FinTech Conversations: The broker-dealership

In our third installation of FinTech Conversations, Advisor360° President Darren Tedesco and VP, Marketing Cynthia Stephens talk about how broker-dealers optimize their tech stack and tech strategy.

Cynthia: Darren, one of the things that drew me to Advisor360° is the make-up of the executive team. The team has a unique combination of enterprise software and financial services experience. What is your background and what does it bring to our clients?

Darren: Advisor360° is one of the largest firms serving broker-dealers in the country by any measurement. Prior to starting Advisor360°, I spent most of my career as an executive at one of the largest broker-dealers in the country, with almost two decades of driving and overseeing their technology efforts. One of the things that makes me different from the average B2B software executive is that I was the very person who we now serve; I fundamentally understand the pain points and challenges facing the companies we license our software to. I deeply understand the industry challenges broker-dealers face and how they run their companies, how advisors work and the obstacles they have in running their businesses, and what an advisor’s clients are looking for in an advisor.

Cynthia: You’ve written in the past about your beliefs on technology integration and how to design for customers. What are a few of your beliefs about enterprise wealth management software?

Darren: When I was helping run the broker-dealer, I learned a few things about myself that I think others may be able to relate to. For example, I didn’t like being “sold into by vendors”—I preferred to be “educated by long-term partners.” I also didn’t want to pay fees tied to our advisors’ hard-earned AUM, when a stock market run-up would drive up our technology cost for no apparent reason other than more buyers than sellers of stocks. I never understood the rationale for having to pay professional service fees for every single software enhancement. And I was not—and am not—a fan of custom software builds, which would leave us trapped, holding the “legacy software bag”—and those same professional service fees—down the road.

What are the mistakes broker-dealer executives might make regarding their wealth management software tech stack?

Darren: Our team has achieved some amazing results over time, and along the way, we’ve experienced some decent sized failures as well.

One of my biggest mistakes as a broker-dealer executive was buying software that was outside of our truly unified software strategy. Since 2003, most of our applications have been built upon our Unified Data Fabric®, with householding as a fundamental pillar, enabling a consolidated view for advisors and their clients in every aspect of our wealth management software. When users have a disjointed experience with the interfaces they use or the data being displayed, it leads to frustration and loss of productivity, as more time must be spent on training and performing “swivel chair” workflows.

I’m often asked, knowing what you know now, would you do what you did all over again (in terms of building out the technology platform inside a broker-dealer)? My answer is always an emphatic “No!” The world has fundamentally shifted over the past few decades from lacking the solution set that exists today. And now, the proliferation of hundreds of “point-solutions” creates a new problem for broker-dealer executives…

Why buying FinTech can be like selecting from the “car parts bin”

Cynthia: Anyone who has looked at the latest Michael Kitces AdvisorTech solutions map can see how crowded the FinTech space is. From your perspective, how would you explain it?

Darren: Think of a car parts bin. Most broker-dealers are not technology experts, yet they buy various car parts and try to assemble their own car in their driveway instead of going to the dealership. This creates the disjointed experience and training issues I mentioned earlier.

It also sets up the broker-dealer for a legacy system nightmare in just a few short years when the car—or system—breaks down and the people who built the transmission, the engine, etc., have moved on.

Advisor360° is different than a single-point solution provider because we are like the car dealership. We’re selling and servicing the entire car. Our deep configuration manager ensures that every one of our clients has the same code deployed while allowing a unique look and feel and/or different functionality to be displayed to multiple groups of users.

Our clients experience truly unified data and user interface layers. Others in the industry speak of unification, but when users dig deeper, they can see that this is just window dressing.

What are the key factors in technology strategy decision making?

Cynthia: Once a broker-dealer executive selects “the dealership,” how do they decide what “trim level” to select and how to configure it?

Darren: Leaders of a broker-dealer—or any business type—are always asking themselves the question, “what am I optimizing for?” Project/program managers are super familiar with the term “triple constraints”—time, cost, scope—and they are always competing. The general rule of thumb is you can get two of the three, but it’s virtually impossible to have all three. So, you can have quick and cheap, but you’re not going to get the full features set, or you can have the full feature set quickly, but you’ll pay a price.

Let’s look at the three constraints separately:

1. Time—Is time on your side? Studies show that most large projects take more time than anyone expects.
2. Cost—Longer projects and scope creep end up leading to greater costs. Studies show that most large projects come in over budget.
3. Scope—It probably goes without saying, but the more you want to do, the longer it will take and the more it will cost.

For most of the broker-dealer executives we speak with, time is not on their side and execution risk and cost overruns are major concerns with an “IT build” strategy. Newer technologies allow you to buy the car engine, but your teams are then responsible for building the car around it. Unfortunately, most broker-dealers do not have expert teams focused on user-centered design, so this ultimately ends up being similar to a build decision.

Cynthia: In closing, Darren, what advice would you give to a broker-dealer executive who is deciding whether to build, buy, or integrate financial technology for the business?

Darren: First and foremost, it's important to fundamentally understand what your core business is. A critical question that all broker-dealer executives should ask themselves is: are you in the software business? Does everyone at your company wake up day-in, day-out solely focused on creating the best technology for advisors and their clients?

The question is obviously rhetorical, as the answer is no.

There are hundreds of point-solutions (car parts) available for purchase and installation in the WealthTech marketplace, for those willing to try their hand at assembling their own “car.” But there are very few true car manufacturers in WealthTech that are proven at scale.

At Advisor360°, our entire company wakes up every day for one purpose, which is to make broker-dealers’, advisors’, and their clients’ lives more productive via the via the wealth management software we develop and support. We are the car dealership, with a fleet of offerings that can be configured to suit the needs of broker-dealers, their advisors, and their clients. The Advisor360° platform can accelerate enterprise-level digital transformation while reducing execution risk and creating a truly holistic, unified user experience.

Darren Tedesco is President of Advisor360° and has been part of our software development since its inception, bringing together the thinkers, creators, and visionaries that help power our clients’ productivity, profitability, and growth.