Assets on Private Client Resources’ system have shot up over the past 12 months, says the firm’s president Robert Fiore.

Assets on Private Client Resources’ system have shot up around 220 per cent over the past 12 months, the firm’s president Robert Fiore tells Family Wealth Report. He believes a seismic shift towards outsourcing among registered investment advisors is driving this growth.

Fiore estimates that around 90 per cent of the firm’s growth has come from the RIA space, and he believes a change in business practices is behind this. “[RIAs] want to give customers more transparency…this is how they’re distinguishing themselves,” says Fiore.

It’s those firms serving clients at the high-end of the wealth scale which are opting to outsource reporting and data aggregation. “It’s really important to a particular market segment,” says Fiore. Most of the RIAs the firm is working with have end clients with at least around $50 million but he says companies are beginning to see benefits for using an integrated outsourced service for clients with assets down to $1 million, and the firm now has some of these on its system. “It might gradually go even lower than that,” he adds.

In-house versus outsourced

The market for aggregation and reporting is valued at around $3 billion, including software and outsourcing solutions provided to private banks, family offices and RIA firms, according to Fiore. At the moment, based on PCR’s prospecting, he thinks around 70 per cent of RIAs are still handling reporting and data aggregation in-house, with a combination of spreadsheets and dedicated personnel. “But we are seeing [this market] open up,” he says.

The other 30 per cent, which have opted for outsourcing, have picked it up quickly though, and the 70 per cent represents a huge opportunity for the firm, says Fiore. “We’re relatively new to the RIA space, we were mostly within private banks and family offices until a couple of years ago.”

“I think it’s true that outsourcing has been neglected in this space,” he says, adding that there’s a lot more that can be done to raise awareness. “How you model your business is going to have a major impact,” and reporting and aggregating is a big part of that, says Fiore, who believes the clients his firm has been winning are the ones who are starting to realize that.

In a recent Schwab Benchmarking Study the top barrier to growth cited by RIAs was devoting sufficient staff time to business development. According to stats on PCR’s website,16 per cent client of relationship management time is lost on administration and error resolution. Meanwhile, the fact that around 87 per cent of new business come from referrals highlights how vital spending time with clients is, according to a recent white paper from Private Client Resources.

The Schwab survey backs up Fiore’s anecdotal evidence. It found that to boost productivity advisors are turning to outsourcing – particularly in areas such as back-office operational functions including data management, performance reporting and invoicing – and adopting new technologies. It also found that RIAs are continuing to invest in technology.

And while it may be difficult to persuade a company to part with its money when many of the world’s major economies are barely growing, Fiore says the payback from outsourcing non-core services for wealth management firms can be seen within around one year, as you free up resources and make the firm more dynamic.

Ultimately, firms are working towards becoming more proactive on the client engagement side, and making this their central focus, as they achieve cost efficiencies elsewhere to support this. The importance of this was demonstrated in a recent Spectrem survey which found the most important factor in retaining clients was returning their phone calls.

“You see clearly the leadership focus” of those firms that grow, says Fiore. 

What are wealth managers looking for?

When it comes to what wealth managers are looking for, Fiore says it’s not just the software but an integration service.

“These businesses are looking for packaged solutions” and systems, such as web portals and CRM, that “talk to each other,” he says. “We’re seeing a trend towards packaged solutions so we’re partnering with the various providers. [RIAs] want to be able to ‘flip the switch’ on a CRM system, for example.”

PCR’s most recent release to the market is Palette Platform, which aggregates, reconciles and validates data from the source – the custodian – and enhances this via its tech offering, such as benchmarking tools, integrated CRM systems and document management, explains Fiore.

He sees benefits in this movement for smaller companies, as they can receive the same kinds of services bigger firms can afford through outsourcing.

“Smaller firms typically do not have a dedicated chief technology officer splicing systems together,” he says, adding that firms such as his own can do the integration arrangements.

“We’re not selling software so we’re seeking out those systems that are best in class.”