Advisors with at least some technology integration can perform a whole lot better than RIAs with none, according to a report from Aite Group, the Boston-based research and consulting company.

Firms with improved technology integration can potentially double client assets, increase revenue by an average of $100,000 and spend a third less time on operations processes, according to the report, “RIA Productivity and Profitability: Integration Pays,” which was sponsored by Envestnet/Tamarac, the Seattle-based technology service provider and outsourcing firm.

In addition, advisors at firms that have some integration earn approximately 20% more in annual income than do peers at firms that lack integration, the whitepaper states.

Despite these benefits, however, “the current state of technology integration among RIAs is tepid at best,” the report concluded, “evidenced by the more than 30% of RIAs that completely lack integration and the [fact that] only 7% claim to have a deep and meaningful level of integration.”

One reason for those low numbers is the fact that so many RIA firms are small: approximately 70% of RIAs employ less than ten people, according to Aite's report.

Human nature is also a factor, said Alois Pirker, a research director at Aite  and one of the report’s co-authors. “To maintain the status quo is very human,” Pirker said. “People get stuck in a certain way of working and it’s difficult to change. There’s also a cost factor, and the fact that technology integration may appeal to a certain slice of the market that has a focus on asset management and core re-balancing.”

But the 201 RIAs who were surveyed did express interest in increasing technology integration, pegging it as their top budget priority.

Advisors who are considering an investment in integrating their technology with one interface that has many capabilities should begin by doing their due diligence, said Stuart DePina, group president for Envestnet/Tamarac.

“They can’t accept that if someone says the word ‘integration” and they license a piece of software they can turn it on and all their problems will be solved,” DePina said. “They should see what their needs are and talk to other advisors. Most advisors are not IT people, so they should consider hiring a third-party consultant who is familiar with those kinds of tech issues. Their custodians may be able to help them, because the custodians have a vested interest in the RIAs performing better. They’ll be aware of consultants who can analyze multiple vendors and the degree of functionality and support they can provide.”

The cost for Envestnet/Tamarac’s integration suite and outsourced services start at $25,000, DePina said. 


Advisors who have integrated their technology functions are reporting positive results.

Marin Financial Advisors, used as a case study in the Aite white paper, said that its assets under management doubled and the number of households served increased by 60% since it began using Tamarac’s portfolio rebalancing application in 2009. Marin, which is based in Larkspur, Calif. and manages approximately $250 million in assets, later integrated portfolio accounting, a Web portal access for clients and data reconciliation to its platform.

Dave Shore, a principal for Marin, said the integration was useful even though the firm’s investment approach is primarily passive, relying heavily on Dimensional Fund Advisor funds and indexed ETFs.

“We had to have a better system of re-balancing so stuff wouldn’t fall through the cracks,” he said. “We’re finding that we can tax-loss harvest with more precision, we can invest excess cash more easily and we have a tighter control on the re-balancing process. And even with a passive orientation, we still have to deal with concentrated positions of low-basis stock.”

According to Greg Carlson, chief executive and co-founder of Minneapolis-based Carlson Capital Management, which this month reached $1 billion in assets, the firm’s technology investment has shifted from being a lever for growth to becoming “a necessity for existence. Even more importantly [our technology investment] is a requirement for continued growth, that is, the integration of people, processes and platform through the effective use of technology.”

Integrated technology, said Carlson, who is not an Envestnet/Tamarac client, “allows client-facing team members as well as non-client facing members to meet the needs of a growing client base and allows us to scale our business without any drop in client service and connectivity.”

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