Choice Paralysis: How RIAs can Tackle Tech Overload

So let's talk a little bit about what you've heard here at FSI. What stood out to you?

Tim Welsh  00:24

Well, this is a broker dealer conference, and broker dealers are in a very interesting regulatory environment. So you can imagine the content is pretty heavy towards those topics. I think the interesting thing today was really the SEC is new marketing rule, which is creating quite an opportunity for advisors to use testimonials for the first time. But it's also a lot of confusion around what they can do what they can't do. I think the industry is still out there, trying to find a way forward on all this, these issues. But I think ultimately, you know, it's the venues like this that get people talking, that I think we'll get some pretty good answers out of it. But in the meantime, it's going to be a great opportunity for advisors to be able to leverage these new tools and platforms to get their story out there broadly in the industry.

Shannon Rosic  01:02

I always have to talk tech with you, especially when we're at events. And the industry is really at a point where advisors need to embrace technology or grow or get out or reinvent or die for lack of better terms. Where are we? Where are we headed?

Tim Welsh  01:18

That's a fantastic question. And I think the the good news is that, the tools and the choice and the flexibility is there. So even the smallest advisor can run a very profitable business. On the other hand, as you grow and get bigger scale becomes more important, you need to have a bigger footprint, you need to bring in more operations, more tech, more people process, all of that good stuff. And that starts to eat into profits and overhead. And so ultimately, you get to the become tweeners, where you made it to this level, you're very profitable. But to get the next level, those next 100 clients, what's next for advisors, you need to invest back in the business. And that's a pretty daunting recipe for anyone to make that decision when they've been at this for a few years. So I think those tweeners are really the ones who are most engaged in this conversation. So I definitely think that, you know, somewhere around that 500 million to seven or $50 million mark, that is sort of the go or no go zone. For those who want to double down and go for it, the energy, the capitals, they're great financing great opportunities. However, for others, that's maybe too much to take on, you know, too much work, they want to, you know, maybe downshift a little bit. And that's why we're seeing such a surge in mergers, acquisition, consolidation, really being driven by not only age and succession, but also, do I build it or join it?

Shannon Rosic  02:37

So what does it ultimately take? And what is the threshold to be a viable player in the space right now.

Tim Welsh  02:44

Depends on your definition of success. As I mentioned, the solo advisor who has a fantastic lifestyle, as 20 clients, makes them happy meets their goals, maybe that is the definition of success, maybe we should all aspire for that. On the other hand, to really be able to get that scale to drive it. Ultimately, we are getting into the billions of dollars of assets under management, and a real vision. Now you're thinking about building brands, you know, being recognized in your marketplace, as well as nationally, obviously, business is not usual anymore, we can work from home, we can have our advisory practice anywhere, which opens up new markets for us. And ultimately, that specialty, that niche focus really translates well in an online environment. So I don't want to give you a non answer here. But what I will say is that, you know, it's really more driven by the owners vision, partnership, who you want to be when you grow up. But in the meantime, all models work, that the beauty of the independent space is fragmented for a reason. And I think it always will be because of that.

Shannon Rosic  03:44

You hear a lot in this industry and advisors have been beaten over the head with it a little bit that they need to grow in scale. But I've seen a lot of choice paralysis, you know, RAs are really looking for that Goldilocks solution of not too much, too much. So what is that perfect solution? For folks, when it comes to tech?

Tim Welsh  04:02

Will the I always say go back to the fundamentals? Like, who are you as a practice, you know, which clients? Are you serving best? Who are your clients make a list of those, what's common to them, and say, Okay, let's get more like them, let's not have the 8020 rule, let's have the 2080 rule. So we can really focus in on that niche and really perfect our practice perfect, our pitch perfect, our content, perfect our approach to financial and wealth planning. And that becomes the core focus there. So if you can get more of those clients, and less of the other ones who maybe are not perfect for your fit, that requires a lot of guts to perhaps fire a client, you know, nobody wants to do that. But that's really where they have to kind of be in that zone. But the good news is on the technology side, we've got small, medium, large, extra large and super, you can get any system you want. So I don't think there really is that you know, a threshold that you need to get to. The good news is that tech is evolving choices here. It really comes down to who you are as a business person. who you want to be? And how you want to serve your clients?

Shannon Rosic  05:03

And we've heard a lot about personalization when it comes to either your technology stack, how advisors are servicing their clients, but how are they supposed to balance personalization and scaling all at the same time? It's a pretty big ask.

Tim Welsh  05:16

Absolutely. And it's almost like those are two competing priorities. And we sort of call it the personalization at scale. Can you get there? Can you tailor portfolios with an ESG? Tilt for this client over here? And then for the ones who don't want to have that, perhaps their portfolios? How do you manage to that? It really does become a challenge. I think the fantastic news is with the rise of direct indexing, as an example, new trading rebalancing platforms are available to be able to give you a dashboard, it comes like you're flying a jet pilot, and you can tweak this one, tweak that one, tweak that one, and be able to really hone in on what is important to that client. There are also other ways to think of, you know, risk as not just a volatility measure, but also, will I run out of the resources when I need them the most? That's a very different definition of risk, versus you could lose 20% of your portfolio. Maybe that's okay. Because I'm, you know, taking person. But for those who are in though that retirement zone, maybe they can't do that. So that I think, really focuses the client and advisor on the right conversation to have, how do I personalize this, so it makes sense, it fits you. And I can do it to your point at scale with tools and technology. And I think the good news is absolutely those are out there. Then innovations every day because it's driven by a big trend like direct indexing, which will have that sort of waterfall effect on other platforms as well.

Shannon Rosic  06:38

Well, Tim, it is always a pleasure talking with you. Thank you so much for your time today.

Tim Welsh  06:42

My pleasure, Shannon. Thanks so much for having me.

Shannon Rosic  06:43

For Advisorpediaand Flyer Financial Technologies. I'm Shannon Rosic.