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Portfolio Pathway- A Digital Wealth-Management Platform

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Oct 23, 18 | WealthTech Insights #39 with Dave Miller

Oct 9, 18 | Portfolio Pathway, LLC: A Digital Wealth-management Platform for Financial Advisors

Evolution of the Advisor Platform

Over the past decade or so, we have seen significant change in the RIA software space. New software entrants, new features from existing players, M&A activity… all contributors to the evolving landscape of RIA software. There are more options than ever before… more integrations than ever before… so how did we get here?

Looking back at the beginning of RIA software, there were a couple of players in each specific category, and each player focused solely on their specialty. Portfolio Management Software, was just that. Same with a CRM, planning tools, etc. At the time, these tools created efficiencies while providing value to end clients versus spreadsheets that were previously used. As software providers grew, the RIAs that embraced these tools became more efficient. The downside? Users would have to learn multiple systems, manage installations, and in some cases, manage physical servers. They also soon realized that they would also have to “swivel chair” between systems that did not talk to each other. Did the efficiency gains outweigh these nuances? Probably.

Enter integrations. This concept made much more sense. Why? Because now users could select a product in each category best suited for them and (generally) live in one system… well, kind of. Deep integrations do exist, but for many, it seems to be just enough to advertise the fact that it exists. The idea that users can live in their CRM or Portfolio Management System and see data from all other systems they subscribe to sounds like a dream… and does work to some extent. It may even increase efficiency. But in practice, for example, a user may only be able to see performance numbers in their CRM… and that’s the extent of it. If the user wants to dig into a performance number a bit more, they would likely need to switch over to their Portfolio Management System.

Then there is the whole issue of security. From a vendor’s standpoint, security is becoming an increasing cost to bare. Data sources, like custodians, continue to increase their scrutiny on delivering data to vendors. In some cases, these custodians may not allow receiving vendors to forward certain data to third parties, thus breaking the integration. This increased cost may squeeze some of the smaller providers. Integration buildouts among providers won’t fade away any time soon, as it certainly adds value to certain users. We could see existing integrations become even deeper.

Enter platforms. An alternative to this so called “best of breed,” with a side of integrations, is a true advisor platform. One provider, all your needs easily accessible in one place – CRM, Portfolio Management, Planning, etc. In an effort to expand into other markets, we are seeing more vendors build out, or even acquire other feature sets. At the same time, some users may find the “swivel chair” approach or light integrations less efficient and possibly more expensive than originally thought. While a single platform may not be for everyone, it does allow the user to learn and operate a single system. If designed with robust features while maintaining simple navigation and layout, a platform may be an answer for many.

Then there is the cost. The obvious hard dollar cost for a system is straight forward. But exactly how it is paid is something to consider. For example, advisors pay a fee for their software and manage that as a cost, like their electric bill or computer. It’s a part of managing their business. But platforms that involve investment management features, on top of all the other tools, are essentially baked into the client’s fees. It is almost reminiscent of a soft-dollar-like arrangement.

There is no denying that the RIA software space is constantly evolving. With new players and options entering the mix regularly, things will likely become increasingly complicated when trying to decide how to best fit your needs. Systems themselves will continue to expand potentially, creating additional complexity. In this end, simplicity will be a significant factor to creating an efficient RIA business. Will a well-designed platform with all your needs and features, packaged seamlessly together, invoke that level of simplicity? Seems to be trending that way.