Rapid growth shouldn’t leave you feeling overextended. Yet, it’s an unfortunate reality that some portfolio management and trading systems just can’t keep up with clients’ evolving needs.
Changing investor preferences and exacting expectations for portfolio personalization are driving successful enterprise firms to reconsider the technology they are using. Asset net flows are increasingly landing in manager-traded separately managed accounts (SMAs), with models-based investing falling out of favor. At the same time, today’s clients are clamoring for alternative investments and actively managed exchange traded funds (ETFs), putting pressure on systems that were built for an era centered around stocks and bonds.
These changes add up. It’s no surprise that trading and portfolio management systems designed for models, passive investments or traditional assets are struggling to keep up with today’s investing realities.
Feeling like your wings have been clipped? It’s time to start flying at your pace. Here are five key signs that it’s time to reconsider your portfolio management and trading systems.
Five Key Signs You’re Outgrowing Your Technology
Warning signs that you’re outgrowing your technology might not feel significant at first, but they gradually become harder and harder to ignore.
Sometimes they’ll start as fickle integration projects and prolonged outages, affecting a specific tool or workflow. In other situations, you might notice that your competitors have technology that seems better suited to new market conditions and investor preferences. Perhaps you’re stuck with a nagging feeling your toolkit isn’t quite as flexible, customizable, or robust as you’d like.
Keeping your technology aligned with your growth isn’t always easy, but it’s key to your success.
1. Customization Leads to Crisis
When a custom request comes in, does it mean more work, waiting for development, and slower time-to-market? You need a more agile team, with rapid responses and a quick turnaround.
Personalization is expected by today’s investors. Firms that are grappling with inflexible systems, when what they really need are custom workflows, are fighting against their own growth goals.
In fact, a recent survey found that just 24% of businesses have unlocked their full personalization potential. Many growing firms still confront outdated infrastructure and old ways of doing business, as they struggle to address new market realities.
Enterprise firms need rapid, tailored portfolio personalization capabilities, across their entire client base. It’s key to winning business.
More than one in three clients say they will entrust more assets to their advisor as long as they’re getting a more personalized experience. Advisors equipped with solutions that provide flexibility are poised to gain ground on their competitors.
2. Portfolio Management Is a Pain
You used to brag about the advantages of your portfolio management system. Now it’s a subject you just don’t discuss anymore.
Manager-traded SMAs account for a greater share of AUM today than they did even a few years ago. Last year, 75% of SMA assets were held in manager-traded programs, up from 68% in 2018, according to Tiburon Strategic Advisors.
With manager-traded assets gaining importance and popularity, today’s systems are facing higher stakes than they were just a few years ago. It’s a shift that makes it all the more critical for enterprise firms to operate with the best portfolio construction and trading systems.
You need to easily manage customized portfolios, capable of executing a deep deck of trades. Your platform should be capable of specific tactical household adjustments and strategic large scale rebalances. And you need to be able to do so in a manner that delivers better results.
Equipped with a platform that’s purpose-built, and that handles the complexities of large-scale portfolios, enterprise firms are able to support multi-asset class trading, sophisticated rebalancing, and real-time compliance checks. By streamlining complex trade execution and connectivity across multiple custodians and asset classes, these firms can meet client needs quickly and accurately, without the added overhead of manual processing.
3. You’re “Old School,” But Not in a Good Way
You would love to provide your clients with innovative solutions, but there’s no support for those types of offerings.
Investors are increasingly demanding active ETFs and alternative investments, so when your workflows get tripped up by anything other than passive investments and traditional investments, your clients are going to notice.
From 2021-2023, actively managed ETFs saw net flows of $163 billion and accounted for 22% of net flows in 2023 (up from just 1% in 2014). Meanwhile, alternative investments are claiming a larger portion of clients’ portfolios, especially among younger investors. As recently as 2017, alts accounted for less than 6% of total AUM; today that number has more than doubled, with alts weighing in at 13% of total AUM, according to Tiburon Strategic Advisors.
Systems that were built and introduced for a different era — what some might call “old school” — are becoming increasingly obsolete. Investment demands are evolving. Investors are placing greater importance on alternative investments and actively managed ETFs.
Enterprise firms need a cloud-native, API-driven platform that’s built to handle today’s in-demand investments, so that advisors can grow their businesses.
4. Your Integrations Aren’t As Reliable As You’d Like
If you’re apologizing for the status of your integrations, you’re outgrowing your tech.
With more than half of all firms picking and choosing their technology, integrations are a fact of life for advisors. But that doesn’t mean all integrations are created equal. Limited integrations lead to major productivity challenges, with 71% of advisors identifying this obstacle as a burden within their firm.
Because they serve as critical connectors between different capabilities and technologies, troublesome integrations can be an early warning sign of a mismatch between the capabilities you need and the capabilities you have.
Enterprise firms need open API platforms that support clean integrations and complement existing technology. You should be proud of your integrations. Whether you’re enhancing your existing systems, or going with a wholesale upgrade, you need a disruption-free platform that adapts to you.
5. You Keep Asking Yourself, “Isn’t That Why We Switched?”
The issues you faced at your old RIA or broker-dealer are rearing their ugly heads. Again.
You picked your technology with intention. Or at least you thought you did. So when it starts to show its seams, it can be tempting to ignore the problem or look for cover-up solutions. But a piecemeal approach comes with major risks.
Enterprise firms know that their trading and portfolio management capabilities factor heavily into clients’ decisions about who to trust and where to bring their assets. In fact, nearly one in three investors would consider changing their wealth manager if they failed to modernize or embrace the latest technology.
The best firms are continuously investing in their technology, so that they can provide the sophistication and services their clients expect.
No More Growing Pains
Is your technology holding you back? Misalignment between your trading and portfolio management capabilities — and your business goals — can create a situation where you’re working against your own interests.
At Flyer, we’re helping enterprise firms recalibrate their capabilities, so that they can grow at the pace that suits them best. To learn more, schedule a call today.
