The RIA firm owner knew he had a problem. Team morale felt inconsistent, costs were up, margin squeeze and regulatory demands were constantly increasing, and everything felt more complicated in the always-on digital world.
While some on his team were eager to accept new challenges and embrace change, others seemed to be discouraged and even scared. He felt tired and a little more than grumpy as it became clear that the wealth management platform he'd selected — after months of painstaking due diligence — was not the be-all/end-all promised in the cacophony of fintech marketing hype.
The installation had been a disruption to the business. It wasn't the installation team's fault so much as the process of implementing change and the varied degree of buy-in and cooperation among team members.
While he had expected the increased spending on technology to improve margins, he saw now that it would be a much longer timeframe than originally expected.
If you are nodding your head — or feeling similar pain in your business — take heart. Most independent financial advisors share a common set of experiences, challenges and opportunities associated with trying to improve their firm, based upon changing industry partners and vendors. Sometimes the experiences are good; other times there is a bit of trial and error.
For instance, some firms are on their second or third CRM or financial planning tool over a relatively short period of time. When asked, "Why have you changed?" often the response "It just didn't work for us, it wasn't a good fit" indicates that maybe they were not crystal clear up front about which problems they were trying to solve and capabilities they wanted to add.
Drivers of Change
Typically, there are two primary reasons advisory firms will consider making a change. The first is externally focused rationale: They feel they are not achieving as much as they could and wonder if answers can be found by changing their custodial, broker-dealer, marketing or technology partners.
The second reason is internally focused: They question their internal effectiveness and systems, their team roles and abilities, and how the clientele perceives their service offering, fee structure and investment performance.
Start With the 'Why'
As with most important missions, it is essential to start with this simple, one-word question: "Why?" That will lead you to answering the "What are we trying to solve?" question. Typically, the problem will fall into one or more of these three categories:
1. Growth: We believe that partners and vendors that align with our direction and service offering will better support our opportunities for growth.
2. Efficiency and cost control: We are trying to improve efficiency and believe those efforts will increase capacity and time savings, and will eliminate the duplication of effort and cost.
3. Capability and commitment to clients: We are trying to enhance capabilities that will raise the level and delivery of our client experience.
There may be other reasons, but partner- and vendor-change decisions typically fall into those three categories. If you are clear about the problem you are trying to solve, then you can more easily shop the vendors and tools that are out there. Looking through that lens will really help.
On the other side of that — whether it is vendors broadly, fintech firms, TAMPs or custodians — RIAs are bombarded with choices. A lot of vendors take a one-size-fits-all, everything-is-integrated, just-buy-from-us-and-you-can-eliminate-everything-else-you-are-doing-and-life-will-be-great approach.
While we, the authors, are not challenging specific companies that have gone out with that message, we would say that the advisor experience does not always match up with the marketing hype coming from these firms.
To that point, we recently participated in a call between a firm researching their decision for a new planning tool, and a representative providing a demo. His consultative approach and clear answers created a refreshing experience, and he was a tremendous help in evaluating the RIA's options.
Diagnose, Plan Up Front
We find it helpful to rely upon a defined process when considering a change in vendor relationships or tools you are using in your business, and importantly, creating the process before engaging with the vendors. Be clear about your needs, budget, integration requirements, etc. We all know that if we go grocery shopping while hungry without a list, bad things happen in terms of budget and diet.
As an example, a firm in Fort Worth, Texas, has successfully made significant changes by following a process in which it first identifies its purpose and ideal outcomes before considering any changes to what it affectionately calls its "strategic partners."
Then the team schedules meetings with a short list of new potential partners in a specific category and provides a written copy of its purpose and ideal outcomes to all parties in advance, so they are prepared for an effective meeting.
From these meetings, next steps are more easily identified until the firm has confidence in a final decision. The final decision can range from improving utilization of a current partner or selecting a new partner.
Another important consideration: How will you measure the effectiveness of this change? For example, if you decide to spend an additional $50,000 a year on technology or to replace your CRM, what do you think is going to happen, beyond just the generalities of, "Oh, things are doing to get better," or "It is going to be easier to do this or that"?
Ultimately, do you want to create capacity? Preserve or expand operating margin? Accelerate growth? Reduce cost?
Be Accountable for the Decision
Assume you had to present this to a management committee or your board of directors. You might say, "I'm going to spend fifty grand for the following reasons and here's the return I expect to get back on that investment."
