into an account. What should be done with it? Should it be invested or used to pay down a debt?

One-click, omnichannel communication provides instant access to this information so real-time decisions can be made. This is value-added service that only can be provided by tech-forward advisors powered by a service-focused, modern custodian.

Real-time technology offers an opportunity for advisors to ask what’s next in terms of additional value for the customer, services that go beyond traditional offerings like portfolio management and the setting up of trusts.


Bill Capuzzi is CEO of Apex Clearing.