Industry |

What Sets The Next-Generation Firm Apart?

Stefan Daniels

Enterprise Data Analyst

Addepar was created in the wake of the 2008 financial crisis to help you navigate turbulent times exactly like this week. Given the volatile environment, this is one of those critical junctures where we hope to provide you with significant clarity so you can pay it forward for your clients during this difficult time.

With so many unknowns on the horizon, a digital presence is more important than ever in order to maintain strong client relationships. As you evaluate the strength of your technology, I encourage you to consider what you will do if your technology stops growing. That’s a question many advisors ask themselves every day, but don’t have an easy answer.

Financial technology undergoes a major shift each generation. Decades ago when the financial services infrastructure was first being built, it relied on mainframes and accessing locally stored data. In the 1990s, industry technology shifted and added locally stored structured query databases. This is where most advisors’ platforms sit today. 

Now, 20 to 30 years out from that development, another generational technology shift is occurring—a shift from local to cloud, and with it the opportunity for continuous improvement. This shift is happening across industries—from shopping and social networks to government systems. As the industry changes, the technology providers that deliver legacy technology are consolidating. Within five to 10 years, legacy platforms will reach a point where they must adapt and modernize from local to cloud computing and storage or become obsolete, struggling against a changing landscape. Advisors operating on these outdated technology platforms will struggle as well to adapt and serve their clients effectively.

I personally see successful advisors fall behind due to their technology limitations and believe advisors should be investing in their future by adopting a new platform now, when they can do it on their own terms. 

While this shift will change the underlying technology you rely on, it won’t fundamentally alter what you do for your clients, and will improve your ability to service them in the future. We like to compare this ‘local to cloud’ to a shift from driving a 90s Honda Civic to a Tesla. The 90s Civic has been reliable—it’s comfortable; it’s familiar. But when you switch to a Tesla, you’ll instantly know how to drive it. The right pedal still lets you accelerate, and the left is the brake. The main difference comes when you look under the hood and can’t find the engine. The local database engine has been moved to a cloud-based model, allowing for a more accurate representation of the reality of financial data. This new technology and improved data presentation offer a better and more flexible way to model financial interactions—between your clients, their legal entities and their assets.

Change is always perceived as hard, but the results pay dividends for advisors and their clients. Platforms grounded in new technology can convert your historical data, ensuring you can continue to access all relevant information for client accounts, while opening opportunities for the future. This technology can also effectively address the generational shift among your clients. Younger generations are growing their assets and are expecting more from technology. With modern technology, you’ll have the power to provide a new slate of services to the next generation of clients, without losing valuable data relevant to those clients.  

Additionally, advisors who make the change now can eliminate the worry that their technology won’t support them as they scale. As you grow your business, you’ll be using a platform that can accommodate your expanding needs. And because tech never sits still, the platform will continue innovating.

Today, tech providers also invest the time necessary to train advisors, as well as their teams, on how to leverage tech to its fullest. Ultimately, with the latest and best-in-class tech, these advisors are well-positioned to showcase added value during volatile market periods as well as prepare for future growth to handle the data requirements of clients in the coming decades.