Three years ago managers at Main Street Financial Management had a problem. The Chicago-based registered investment adviser’s clients had come to expect a level of technological sophistication from their financial custodians, and when it came to communicating with their advisers, something was missing.
“We were having trouble getting them to call us back and meet with us,” says Main Street CEO David Lyon.
The firm’s clients, whose account size averages around $11 million, wanted a more collaborative relationship and on-demand access to their investments and advisers, not another five-page cash flow analysis. Main Street put a lot of work into reports like that — the firm’s service model is focused on taking a high-touch concierge approach — but clients found the process to be a drag.
That’s never the kind of feedback an adviser wants to hear, but after Main Street conducted some research, Lyon recognized it as an industry-wide problem and devised a solution: a web application called Oranj aimed at increasing collaboration and accessibility.
Though custodians such as Omaha, Nebraska–based TD Ameritrade and San Francisco–based Charles Schwab Corp. had long been providing high-tech access to information on the go, what Main Street’s clients were really asking for — a combination of real-time investment information plus quick, unlimited access to an adviser — wasn’t widely available. Although much of the financial industry had been capitalizing on the fintech start-up culture for years, creating web and mobile apps to make life easier for everyone from hedge fund traders to individuals managing their checking accounts, RIAs had become complacent.
“People were just living their lives differently — using Amazon, using mobile banking, using all of these things to manage their lives — and our industry was just a decade behind,” says Lyon.
That’s beginning to change. Taking cues from clients, personal financial management tools like Mint and robo-advisers like Betterment, RIAs and third-party developers are launching a new wave of financial management tools aimed at increasing accessibility and collaboration and improving client perception of their process.
“The adoption of technology in our space takes a long time,” says Rishi Nangalia, CEO of New York–based REDI Holdings, maker of the REDIPlus trade management platform. “Getting going on something like Mint.com where you’re using it manage cash flow and bill payment is one thing, but when you’re talking about an RIA selecting a tech platform to manage their entire business, that’s a whole other thing, as the due diligence process is understandably much more robust.”
This hesitancy, plus the amount of time and money it takes to create new technology, is why many RIAs have opted to rely on their custodians or third-party developers such as Boston-based Blueleaf Wealth and San Francisco–based Advent Software for portfolio-monitoring services. Other new offerings include Dallas-based GuardVest, which allows investors to compare their holdings, risk profiles and fees against industry averages and gives advisers a platform to create sample portfolios as a way of luring new clients.
The rapid growth in demand from clients is pushing some independent advisers to innovate on their own. For Main Street, that meant spending much of 2013 teaming up with third-party developers to create Oranj, a web application that Lyon describes as a “collaborative personal financial management tool.” Its function is similar to that of Mint, which allows individuals to track their accounts and spending online and on mobile devices, but has the additional capability of allowing advisers to communicate with clients and keep track as they create and update financial goals, weigh those goals by importance and make transactions using connected accounts. The app is integrated with online real estate database Zillow, so clients can also look at their property holdings. But the key feature is interaction with advisers: Investors can open or transfer accounts directly to managers or advisers, and both parties can send direct messages and schedule meetings through the app. The hope, Lyon says, is that when those meetings take place, the conversations now will be more meaningful.
It is not only existing clients’ business that is at stake. There are only so many multimillion-dollar accounts to manage, but a much bigger client pool is forming among the mass affluent (those with $100,000 to $1 million in assets). Up to 60 percent of the Gen X and baby boomer members of that demographic aren’t working with a financial adviser, according to a 2014 study conducted by Boston-based Fidelity Investments. Lyon calls this “staggering” and says that for independent advisers, it’s a massive opportunity that can’t be exploited without embracing technological collaboration.
The opportunity hasn’t gone unnoticed. After Main Street integrated Oranj with its custodian TD Ameritrade, other TD clients recognized the value of the product and the cost of creating a similar one on their own. The requests for licensing — from RIAs within TD’s client pool and outside — began to pour in.
“We didn’t intend to get into the fintech-licensing space,” Lyon says. But what started as a private solution has become a sensation, with more than 180 other firms opting to license the product in the past 12 months, bringing the total to 227.
Judging by the popularity of Oranj and the demand for other products like GuardVest, investors are encouraged by RIAs’ response to their wake-up call. In a world of instant online browsing, shopping and banking, it’s clear to all parties that the old model is nearly obsolete.
“We’re trying to take away the static and rigid process that I think people have become accustomed to,” Lyon says. “Now the conversations are about what clients want to talk about, not just what we want to tell them.”
