Press: Wealthtech Solutions Continue To Evolve In Tandem With RIA Priorities

For as much as the term “disruption” is used in connection with the technology sector, when it comes to wealthtech solutions provides who serve the RIA channel, it is frequently about both evolution as well as revolution.

Over the past 15 years, the rapid growth of the RIA channel helped drive a proliferation of third-party wealthtech solutions providers, all competing vigorously to support this segment of the industry.

While the pace of expansion of the wealthtech segment may have slowed in certain respects, innovation – both significant and incremental – continues apace.

In many ways, consolidation trends and the relentless need to drive greater scale and cost efficiencies have made wealthtech solutions providers more essential than ever with multiple day-to-day operating functions for RIA aggregators, RIA consolidators, RIA and hybrid RIA firms.

A quick review of four mission-critical wealthtech sectors – digitally-enabled investment management, back-office solutions, workflow automation and lending solutions directed at the end clients of RIA firms – combined with specific instances of providers underscore the ways in which wealthtech as both evolution and revolution are playing out across the industry.

Digitally Enabled Investment Management and Portfolio Construction

Let’s start with leveraging technology to construct, manage and optimize client portfolios and deliver solutions to elevate the client experience, a core competency that remains at the heart of the RIA model for many financial advisors.

This is where digitally-enabled solutions can replace what would arguably be one of the most significant areas of cost in terms of manpower and resources that would otherwise need to be shouldered within an RIA firm.

Take Vestmark, for instance. The firm delivers portfolio construction, portfolio management, trading solutions and a broad range of other tech-driven investment management capabilities for wealth management enterprises and their financial advisors.

Ananya Balaram, Chief Revenue Officer at Vestmark, attributes the firm’s continued success over its past 23 years of existence – itself a differentiating feature compared to the average lifespan of most wealthtech firms – to a key foundational characteristic: “One of our biggest points of differentiation is that we are technologists…[who] happen to understand the wealth management space. This contrasts with our competitors, many of whom are…wealth management professionals trying to be technologists.”

Vestmark supports over $1.5 trillion in assets across five million accounts. Vestmark Advisory Solutions has $26.1 billion in AUA that flows through its model marketplace of over 1,000 strategies from nearly 200 asset managers.

The firm’s VAST platform, which originally targeted individual RIA firms but has generated traction across large wealth management enterprises generally, enables firms and their financial advisors to provide individualized tax-rate informed investments on a scalable basis, which creates a highly tailored client experience.

According to Balaram, “It comes down to personalization and scale. When we work with large enterprises, our products must serve a broader range of advisors and clients. Even so, we can deliver what we believe to be more diverse and qualitatively superior tools.”

“The flexibility and modularity of our offerings allow us to deliver our platform and services in a way that makes sense for each engagement, whether as a piece of a larger puzzle or the entire puzzle.”

Back-Office Solutions Platforms for RIAs That Lack Tech Infrastructure

While investment management tends to be a top of mind capability for both advisors and their end clients, back office capabilities have been an area where small and mid-sized RIAs – firms with $300 million in client assets or less – have struggled.

Put simply, it isn’t easy for RIA firms at this size and scale to gain cost-effective access to the full range of back office services they need to compete effectively. In fact, the escalating costs and complexities of running a small to mid-sized RIA on a “do it yourself” operating basis has significantly driven the tuck-in recruiting trend of smaller RIAs surrendering their registration to become part of a larger independent enterprise.

It’s certainly a common scenario that the team at AdvizorStack, an outsourced CTO provider and consultant for RIAs, is having increasing success addressing.

While many larger outsourced tech providers don’t see a bang for the buck in partnering with small to midsized RIAs, AdvizorStack focuses on that niche. Paul DeMaio, CEO at AdvizorStack, works alongside his son, Nico, who serves as President of the firm, which launched in 2022.

“Partnering with various service providers, AdvizorStack offers end-to-end solutions, effectively becoming our clients’ back office. Our aim is to establish a one-stop-shop for independent advisors, emphasizing seamless transitions, superior servicing and best practices implementation,” said DeMaio.

“At AdvizorStack, advisors gain access to a suite of tools under a single contract and fee structure, simplifying their business operations. We enable RIAs of any size to scale efficiently with robust tech and back-office infrastructure. Our solution is a game-changer for those seeking true independence and allows firms of all sizes to maintain autonomy in an era of industry consolidation,” he continued.

Workflow Automation Solutions For Legacy Operations And Technology Platforms

While AdvizorStack’s solutions might make sense for RIA firms with limited tech stacks of their own, it is a decidedly different set of circumstances for larger RIAs that already have multiple and disparate legacy tech and operations structures.

For these firms, they face the urgent challenge of seamlessly integrating these different pieces of their tech stack so that all the parts can connect with one another to support the delivery of a high-quality advisor and end client service experience.

Docupace, a solutions provider focused on digitizing and automating operations in the wealth management and investment management industries, is a pioneer in the space. With plans to celebrate the firm’s 22-year anniversary next month, Ryan George, Docupace’s Chief Marketing Officer, offered some insights into what he sees as the firm’s competitive edge.

“We collectively saved our customers more than two million hours in paperwork processing time, facilitated the opening of more than 2.5 million client accounts and processed more than 16 million work items for customers in just 2023 alone. Establishing our services as an indispensable force multiplier keeps us out of the fray – but we have to maintain that armor every day.”

According to George, Docupace’s API Developer Portal is an excellent example of just how the firm operates.

“It enhances collaboration, accelerates development cycles and fosters a vibrant ecosystem of third-party integrations.”

New Value-Add Solutions For RIA Financial Advisors To Align With End Clients

RIA-affiliated financial advisors are also contending with a surge of increasingly complex client expectations and demands, with an outsized impact on the growing number of wirehouse breakaway advisors who either launch their own RIA or join an existing one.

Former wirehouse advisors trying to appeal to their pre-existing clients are under especially strong pressure to replicate the widest possible array of value-add services that were available at their previous firm.

The absence of such services – especially lending solutions – creates a client need that must be addressed more effectively in a higher interest rate environment than has existed over most of the past 25 years.

This is where UPTIQ’s solutions come into focus. Founded in 2022, the company enables RIA-affiliated financial advisors to connect their clients to a network of lenders to fund their liquidity objectives.

Currently, over 300 RIA firms utilize the UPTIQ platform to fund their client liquidity needs and the firm processes nearly $150 million in loan requests per month.

According to Taylor Adkins, Chief Operating Officer at UPTIQ, “Financial advisors can connect their clients, via the UPTIQ platform, to 60+ lenders who can fund any kind of loan or liquidity need, including personal loans, residential mortgage, securities-backed, aircraft, working capital, commercial and industrial, commercial real estate, corporate, agriculture and more.”

Adkins emphasized that there are no limits to the size of loans placed on the UPTIQ platform.

“Whether a client is looking for a $500 personal loan or a $500 million commercial energy loan, UPTIQ can fulfill virtually any liquidity need.”

Differentiation is vital also. According to Adkins, the UPTIQ platform is superior to options typically available to financial advisors because the company will pre-qualify and match the client to lenders who will actually fund their liquidity need.

What RIA’s Demand And Expect

How do RIAs themselves approach the decision-making process surrounding the selection of third-party solutions providers these days, with so many choices?

Mike Papedis, Managing Partner and Co-Founder of San Diego-based Fusion Financial Partners, a third-party strategic consultancy to the independent RIA space, frequently explores the attributes of wealthtech solutions providers that resonate with RIAs in the process of building out their tech stacks.

“Freedom, flexibility and choice are central themes of the RIA segment. These firms seek optimized operations from an integrated technology ecosystem where components work seamlessly together,” said Papedis. “RIAs demand partnerships that bring unique capabilities, support client-driven customization options and enterprise-level data management.”

Papedis added, “Conversely, RIAs can experience frustration with their current wealthtech installations, primarily because choices were made based on what looked good at the time of the sales demo.”

“What’s the result? Technologies are put in place without the benefit of a comprehensive plan on how systems will all come together, highlighting the gap between ideal technology ecosystems and the reality many RIAs face,” according to Papedis.

How Will Wealthtech Remain Relevant To The RIA Channel?

Where will the economy and the markets land in the balance of 2024? While nobody knows for sure, the future of our industry, at least in broad brush-stroke details, is far less opaque.

On the regulatory front, harmonization between the IBD and RIA segments of wealth management will continue to proceed. For IBDs, which have long faced the brunt of regulatory attention, this might not change the world all that dramatically.

However, for the RIA channel, which has historically been more lightly regulated by comparison, this is probably less welcome news.

At the same time, technology-driven disruptions will also continue. Some of these disruptions, like AI, are potentially far-reaching, but this doesn’t mean it would be wise to overlook the importance of ongoing incremental digital innovations that can produce significant new efficiencies to how we work day to day.

Finally, advisor and client expectations on what constitutes an ideal digitally-enabled service experience continue to rise. This means RIA firms need to assume a much more proactive stance in frequently recurring reviews of their tech stacks and how well they are, or aren’t, working.

For wealthtech solutions providers who are actively filling a strategic void, anticipating mission-critical needs before they arise or providing a set of solutions that more effectively create scale and build efficiencies, growth opportunities should continue to abound.

Andy Kalbaugh is Founder and Managing Partner at Cassique Strategies, a wealth management industry-focused strategic consultancy.