The human roadblock to RIA tech transformation: Q&A with In|Vest speaker, Orion CEO Eric Clarke

Register now

Q: What are advisors asking for?

ERIC CLARKE: Advisors are always looking for scale. There are 10,000 baby boomers retiring every day and that is creating a lot of demand for financial advice. Those advisors then are constantly looking to add more scale and serve more households. Integration drives operational efficiency and that is where RIAs are looking to spend to drive growth.

The other important piece is client experience. Advisors want to provide an experience that matches investor expectations. Even though they are dealing with primarily baby boomers, those clients are still using apps like Uber, Netflix and Amazon, so they have high expectations that working with an advisor will be similar or on par not just to competitors in our industry but to experiences outside our industry. Technology investments are looking to provide scale or upgrade the client experience.

It’s important for advisors to realize their brand is based on the perception their customers have when they’re doing business. It’s not based on what an advisor says. In this day and age, the brand isn’t something we can imprint on others through ads. It’s very much a social brand that’s built on human experience.

What advantages does tech provide advisors?

Advice is becoming more and more about immediateness. It’s about the client needs they have over the next 18 to 24 months. Going through the process of creating a 40-year projection of your finances is the equivalent of getting a root canal. It’s something painful but you know it’s going to help you down the road. Advice is becoming much more about short-term corrections that create a different long-term destination. Each contact point along the way is creating the client experience and reinforcing the brand. The firms that have learned to master those touchpoints are the ones that are really growing rapidly.

For example, I know my iPhone is not as capable as a comparable Android phone of the same price. The iPhone is just much easier for me to adapt and utilize. When we talk about client experience it’s about taking the complex and making it very simple for clients. That is a huge opportunity today to create an experience that is not only relevant but digestible. If a client comes into an advisor’s office and is worried about saving for a child’s college education, talking about beta and standard deviation of a portfolio is just not useful and not going to help that client. It’s just a mismatch.

Tech Survey RIA tools of the future, now
Eight tech tools planners can use to transform their practice.

What are some of the dangers for RIAs?

The biggest hurdle for us as an industry is a lack of regulatory oversight. The SEC doing an audit of an advisor on average every eight years is simply not enough. Hopefully, the regulators will get additional funding for the proper amount of coverage. When you have any bad actors, regardless of the specific part of the industry, it can tarnish the reputation severely. If you look at financial services compared to other industries, we basically have the reputation of used car salespeople. We have to take a step back and say, ‘What are we doing to help improve our reputation with the general investing population?’ One of those things may be to have more regular frequency to audits. A lot can happen in an eight-year timeframe that might not be in the best interest to clients.

Where do you stand on the SEC’s Regulation Best Interest proposal?

I’m absolutely for a fiduciary standard. I’m absolutely not for a watered-down fiduciary standard. If regulators are going to water it down then we would be better off where were are now having a clear differentiation of what it means to be a fiduciary for an investor or a broker. There is a difference today. If everyone is required to act in the client’s best interest that’s great, as long as it is not watered down.

What is the biggest roadblock to adopting new tech?

If you really step back and look at it, there are people and processes that are in the way of scale. You have to spend a lot of money and resources on the training aspect to help with the behavior side of the changeover. When you implement new technology you have to start with the users. Once the team buys in, then there has to be new processes in place. Employees have to change workflows if firms are to succeed. People trump the process and the process trumps the tech. Even if firms buy the very best technology, if people aren’t on board and willing to change their processes, then the technology is not going to work. That is something that can prevent firms from getting to the next level.

Ultimately, the missing piece for most firms is getting their people to buy into the process. It’s very much overlooked. You can read myriad reports about the pros and cons of new tech but at the end of the day, how do I go about doing the people side of the transformation. It’s investing in training. Maybe that’s not much of a cost in hard dollars but it takes a lot of time to get people trained. Honestly, people are falling a bit behind what the technology can do today. We are spending more and more money on training clients than I ever thought we would.

For reprint and licensing requests for this article, click here.
RIAs Disruptors Practice management software Client acquisition Client retention Fiduciary standard Amazon In|Vest Conference