This is the ninth installment in a Financial Planning series by Chief Correspondent Tobias Salinger on how to build a successful RIA. See
Out of the many types of companies seeking to work with financial advisors in some way, perhaps none are more numerous than the wealth management technology firms.
The famously comprehensive — or infamously so, at this point, due to the sheer volume of listed companies — "
For advisors in the beginning stages of their careers or launching a firm, the combination of necessity for 21st century consumers accustomed to easy interface, manifold tech needs and vendors eager to pitch their services and scale of spending by the largest companies in the industry explains why the choices can be so important and difficult. In fact, another FP series solely devoted to wealthtech, called "
And that's why experts say advisors should start by figuring out their immediate needs for
That means that some of the most expensive and all-encompassing providers "might be the Lamborghini that you don't need just yet," said Leighann Miko, founder of Los Angeles and Portland, Oregon-based RIA firm
"Advisors have to consider how they plan to grow. The question becomes, will you stay solo, will you build a large team?" Miko said. "That's step one is, what is the actual vision? … I think I lacked that vision a little bit. Some of us as advisors stumble into these bigger teams by accident, and then you grow and you realize, 'Oh, I've got to bring on more support staff, more people to keep up with capacity issues."
The cost, degree that clients will interact with the tech, how one vendor's service works with that of another and whether the collection of them together will enable an advisory practice to grow all figure into the equation, said Andrew Altfest, president of New York-based RIA firm
"You have to look at your strategy, and your strategy needs to be married to your technology," Altfest said. "You have to start with your strategy first."
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Rising tech investments
That focus on the key mission could help alleviate some of confusion and possible fear of competing on some level with the giants of the industry who are leveraging millions of dollars in investments toward technology. For example, LPL Financial revealed
And other large firms are racing to keep up, whether through internal development or M&A deals. Last year, the number of transactions involving wealthtech jumped by a third to 138 deals, according to investment bank and consulting firm
"The wealth management industry has a significant need for improved technology, and there has been a consistently high level of technology adoption across the sector in the past decade," Echelon's 2024 deal report stated. "Due to a decreasing advisor population, an increased client demand for simple and integrated account access and a high level of personalization from the tools they use to invest, financial advisors have been continuously seeking solutions that enhance operational efficiency and meet the latest client demands. This has created great incentives for companies to innovate and has led to supreme demand for wealthtech solutions."
Echelon, which predicted the volume of wealthtech deals to rise further this year, breaks down the field into seven sectors: portfolio management and reporting; financial and retirement planning; risk, compliance and regulation; alternative investment solutions; data and analytics; CRM, marketing and business development; and turnkey asset management platforms and other. The Kitces map uses five general categories of planning, investment management, client engagement, business development and operations, but each of them has several sub-categories such as any number of specialized kinds of planning or eight different vendors that provide client portals.
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Try to keep it simple
At a minimum, advisors will need to consider their choice of custodian and compliance requirements and how they tie into the CRM, portfolio management, trading operations, billing and virtual signature providers, Miko said.
But they must weigh the benefits against the risk of chasing after "the next shiny thing" in a way that is "making life harder by having more systems," she said. "Technology is there to help us, but it can also complicate things."
AI and its data-driven insights carry the power to be "a tremendous catalyst for our business" in terms of saving time, serving the existing base of clients better and connecting with new ones, Altfest said. If a firm has a minimal or nonexistent plan for its adoption of AI, "That in and of itself tells you something," he said.
"We're in an incredible period of what I would call going from tech stack 1.0 to tech stack 2.0," Altfest said. "Those are all great things, but you have to evaluate the tools today for what they are, but also their roadmaps."
