Choosing the right software for a new wealth management firm

By Eric Rocks

Business people reviewing financial data on digital tablet

You’ve put in your time at a large wealth management firm like a wirehouse or bank and now you feel it’s time to hang out your own shingle. If you have a set of loyal customer accounts that you are transitioning, time is of the essence because you’ve got to be ready to conduct business on day one. Fortunately, you are in a great position with pre-sold assets transitioning with you, and the knowledge of what works best for your style of investing and client management. Now, selecting the right software solutions has got to be top of list to ensure your venture is profitable.

Up until now, all software and digital automation has been someone else’s decision. But now you’re in charge and you’re spending your money. How do you set priorities? How do you select a solutions vendor? What should you expect to pay for software and services?

Here are six tips for choosing the right software for your new wealth management firm.

  1. Before Purchasing Software, Showcase Your Credentials

If you are truly starting out as a brand-new venture, you need to establish your presence with a professional looking website and marketing collateral. This will form the cornerstone of your business growth. Here is where you first begin to build confidence among potential clients by showcasing your credentials, experience, and track record. Now that you’ve captured the client’s confidence, you need an onboarding system that allows you to capture relevant contact and demographic information, account assets, positions, investment strategy, goals, special interests, risk tolerance, and of course, receive and record funds to invest.

  1. Quality Communications Build Client Confidence and Retention

Your clients entrust you with their hard-earned assets, so ensuring that their wishes are met in terms of portfolio construction is paramount. Once investment strategies are established, you will need software that can model a portfolio that has the best chance to achieve your clients’ goals. Modeling portfolios and testing alignment to the investor’s policy statement gives the advisor the ability to make the right trades for their clients. You will need a way of executing your trades in the marketplace and a trade-order management capability is paramount. It lets you make trades, purchase investment instruments, and interact with custodians.

All these tools are standard fare for wealth managers. But the key to building a wealth management business is client relationships. The systems that enhance those relationships such as customer relationship management (CRM), performance measurement and reporting, and online client portals are crucial. While clients appreciate professional looking, personalized monthly statements and performance reports, today’s investors, as well as their legal advisors and accountants, demand 24/7 access to the same information in real time. That’s why a robust, secure, online client portal is so important – even when online trading is not an available service.

  1. Start Today By Thinking About Tomorrow

Once you’ve established the kind of systems you’ll need to run your business, how do you go about selecting the vendors that will provide the software solutions and support? A number of software vendors offer excellent point solutions that do one or two major pieces of the wealth management process. However, this “best of breed” approach can be costly and time consuming if you don’t have the staff or budget required to support system integration. You will also find vendors that can provide all or most of the functionality you’ll need starting out. But what happens when your business starts to grow?

  1. Build Business, Not Infrastructure

Ironically, as desktop devices have become exponentially more powerful, their usefulness as anything other than an entry point into wealth management systems has declined at an equal pace. With the exception of some large, institutional wealth management firms that have made huge investments in client server and data security technology, the “go to” deployment model is now software as a service (SaaS). In this model, the software applications and data are hosted by the vendor or at secure data centers that meet regulatory standards for cybersecurity and disaster recovery. The SaaS subscription model takes the onus of support, upgrades, maintenance, and data security off the shoulders of the wealth management firm, so it can concentrate on building the wealth of its clients. You may also opt for a fully-outsourced model in which the vendor runs all the applications for you and provides you and your clients with the all reporting, analysis, performance measurement, and investment accounting.

  1. Future Proof Your Business

As your clients and their investments continue to diversify, you want software systems and vendor expertise that can handle any new market, asset class, or government regulations that you may encounter. That means aligning with a vendor that has a broad customer base and a wide range of integrated technology and expertise. While many startups may feel that the large, established vendors are out of their price range, this is not always the case. In the SaaS delivery model, the vendor can offer a system with deep functionality, but just turn on the features that you currently need. You pay only for what you use. Larger vendors can also spread the cost of development, maintenance, and security over a much larger customer base, allowing them to bring down subscription and support fees to affordable price points.

  1. How Much Will It Cost?

Rule of thumb, a wealth management firm should expect to pay the vendor two basis points or less per year on assets under management (AUM) for all software and services for a top tier platform. That percentage will drop as assets grow, often dropping below one basis point as AUM becomes more substantial. At smaller startups, implementation fees are minimal. Larger operations can expect to pay a one-time fee of one basis point on AUM.

This article was originally published on Investopedia. The SS&C Learning Institute provides online courseware on over 200 subjects of interest to financial services professionals and students. You can learn more here about the SS&C Learning Institute’s curricula for companies, universities, and individuals.

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