True, software vendors themselves may be more enthused than advisors, but the conflagration of information-sharing ventures on RIAs' behalf is no footnote

February 15, 2013 — 6:02 AM UTC by Brooke Southall


Brooke’s Note: I’m pretty unabashed about praising cool things that crop up in the RIA business — whether or not they fit anybody’s idea of purity. T3 is one of those things. Who would have thought five years ago that you could get virtually every key tech company related to RIAs all in one place and pretty much bringing their A games to the event? I like it. One last-minute anecdote I heard was from Frederick Van Den Abbeel of TradePMR Inc. that announced touch-screen trading applications called Fusion. “After we made the announcement and general session, we had about seven Fidelity staff come over to our booth wanting to know how we did it,” he says. Maybe it was eight, five or three, but you get the point.

RIAs — and their proxies in the form of asset custodians — are funneling about $1.3 billion into RIA technology every year, according to an estimate made by Nexus Strategy LLC principal Tim Welsh (granted, gamely on the back of an envelope; but seriously, nobody’s come up with anything better).

The ad hoc calculus goes like this: There are about $2 trillion of total managed assets by RIAs, and these firms on average charge fees of about 1%. That means RIAs have gross combined revenue of about $20 billion. A rule of thumb for how much advisors spend —- or should spend — on technology is 5% of revenue, which equals $1 billion. It’s then estimated that in aggregate, asset custodians may spend and invest another $100 million to $200 million that accrues to RIAs’ benefit. This leads to the loose calculation that as much as $1.3 billion pours into RIA technology annually. Of course, it can be much more than 5% of revenue for a startup: See: How I picked technology — from Black Diamond-in-SSG to Dudamobile — to use in my startup RIA.

Apparently, this amount is sufficient to result in the mustering of the RIA technology troops to the tune of the Technology Tools for Today conference that went down this week in Miami. See: T3 goes big in Miami but Fidelity steals the show with avatar advisors and smart coffee tables.

Where Chihuahuas cavort with Rottweilers

Not only did it boast a lengthy and diverse list of attendees but it also included the kinds of attendees that don’t necessarily love to rub shoulders — such as Fidelity Institutional Wealth Services, Schwab Advisor Services, LPL Financial, TD Ameritrade and Pershing Advisor Solutions LLC. What resulted was something like the Mill Valley, Calif., dog park — where Great Danes sniff Chihuahuas and Rottweilers cavort with poodles, almost satirically oblivious to the superficial differences in their appearance.

By this, I mean you had a Salesforce presence on the one end and a Total Rebalance Expert or HiddenLevers on the other. (Speaking of Salesforce, I heard that the San Francisco company is well and truly ready to engage with the RIA world and may even deign to speak to some of its reporters, ahem. To date when we have written about Salesforce we have reached a big New York-based PR agency known for spinning things like oil spills and the like. and then they decline comment. Franklin Tsung of AppCrown, LLC has ably filled in.)

Junxure chief Greg Friedman declared his efforts on YourSilverBullet, the tech vendor grapevine, obsolete.
Junxure chief Greg Friedman declared his
efforts on YourSilverBullet, the tech vendor
grapevine, obsolete.

But getting back to the conference, you had Fidelity flexing big special-effects muscle and Schwab playing it much lower key but sending in Brian Shenson to show strong support. Schwab’s superstar, Neesha Hathi, was waylaid by flu, but the company held a press event that RIABiz participated in to get this interesting story.

A bigger pie

Welsh says that massive participation in T3 among vendors has reached a critical but little-discussed mass that amounts to the power of conspicuous absence.

“If you’re not there, people say: Why isn’t so and so there. It’s the missing-persons effect,” he says. “People wonder about your viability. Advisors know that if a firm doesn’t succeed, then they need to start over again.”

This seems to indicate two things: (1) the pie is pretty big, and (2) the pie is getting bigger.

The assets meandering to the RIA side as Wall Street continues to self-immolate are not in vaults. Those assets are, in essence, held and advised upon electronically by use of technology. Whereas every Merrill Lynch advisor basically shares one big system, each advisory firm tends to come up with its own.

Not only is basic portfolio-accounting software demanded but, increasingly, a world of customer relationship management software for sales; rebalancing and trading software for labor savings; and financial planning software to add value. New software categories are being invented all the time relating to analytics, account aggregation and risk analysis — vying to do things more and better for advisors. Blueleaf and Riskalyze are two companies that just came to our attention. See: How Blueleaf sees itself taming the RIA’s two betes noire — and how it is being challenged on that.

The clustering gene

If, as the Nexus Strategy estimates suggest, revenue is roughly tied to RIA asset growth, then software sales are tied to a rich area of growth — aside from the growth created by a greater variety of services.

I also happen to believe that there is a clustering gene that attaches itself to the one that makes software code interesting and knowable to tech geeks. I don’t think it’s a coincidence that technologists — like limpets on rocks — are found in such proximity in places like Silicon Valley, Waltham, Mass., or North Carolina’s Research Triangle. As small companies, incubators house geek startups like jail-range chickens. See: Top 12 crucial technology happenings affecting RIAs in 2012, Part 2.

My one fear for T3 is that it might lose its dog-park quirkiness. Could the Salesforces and TD Ameritrades pay-for-play their way to total dominance of the event to the suppression of the small and bleeding-edge crowd? Could the big guys decide that the event is too mom-and-pop for their tastes — robbing it of some of its wow factor? Could Joel Bruckenstein start booking the kinds of A-level conference venues that jack up everyone’s cost and make us forget that the RIA business is still, in essence, an aspirational business and not a laurel-resting one? (For now it appears that we’re safe on the latter concern. The Anaheim Hilton. booked for T3 2014, is an aging matriarch from all reports. See: What Messrs. Bruckenstein, Drucker and Veres cooked up in a Chicago airport hotel. (Incidentally, I attended the T3 conference in San Diego a few years ago at a swanky LaJolla venue. Bruckenstein told me not to get used to it, as he had managed to book it at a rock-bottom price during the 2008-09 mini-Depression.)

Advisors gravy?

The biggest knock on T3 is that it doesn’t attract advisors as effectively as it attracts vendors. But certainly I’ve heard people also say that, still and all, they come away with nice little prospect lists from the event. I happened to speak to David Miller, founder of PortfolioPathway, when he was at T3 this year, and he said he was happy with the number of prospects he met. People also say that having any advisors there can be viewed as gravy, because it is a worthy B-to-B event unto itself.

One sign that this is true is the recent dissolution of YourSilverBullet by Greg Friedman. It was originally formed to get isolated RIA technology vendors to talk to each other. But now that technology socialization is spreading like Linkedin endorsements, he’s declaring his efforts obsolete. He’s a little busy, too, running an RIA and Junxure, perhaps the biggest CRM competitor to Salesforce. See: Greg Friedman is set to finally bring Junxure to the cloud and beat back the Salesforce-ification of the industry.

(A previous version of this article was off a decimal point in the calculation made in the first few paragraphs, a mistake we were saved from by the graces of an alert Morningstar employee, Kartik, who commented below.)

Mentioned in this article:

Nexus Strategy
Consulting Firm
Top Executive: Timothy D. Welsh

Technology Tools for Today
Consulting Firm
Top Executive: David J. Drucker

Asset Custodian
Top Executive: Robb Baldwin

CRM Software
Top Executive: Marc Benioff

LPL Financial
Asset Custodian
Top Executive: Bill Morrissey

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

AppCrown, LLC
Outsourcer, CRM Software, Tech: Other
Top Executive: Ted Tsung

CRM Software
Top Executive: Greg Friedman

Share your thoughts and opinions with the author or other readers.


Mike Byrnes said:

February 15, 2013 — 4:50 PM UTC

If “RIAs have gross combined revenue of about $2 billion” and they need to effectively use technology to be successful in the future, why don’t they attend T3 in higher numbers? Are they getting the same access to these vendors in other ways (e.g. their custodian’s conferences, etc.)

It seems there is value in having a vendor-association kind of conference, but the true value is when the end clients (the advisory practices) are at an event like T3 to plan and make purchase decisions.

Mike Byrnes, President of Byrnes Consulting, LLC,

PS Tweeted this article out @ByrnesConsultin


Kartik said:

February 15, 2013 — 5:46 PM UTC

Isn’t 1% of $2 trillion = $20 billion, not $2 billion?


Elmer Rich III said:

February 15, 2013 — 5:50 PM UTC

Good so Brooke is a tech weenie, and that is said with all respect. lol If there are ANY tech solutions to financial services problems — we have to have them. Stat So yes, we need the best tech.

But as the money flows show, most tech is supply vs demand driven. Like all conferences have become. If there is no real demand – advisors and the industry really do not have the time to waste.

Also, the history of any tech is that it plateaus. How many more “advisor” solutions is there a market for. Certainly, Fidelity has more money than god and will keep pushing tech.

Engineers or all sorts always preach the greatest new engineered thing. Making stuff is easy. Finding real demand, that is growing — is real hard. Generally, it’s not a “thing” that makes you money but processes — involving real people acting in some way.

The other problem with tech is the instant commidifiication. Every advisor has some version of CRM, or the same and uses the same lists and contact tactics. Because financial services is so heavily regulated it is a very conservative business where “following” is the main business model. And that makes sense.

In marketing and sale, we have only seen the tech spoil CRM tactics. Client hate being “salesforced.”

By definition, tech companies have opposite incentives from their clients. They want to sell a highly scaled product with as little customization as possible to a whole lot of people. Clients are best to avoid customer-facing commodity solutions.

So it’s a bit hard to imagine what kind of joint problem analysis and solving goes on at these junkets — at old hotels! lol Of course, the conference sponsor always makes money.


Elmer Rich III said:

February 15, 2013 — 5:55 PM UTC

Who’s going to make a tech buying decision from a conference experience? In a run down hotel? Just asking.


Brooke Southall said:

February 15, 2013 — 6:09 PM UTC


My goodness. This is why I’m a journalist and not a stock analyst. I reworked the numbers based on your alert comment. Needless to say, it’s a happy error and rather surprising that nobody here or anyone else caught it.

thank you,



Kartik Srinivasan said:

February 15, 2013 — 6:21 PM UTC

@ Brooke. No worries. I had to triple check my math to make sure I wasn’t missing something. I work at Morningstar and since we are a big recipient of the RIA technology spend, I am happy to see this number go way up!


Stephen Winks said:

February 15, 2013 — 8:26 PM UTC

The reason why these conferences are not well attended is advisors and brokers are not technologist, not should they be. It is like a physician having to build a heart and lung machine before they can practice medicine.

Brokers and advisors should require large scale instituionalized support for expert fiduciary standing. Unfortunately, the advisor must make complex suboptimal incremental solutions which rarely come close to supporting expert counsel. And because of the disjointed approach to technology, systems are outrageously expensive and not very effective. This is why the advisory industry is a cottage industry—there is no scale and a uniformly high standard is contraversial. The advice resulting today is unauthenticated, magnifying the risk if one acknowledges fiduciary status, it not easy to execute, and kills advisor margins rather than optimizing them.

The advisory industry needs to find a way to make expert advice safe, scalable, easy to execute and manage as a high margin business at the advisor level. This is not only possible but easy to achieve—it just requires a comprehensive approach that will outdate incremental solutions.. We just have a lot of free agents running around expecting premium pricing for small incremental contributions to a comprehensive solution.

This is how the free market works and almost guarantees that none of these incremental solutions will survive economically unless thay have a low cost, scalable, comprehensive approach to expert advisory services with an audit path and third party expert opinion letters to prove it. This is transformation innovation and will render commission sales obsolete because of its high cost, absense of accountability and on going responsibility for recommendations, as its product focus precludes responsiveness to fiduciary duty and the individual needs of the investor.



Bubba said:

February 20, 2013 — 3:06 PM UTC

I agree that the only reason anyone goes to T3 is because you feel like you have to be there or you will be missed. In the same breath i have to say that it is a shame that no one gets any more out of T3 than to see an be seen. I have talked to vendors and they confim this and they see it as a wast of time. THE BIGGER POINT HERE IS THAT ONCE VENDORS REALIZE THE LACK OF BENEFIT AND THE SCALE STARTS TO TIP THE OTHER WAY THE BOTTOM WILL FALL OUT VERY QUICKLY. IT IS LIKE A LAME PARTY THAT EVERYONE WANTS TO BE AT BECAUSE THE COOL KIDS ARE THERE. ONCE A FEW START TO LEAVE THEY ALL RUN FOR THE EXITS. Sad but true.


Elmer Rich III said:

February 20, 2013 — 3:19 PM UTC

I’s a shame, but since the recession ’08, conferences have shifted to total seller-focus. The value for prospects then drops, driving away buyers, lowering the value to sellers. A vicious and not virtuous cycle.


Stephen Winks said:

February 20, 2013 — 4:01 PM UTC

Bubba (love the name),

Thechnology os the key to innovation, the problems are (a) cost and not be streamlined and (b) simplicity can not be achieved without a comprehensive fiduciary solution, yet (d) brokers are not technologist nor are (e) advice business unit managers as (f) their employing broker/dealer neither acknowledges nor supports that berokers render advice.

Essentially, there is no one to pull the trigger on innovation.

The SEC’s solution and the solution precedent established in Europe, is it is the brokerage industry must support fiduciary standing in the best interest of the investing public. The entire financial services industry is clinging to a 1940’s view of the world.

Modernity is being thwarted by the US brokerage industry even in the face of statutory imperative. This is untenable and must be resolved without compromise in the best interest of the investing public.



Stephen Winks said:

February 20, 2013 — 4:05 PM UTC

Bubba (love the name),

Thechnology os the key to innovation, the problems are (a) cost can not be streamlined and (b) simplicity can not be achieved without a comprehensive fiduciary solution, yet (d) brokers are not technologist nor are (e) advice business unit managers as (f) their employing broker/dealer neither acknowledges nor supports that berokers render advice.

Essentially, there is no one to pull the trigger on innovation.

The SEC’s solution and the solution precedent established in Europe, is the brokerage industry must support fiduciary standing in the best interest of the investing public. The entire financial services industry is clinging to a 1940’s view of the world.

Modernity is being thwarted by the US brokerage industry even in the face of statutory imperative. This is untenable and must be resolved without compromise in the best interest of the investing public.



Brooke Southall said:

February 20, 2013 — 4:17 PM UTC


The beauty of the free enterprise system is that people can vote with their feet and dollars. Right now it’s a landslide for T3.

I presume from your anonymous posting and large caps that somehow you feel like the loser in this election?



Elmer Rich III said:

February 20, 2013 — 4:55 PM UTC

Brooke’s point is right on and the bottom line — there is growing demand.

We were with a new RIA client yesterday, and building a marketing plan. I don’t see radically new and better tech solutions helping that work but always looking for anything that can help. We are actually finding some “old school” tech to be the most productive.


Stephen Winks said:

February 20, 2013 — 10:01 PM UTC

Isn’t the point that conventional brokerage support of transactions and the avoidance of advisory services support have already rendered obsolete the old brokerage format of not being accountable or responsible for recommendations.

Aren’t we just talking about how effective advisory services support is, its cost, its scalability and its ease of use in support a high margin advisory services practice in the consumer’s best interest. These goals are achievable and are within our grasp regardless whether the brokerage format likes it or not. We are simply geting more scientific as Edwards Deming suggested—“if you can’t describe what you are doing in terms of process, then you don’t know what you are doing.”

The world brokers and advisors know is about to change in profound ways all based on process and enabling technology. Old school solutions only work if you still have a 1940s mind set.

There is nothing wrong with T3, it is just that the solutions advanced are incremental and are not developed in terms of an overarching expert authenticated prudent investment process that simplifies complexity, streamlines cost and establishes professional standing.



Brooke Southall said:

February 20, 2013 — 11:08 PM UTC


I recall from Economics 101 that the triumph of capitalism is not its ability to create things merely at 'scale.’ Where it wins out over a centralized economy is in its ability to provide a vast array of differentiated products. To a central planner, the idea that you need 100,000 differnet kinds of blue jeans seems silly…but not to the consumer.

RIAs intuitively understand this. They find technologies that suit their abilities and that serve their varied clienteles. You can call this incremental. But I think that if a centralized system were so great that it might have happened by now. Perhaps institutions are a different animal with a narrower, more homogeneous set of objectives and goals. To constantly say that RIAs should just act like institutions may miss a larger point.

The sound of “overarching expert authenticated prudent investment process that simplifies complexity, streamlines cost and establishes professional standing” sounds good but what does it know about my plans to sail around the world?



Elmer Rich III said:

February 20, 2013 — 11:20 PM UTC

Good point. It is a principal of life to expand into different niches and habitats. Business seems the same. Also, as Brooke suggests, the more different variations the more money for everyone.

The RIA biz is very new and maturing rapidly. Now it faces the brand new challenge of managing DC retirement assets. More challenges lie ahead.

RIABiz does a great job of chronicling the dynamics of this proliferating business. Fun to participate in and watch but also a little nerve wracking.

The idea that one, or even ten, processes and models can handle the complexity is a quaint notion.

Abstract principals are fine but implementation is reality. Never as simple as principals.


Brooke Southall said:

February 20, 2013 — 11:24 PM UTC


I didn’t say “the more money for everyone”. If one big provider can do it, then so be it. I just don’t think that works any more than having one big advisory firm.

I also think you mean principles, not principals.

I’ll be quiet now.



Stephen Winks said:

February 21, 2013 — 1:30 AM UTC


There will surely be ten or more vendors who make advice safe,scalable, easy to execute and manage. The question then becomes how good the solutions are and their price.

Given presently large scale institutionalized approach to expert fiduciary standing is not available to brokers or advisors, by definition the first comprehensive solution which simplifies expert fiduciary standing will become the reference point that makes advice safe, scalable, easy to execute and manage at a far lower cost than a packaged product (limited by prospectus so it can never be client centric). It is large scale institutional support for expert fiduciary standing with the means to prove it.

If I understand your comment correctly, it seems your unfamilarity with advisory services makes you wonder if such an expert authenticated prudent investment process is possible or even desirable?

Some pretty important institutions not only think it is possible but are sufficiently intrigued to (a)bring professional standing within the reach of their advisors (b) greatly enhance their margins while© driving an unoprecedented level of investment and admionistrative counsel (d) streamlining cost and (e) tripling their earnings multiple.

Fiduciary standing is not an abstract principle as it is now required by statute and clearly defined by 800 years of common law and leading expert practitioners.

You either do not understand advisory sevices or have never been required to formulate and definitively defend expert services.

Fiduciary standing is not conjecture as very specific duties are required, over 360 at last count, which must be performed in real time for an unlimited number of accounts—the perfect application for technology.

You might want to give more serious thought to expert professional standing and how it can be facilitated as a high margin business as it doesn’t seem you have ever thought in those terms.
If you had, you would not be shooting from the hip as usual.



Joel Bruckenstein said:

February 21, 2013 — 3:19 PM UTC

Don’t worry Brooke,

T3 has always made an effort to stay affordable to all. We charge some of the lowest attendee prices in the industry for a three day national event, and out exhibitor prices are very competitive, and they will remain so. We realize that part of the allure of T3 is the opportunity to interact with new, emerging technology firms that wish to serve advisors. We will continue to provide such firms with an opportunity to participate. It is good for our attendees, it is good for the industry, and it is good for T3.

Joel Bruckenstein
Technology Tools for Today (T3) Conference

PS-It has been a few years since we last saw you at T3. Hope to see you Feb. 10-12, 2014 in Anaheim, CA for our 9th Annual Conference


Stephen Winks said:

February 21, 2013 — 4:05 PM UTC


Incrementalism is like a physican treating a symptom rather than curing a disease.

Affordability, the elasticiiy of demand based on price-in economic terms, is the driver of transformational innovation and requires scale as Henry Ford pointed out in bringing automobiles within reach of everyone.

The question of scale answers whether innovation is suficently affordable to be transformational thus connecting process, technology, work flow management, conflict management in very important ways.

If advisory services is to ever embrace modernity and move beyond 1940, it must embrace an expert authenticated prudent investment process (asset/liability study, investment policy, portfolio construction , monitoring and management) based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters which inform us of our fiduciary duties.

Your interest in sailing around the world is central to investment policy which defines the client in very intricate terms and accordingly sets forth investment strategy unpon which portfolio construction is based..



Elmer Rich III said:

February 21, 2013 — 4:16 PM UTC

The fact of the matter is that in every aspect of the business, and you see this on the retirement plan side as well, more people are making more money.

We have been talking about the tech side here but even the conference people alone are making a lot more money.

Is there value added? Well, that’s the thing about demand – people voting with their feet can different from value. But sponsoring a conference is like putting up a circus tent. You put it up and sell tickets, that’s all.

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