Seventy-nine percent of wealth management firms surveyed by F2 Strategy are planning changes to their operating model in the next 12-24 months, according to the findings of a new survey trend report released Wednesday by the research and consulting firm.
“Operating models require continuous improvement—both firms that stated they were not satisfied and firms that stated they were very satisfied said that they're going to make changes,” the report says.
“Operating models are complicated because they are unique to every firm,” according to the report, which notes they are “informed by who your clients are, who your advisors are, what technology, what combination of technology you use, and what you consider important to your value proposition.”
According to the report, advisory firms that are most successful with an operating model “think about what they want to achieve, where they want to be great and how they want their people organized first, then determine the right technology to fit that model.”
Advisory firms don’t lack tech tools, according to F2. But they “haven't connected them with the right leaders to reach the point where the tools are behaving in unison,” F2 says.
Onboarding was cited by 72% of respondents as a key source of friction, significantly higher than the next highest friction points of alternatives processing and data consistency and reporting, both of which were cited by 45% of participants.
“There is no standard operating model, and the dispersion of structures was a big insight” from the survey responses, according to Bryce Carter, Head of Client Engagement at F2 Strategy.
“Across most dimensions, advisor-to-ops and advisor-to-tech resource ratios, household loads, and organizational structures, there is a wide dispersion in how firms are operating,” he told WSR by email on Thursday.
“The industry has not converged on a ‘best way’ to structure tech and ops around advisors.” — Bryce Carter, Head of Client Engagement, F2 Strategy
“The industry has not converged on a ‘best way’ to structure tech and ops around advisors. Operating models are driven largely by the firm’s client segment.”
Carter added, “Even among firms that felt confident about their current operating structure, they were still thinking about or planning changes. Evolution of the operating model is an ongoing effort. The firms pulling ahead are actively engineering their model, while those falling behind are operating in reaction mode.”
He went on to say, “Firms are optimizing what’s easy to measure, not what drives advisor experience and productivity. Firms know what it costs to operate and the speed of parts of the system, but they don’t fully know where the system is breaking down for advisors. Why? Advisors still struggle with onboarding, having a full grasp of their data, many aren’t using CRM to its full extent, and their workflows are not optimized. Firms know this is a problem but aren’t consistently engineering solutions to address it.”
Data in the report was generated from a survey conducted by F2 in February that included responses from 36 RIAs, broker-dealers and wealth management firms representing $9 trillion in assets, according to the firm.
“We conducted an online survey with our national cohort of wealth management firms,” Carter told WSR. “We also conducted a virtual session with the cohort for deeper discussion on the insights.”
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
