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17 July 2019

High-Growth RIA Firms are Power Users of Technology

Surprise: the fastest growing RIA firms are less focused on profit margins and client referrals, and more focused on technology training and integration.

That’s one of the eye-opening findings of the latest Dimensional Fund Advisors’ RIA Benchmarking Study, as reported in (May 30, 2019). The study compared firms in the highest quartile of growth rates against those in the lowest. The key differentiator is not the actual technology they use – both high- and low-growth firms use comparable CRM, portfolio management and financial planning tools, according to the study. Rather, what distinguishes high-growth firms is how they use technology, choosing to make it central to their business and training their people to take full advantage of the functionality.

Higher-growth firms also focus more time and resources on integrating the technologies they use to optimize staff performance and efficiency.  Additionally, they tend to hire more client-facing employees and pay them well. And through the smart use of technology, these firms have been able to reduce the time advisors spend on non-essential functions so they can spend more time working with clients.

These findings track with feedback we receive from our Black Diamond® clients, supporting the case we have been making for a long time: technology is not simply about increasing operational efficiency, but about giving wealth management firms a strategic and competitive advantage. Successful firms have harnessed the power of integrated technology to deliver a differentiating experience.

Because of this, we’ve made integration one of the core tenets of the Black Diamond Wealth Platform. Key features such as initializing online account opening through major custodians, account aggregation within our client portal, a robust, built-in rebalancer application, deep, 2-way workflows with core systems like CRM & financial planning, and at-a-glance portfolio risk analytics within both the advisor and client dashboards, are just some of the ways Black Diamond unifies technologies.

Another characteristic high-growth firms have in common, according to the study, is that they diversify their channels of business. If there is any lingering doubt that both a 24/7 client portal and mobile access are essential to a modern advisory practice, this finding should help put it to rest.

The DFA study also underscores an important issue confronting advisory firms today: as much as wealth managers are competing for clients, they are also competing for talent. That means equipping advisors and client service teams with easy to use technology tools that enable them to be more effective and productive in their roles. Today’s more tech-savvy talent pool is likely to gravitate to firms that make leading-edge technology a key part of their proposition. In the DFA benchmarking study, high-growth firms had a higher rate of employee-generated referrals than lower-growth firms, which the study attributes to those firms’ focus on creating a rewarding client experience.

Clearly, technology has gone beyond its supporting role in growth and become a true enabler. A deeply integrated technology stack, in the hands of employees who are well-trained in its capabilities, can propel an RIA business into the ranks of the fastest-growing firms.

To hear from a number of firms who are leveraging all that Black Diamond has to offer visit