News, Vision & Voice for the Advisory Community


How vendors fail RIAs -- and themselves in the bargain -- by insulting RIA intelligence

Anything with a whiff of closed architecture, overcharging, inauthenticity, opacity or idiocy masquerading as information is a long-term credibility corrosive

Wednesday, December 9, 2015 – 12:42 AM by Brooke Southall
no description available
Brooke Southall: RIA vendors are selling the wrong product, selling it in the wrong spirit or marketing it in the wrong way.

Brooke’s Note: In the press releases I receive every day I’m finding it harder and harder to distinguish between the ones that come from Wall Street from the ones that come from the RIA realm. Same goes for some of the ADVs. It sends a chill down my spine. It reminds me of the kids I knew in high school who wore Grateful Dead T-shirts and believed in world peace who now drive SUVs, tasseled loafer to the gas pedal, motoring to the country club. Once you grow up, conventional wisdom goes, the time for creativity, ideals and minimalism recedes into the rear-view mirror as you grab to get yours and wrap it up in as many layers of security as you can. See: What cheap lessons Donald Trump and Bernie Sanders are teaching RIAs about the dangers of trying to institutionalize their practices. The builders of the Wall Street advice machine blew it and left us with a terrible system and an even worse ethos. The RIA movement — a second chance to do it right — now calls its own shots. As such, it is at a crossroads: It can use that power to protect its gains and growth rate Wall Street style. Or it can adopt a Google mentality of being a rebel that carries a big, benevolent stick. RIAs know the difference and If RIA vendors can’t figure out how to serve them, RIAs will find ways to do it all themselves. See: How RIAs are becoming as complacent as wirehouses — and what it’ll take to snap out of it.

RIAs are the future of financial advice.

These days, you won’t find a lot of people to argue with this proposition, which is based on the premise that advice is a process, not a product; delivered for a fee and in the context of a plan — not in the context of absolute returns — in a humane, transparent way with no “gotchas” in the small print. See: What exactly is an RIA?.

RIAs get this and are widening their lead in the marketplace every day as a consequence. See: Page One Wall Street Journal article is a 'home run’ for the RIA industry.

The group that continues to refuse — deliberately, if not willfully — to get it is those providers of picks and shovels to RIAs — vendors. Either they are selling the wrong product, selling it in the wrong spirit or marketing it in the wrong way.

Vendor Newspeak

Many of the sellers of investments to RIAs insist on insulting RIAs’ intelligence with their dog’s dinner of commissions, fees and poor transparency and a sales process that makes the RIA wonder if the company rep stepped in from Mars — or, worse yet, Wall Street. See: The Fiduciary Debate: Getting past the vested interests.

Software firms for RIAs are little better with CRM providers that call investors sales prospects and performance reporters with no ability to give values of many assets or sufficient information about assets held away. Then there’s planning software that doesn’t produce a plan for any client whose life diverges from a mythical linear path. See: Why Commonwealth Financial dumped Microsoft CRM and where the decision’s go-it-alone hazards lie.

Not to mention RIA custodians who suck up fees using crude banking methods of interest margin and revenue kickbacks with mutual fund providers while keeping such sausage innards out of the customers’ sight. Custodians call their technology programs open architecture when they are closed and they ignore the existence of assets at other custodians. They throw wrenches into the well-oiled RIA process by going out of their way not to create a web of coopetition with other custodians. Yet they seem a little too cozy with pricing. See: Custodians defend their records in having RIA backs in battles for the fiduciary standard and against FINRA takeover.

Symptomatic of the clunky disconnect between RIAs and service providers is the jargon vendors toss around — platform, tools, seamless, suite, integrated, customized, outside-the-box and disruptive — with a numbing persistence. See: The 10 essential qualities an advisor must possess to become an 'ethotic’ leader in these days of roiling markets.

Clients last

Besides the annoyance factor, this assault on the senses and brain cells has a deeper, more pernicious effect on the future of an enterprise as promising as the RIA business. It represents the bad old days when wirehouse stockbrokers and financial advisors were almost synonymous because those brokers “advised” most of the assets — at least ones held by high-net-worth individuals. See: How one boomer put faith in stockbrokers, trusted more in himself and retired rich enough.

It was a broken process that made clients into pigeons using inappropriate products and ill-conceived asset allocations at exorbitant, hidden prices.

Everybody got paid. Putting the client first could literally get you fired. See: An X-ray of one affluent, educated and sophisticated investor’s portfolio shows how it was chewed up by fees.

Messenger is the message

All of this perverse vendor activity is labeled as marketing. It isn’t marketing. It is a perversion of the word.

“Marketing is about communicating the value of a product, service or brand to customers or consumers for the purpose of promoting or selling that product, service, or brand,” according to Wikipedia’s definition. The two key words here are “communicating” and “value.” RIAs are the best communicators in the financial services business. After all, they have to explain investing, goals and economics to 85-year-old widows and 16-year-old scions. See: A conversation between a wirehouse advisor and a senior citizen who seeks trust.

RIAs are singularly successful in this endeavor because what they explain and what they are do are so well-aligned. Granted, clients don’t always understand what RIAs — who, in fairness are no strangers to jargon — are saying. But they do understand that they are getting the truth and engaging in an authentic process.

“From a societal point of view, marketing provides the link between a society’s material requirements and its economic patterns of response,” the Wikipedia entry continues. “Marketing satisfies these needs and wants through the development of exchange processes and the building of long-term relationships.”


'A’-listers and how they got there

When marketing is broken, the whole process is broken. This broken link is something that RIAs understand and that Americans — with the Department of Labor as their most vocal proxy — increasingly understand. See: Obfuscation Nation: 401(k) fee disclosure laws still don’t give the true cost of plans and may well cause more agita for would-be retirees.

RIA vendors frequently tell us that they seek to win their “fair share” of RIA assets. Talk about a lowest-common-denominator way of looking at things!

Companies need to strive for more than their fair share for progress to occur, as exemplified by companies that have won more than their fair share in the RIA business during the past five years, firms like Dimensional Fund Advisors, Vanguard Group, TD Ameritrade Institutional, Orion Advisor Services LLC, Jemstep, Tamarac, MarketCounsel and Dynasty Financial Partners.

These companies do not walk on water, just as other unnamed companies don’t all troll the ocean floor in cement boots. Not at all. But the companies above have grown big-time as providers to RIAs in large part by respecting their intelligence.

Examples include DFA’s declining to sell ETFs, Vanguard’s willingness to drop prices unbidden, TD Ameritrade’s willingness to create an open API in its Veo technology and fiduciary advocacy. See: Dimensional Fund Advisors to launch 13 target date funds but can its RIA 'cult’ deliver success?.

Both Orion and Tamarac took RIAs to the cloud and created integrations with third-party vendors that RIAs may not necessarily have known they needed. Dynasty has succeeded by using a judicious admixture of proprietary and nonproprietary technology. MarketCounsel is evolving to provide business consulting because that is what RIAs really need when they ask for compliance help. The Englewood, N.J.-based firm also goes out of its way by hosting its own conferences to share its intelligence. Jemstep seems to be gaining traction by making the RIA better in humble fashion. See: Orion and Jemstep form first big marriage of non-robo and robo software — at advisor behest — to create RIA e-commerce.

Forward march

Philip Palaveev, CEO of The Ensemble Practice, famously said that company culture is defined by what its employees do when nobody is looking. See: Palaveev’s advice for 2012: Risk being a bit boring and focus on the organic growth of your practice.

I’d fine-tune that definition: It’s what you do when you can presume that 98% of your customers will be none-the-wiser if you pull a fast one, cut a corner, shade the truth or redefine a term like “open architecture.”

Why live in a post-Wall Street culture and market according to its dictates? Truly, what vendors in the RIA business gain by using smarts-insulting “marketing” practices amount to pennies in front of a bulldozer of change to a better paradigm and a much bigger market. The RIA business can be counted at about $3.5 trillion of AUM, a fraction of a wealth-management pie that crests at about $21 trillion. See: How many RIAs are there? No, seriously, how many?.

What marketers need to realize is that RIAs represent closer to 80% of net new assets. See: McKinsey: Robo-advisors have a cloudy future but 'virtual advice’ delivered by 24-hour super-centers with experts and algorithms will win the day.

Marketing to RIAs is an extremely complex task but the modern phenomenon relies on some time-tested principles: Respect their intelligence and start seeing the big picture. In other words, treat RIAs as partners and understand that partners see through you like a plate-glass window.

That’ll take patience, putting aside the gimmicks and fluff, and substituting vegetables for the cotton candy. But the rewards will be there. It takes one to know one. RIAs know what it means to put clients first. They’ll see it in you but only if it’s there.

Related Moves

Envestnet nabs Dani Fava to cross-pollinate semi-autonomous units and reap 'financial wellness' as the end product

The Chicago outsourcer has a massive, partially disconnected arsenal of products that CEO Bill Crager is rationalizing into 'wellness' with yet another new unit.

July 23, 2020 – 1:42 AM

Dimensional Fund Advisors, long the flagship of factor investing, struggles to chart a course as a nimble rival and big foot competitors cut into its market--and exploit its slow move to ETFs

Vanguard, BlackRock and Avantis rattle a complacent Dimensional Fund Advisors with fee cuts and ETF roll outs based on 'smart beta.'

August 9, 2022 – 1:57 AM

Noreen Beaman steps down as president of Orion Advisor Solutions after Brinker migrates to Orion software and enterprise deals 'prove out'

The former Brinker CEO oversaw an 18-month transition of her then $26-billion TAMP and will remain as vice chair of the company after 'mutual' decision on role changes.

February 10, 2022 – 2:22 AM

Brad Shepard unexpectedly resigns from Orion Advisor Services after 10 months, and his chief strategy officer position will remain vacant, the company says

The Nashville, Tenn. executive came aboard to create a 'go-to-marketing strategy' for Brinker, HiddenLevers and legacy units but gave his notice this week.

January 7, 2022 – 11:40 PM

See more related moves

Mentioned in this article:

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

The Ensemble Practice LLC
Consulting Firm
Top Executive: Philip Palaveev

Envestnet | Tamarac
Portfolio Management System, CRM Software, Trading/Rebalancing
Top Executive: Stuart DePina

Pete Giza

Pete Giza

December 12, 2015 — 12:58 AM

Stephen Winks,

The “huh?” was directed at the article, not your comments.


brooke southall

brooke southall

December 10, 2015 — 4:49 AM


Excellent thoughts on DFA.

My point was not that Hancock ETFs with DFA are bad. They are likely good for the reasons you point out.

But I think DFA could have had a field day in the ETF business i.e. lots of assets, had it chosen to go that route on its own. It chose not to. I picked that out as a case of it doing the opposite of what Wall Street would have done.

Still, I get your further point that DFA’s actions are its own form of self-interested marketing, though 'ploy’ is a bit strong. That would be a good topic for discussion!

I was expecting when I callously attacked a mostly good industry and praised a few less-than-perfect companies, and left out other deserving ones [for lack of space and brainpower] that I’d get a few good chidings.

Yes, I’ve always respected your approach to PR, too.



Paul Damon

Paul Damon

December 10, 2015 — 3:56 AM

Point taken, Brooke. My soul would certainly die a little each morning at 5:30am PT when the deluge of press releases that you likely receive begins. So many “innovative solutions” to sift through. I certainly hope to keep my clients consistently in the 'communicating and value camp’, be the product and/or message geared toward the advisory or institutional side.

Regarding DFA and ETFs though, they are effectively selling ETFs now via the deal with John Hancock, right?


And RIAs are a/the primary buyer of ETFs, known for their typically lower costs and greater transparency, so why the negative connotation regarding getting into the ETF game other than the firm’s heritage. Their exclusivity, which I’ve been fascinated by, could be viewed as quite a marketing ploy in itself (maybe not insulting insomuch as custodians’ penchant for opacity); from what I read and hear, it seems DFA-approved RIAs allocate the (vast) majority of their client portfolios to Austin. Such loyalty is the golden ticket for any asset manager. Perhaps DFA being more accessible via the new factor index-linked subadvised ETFs is actually a win for RIAs — either for those intelligent enough advisors who can’t get down to Austin for the weekend because they’re too busy with soccer duty and/or who want to maintain more of an open architecture platform to place their clients in the products that best serve them, be they tilted towards factors with a discretionary component or patterned on a rules-based index, tracking traditional market cap weighted indexes or even good ol’ active managers looking to best benchmarks in good times and minimize downside capture in the bad (for the right cost, of course).

Stephen Winks

Stephen Winks

December 10, 2015 — 11:54 PM

Pete Giza,

You might agree that the personal ethics and integridity of the advisor, which is so important to the consumer, is thwarted by brokerage industry compliance protocol which opposes the broker acting in the client’s best interest as defined by statute of all those who render advice. Thus I understand your Huh comment. Clearly from a brokerage perspective you sees no problem with 40% of the earnings on your client’s retirement savings being lost to brokerage commissions, fees and administrative cost as found by the White House Council of Economic Advisors. Your confusion can be excused as your simply turning a blind eye to things you can not control. Yet the point is the brokerage compliance protocol should protect the best interests of the investing public not the industry’s conflicted self serving interest.
Stephen Winks

Stephen Winks

Stephen Winks

December 9, 2015 — 11:40 PM


If it were only true that professional standing in advisory services were part of the discussion, we would have none of the controversy about acting in the best interest of the investing public. The insularity of publically held brokerage firms have made personal ethics a career detriment. The client’s best interest are easily disposed of and the broker has no say in the matter. Person ethics in the client’s best interest will prevail in a free market even if it means advisors must divorce themselves from the insular brokerage business model which only considers its self interest at the expense of the investor. This was not always the case but has become a problem of the past two decades to which the industry seems to have no recollection. A terrible deterioration of personal ethics.

Stephen Winks

Pete Giza

Pete Giza

December 10, 2015 — 1:54 AM


RIABiz Directory

The Industry Sourcebook for RIAs

   |    LISTING

RIABiz Directory sponsored by:

Directory Sponsor Logo