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Industry Spotlight > RIAs

RIAs Look to Automation, Multiple Custodians to Spur Growth

By Michael S. Fischer

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What You Need to Know

  • Two-thirds of respondents said they want more automation in new account opening and client onboarding.
  • Sixty-four percent of advisors surveyed reported using at least two custodians.
  • Respondents cited winning new business as the biggest operational challenge of the year.

Independent financial advisors consider growing their business their biggest challenge in 2024, and they believe that robust technology, coupled with multiple custodial relationships, will drive firm growth, according to a recent survey by Interactive Brokers.

Advisors in the survey by the automated global electronic broker said they believe that technology, and specifically automation, can transform their work with clients, with 79% agreeing that automation will give them more time to cultivate client relationships. 

Sixty percent said automated processes enable new team members to get up to speed faster, and 58% said automation in account management reduces overhead costs.

“Advisors want robust technology that keeps costs low so they can manage their firms the way they want — this is why we’ve leaned into automation since the beginning and it’s why others are now doing the same,” Steven Sanders, executive vice president of marketing and product development at Interactive Brokers, said in a statement.

In particular, advisors are asking for more automation in the tools they use to manage client accounts. Two-thirds of respondents said they want more automation in the new account opening and client onboarding process.  

Advisors also said client reporting and portfolio management could benefit from increased automation. 

Interactive Brokers conducted a global email survey in April and received completed responses from 100 fee-based, independent advisors with an average of 24 years of experience and $72 million in assets under management. One-fifth of the sample reported managing an average of $278 million in client assets.

Multiple Custodians

Using multiple custodians makes good business sense for advisors, the survey results showed. Respondents said client preference is the main reason they go the multi-custodial route. They also cited service availability and diversity in investment product offerings as reasons they use more than one custodian. 

The multi-custodial model appears to have become the norm, Interactive Brokers said. Sixty-four percent of advisors surveyed reported using at least two custodians, and 34% said they use three or more. 

Sixty percent of advisors who use only one custodian said they are open to using more.

Respondents cited cost as by far the main reason for choosing one custodian over others. A custodian’s operations, including its customer support, and its trading platform are other factors that weigh heavily on the decision. 

“It makes sense that most firms use a multi-custodial model,” Sanders said. “With a second — or even third — custodian, fiduciary advisors can access products that serve their clients best more easily.” 

Seventy-six percent of survey respondents said they are more focused on using high-interest rate accounts for cash balances than they were three years ago. In fact, 80% agreed that as fiduciaries, advisors should manage client cash balances in accounts that offer high interest rates. 

Room to Grow

According to the survey, advisors are getting more aggressive with their marketing, citing winning new business as the biggest operational challenge of the year. They are also asking for more client referrals and doing more industry networking in order to spur firm growth.

This desire to grow may be tied to plans for future team expansion. Thirty-nine percent of advisors surveyed said that recruiting and training young talent to take over the business is part of their long-term succession plan.

Ten percent said they would sell to an aggregator or consolidator or accede to a roll-up merger. And 9% said they would bring on mid-career advisors or advisor teams.

Michael S. Fischer

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