Joe McQuaid: How to Build the Best Tech Stack for Your RIA

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Hello and welcome to Barron's The Way Forward. I'm Greg Bartalus, and my special guest is Joe McQuaid, Managing Director of Platform Solutions at Concurrent. Today, he will discuss what advisors need to know when launching an RIA in terms of their tech stack implementation and integration. Welcome to the podcast, Joe.

Thank you, Greg. Appreciate it.

Excellent. Before we jump into the topic, tell us a little bit about your background and what you do at Concurrent.

Yeah, absolutely. So been in the investment industry for 25 years, spent a good part of my career on the distribution side of the business, raising assets for mutual funds, ETFs, separately managed accounts, alternative investments. About 6 years ago, left the corporate world and entered the independent world in working with an RIA. What I noticed when I first started in the RIA world was there was a gap There was a need for operational consulting and for individuals and helping them build out their tech stack. So I built my own consulting company around operations and technology, ultimately started my own RIA, which ultimately is now going to merge with Concurrent in the next month or so. I joined Concurrent officially 9 months ago, started as a consultant, but became a full-time employee running their platform and building out the future tech stack.

When we talk about someone starting an RIA, the options, there's so many. I mean, it must be dizzying to consider. Where should an advisor even begin at this point?

Yeah, it is dizzying at this point. I remember back in, I think it was 2017, 2018, Michael Kitces came out with the technology map, and I think there was maybe 40 or 50, you know, logos on there. And now there's hundreds and hundreds of companies. So I think really where you need to start is what's your vision for the future of the company? What are you trying to build? And then from there, you can start putting together the pieces that ultimately make the tech stack. And, you know, we keep calling it a tech stack, but I think it's more of almost a hub and spoke model because I believe that you do have some core pieces of the tech stack that sit in the middle. And then you have some pieces on the outside that are interchangeable over time.

And would the portfolio management tool mainly be that central?

Yeah, yeah, I think there's a few pieces that probably go in the center. I think the custodian, and that's important when deciding what type of technology you want to build for the future. I think the portfolio reporting management rebalancing tool is important. I also think a CRM. Is extremely important in that center piece.

Financial planning too, all that.

Yep, yep. And probably compliance as well.

What else? I mean, you know this topic intimately, so, you know, help out an advisor out there who's in, you know, what would you do if you're in their shoes?

Yeah, absolutely. And I think really I would embrace innovation. And to me, there's really 3 standards that we try to go by. You know, when you look at your, your technology, it's ever evolving and it's going to continuously change. And I know not everyone's comfortable with change, but, you know, really the story I've been telling about our tech stack is if you go back, you know, the beginning of the internet, really early 1980s, mid-1980s, and I started in 1999 and I didn't even have an email. At that time. So it took a while before we really embraced the internet and emails and websites. ChatGPT came out in November of 2022. In so far at the Barron event, at the Barron's event, almost every single speaker I've heard has mentioned ChatGPT. So it's really taking over our entire technology and the future of technology. So I think you need to embrace innovation. I think you need to make sure you have integration. The number one complaint I always hear in the RIA space about technology is that the pieces of technology do not talk to each other. So I do think you need to spend a lot of time on reviewing the integration that each piece of the puzzle provides to your tech stack. And then last and probably the most important, probably should say it first, is cybersecurity. I would argue that this is one of the biggest risks in our entire industry right now. And I do believe you need to spend a lot of time on making sure that each piece of the puzzle, so all of the endpoints, has the proper cybersecurity.

Right, and I mean, just one violation and it can cause irrevocable damage for your business. So the stakes are exceptionally high.

Absolutely. Could, you know, obviously reputation risk and then ultimately could be financial risk as well.

Tell me a little more about scalability. How should advisors approach that? What kind of assumptions should they make and to what extent should they err on being conservative? Like, let's say they should grow far faster than they anticipate, right?

Yeah, and that's a great question. And I believe you need scalability in all different fronts. And this is probably one of the reasons why the aggregator model has also been so popular over the last, you know, 5 to 7 years. Because of scale and pricing. You know, there, as you build out your tech stack, it's obviously a pretty high cost for your firm, and that ability to get lower pricing is certainly scalable. The other thing is that really when I was talking before about the core spoke model, if you look at the outside of that circle, that's really where you can get scalability. So most advisors in the past, maybe their top 10% of their, of their book of business, they provided additional estate planning, tax planning, and insurance planning, really all the buckets of a true financial planner. Well, now with the onset of other secondary pieces of technology, you can offer those types of services at scale. So whether it's like the FP Alphas of the world or Vanilla, where you can offer these types of services to your entire book of business in a pretty quick and efficient manner.

And in terms of settling on actual, or choosing certain products, I assume advisors are going to do their homework. They're going to talk to trusted peers, they're going to look at reviews, you know, test all of that. Is there anything you could add to that? I mean, they'll be taking feedback from many, many places. What else might you recommend to choose things?

Yeah, absolutely. And that's a great place to start is ask other colleagues that you know within the industry on what pieces of technology they're using. I think the secondary part of that due diligence process is to make sure that there is integration with either your custodian or the core pieces of technology that you're utilizing currently. So such as your CRM, or your portfolio management system. And then last but not least is the cybersecurity, is making sure that they have strong security already built into that piece of technology, which will also complement your existing cybersecurity at the firm level.

So in terms of cybersecurity, there are more and more advisors are working remotely with clients, like, so tell me about having the technology to support those advisors who are working in far-flung places, et cetera. Any thoughts on that?

Yeah, absolutely. We actually have a lot of experience at Concurrent with that. We have 36 different locations. We go as far west as Alaska and as far south as Miami. So we're always looking for technology that makes it more efficient across the board. And I think there's a couple different areas that we focus on. I had mentioned before the endpoints. So most of the advisors that we work with are using a cellular phone, they're using a tablet, they're using a desktop or a laptop, and all of those are entry points for cybersecurity. So we need to make sure that all of those devices are protected. The second area is we're trying to review and log all of the activity from all of those devices to make sure that, It's either coming in or going out. So any emails coming in, any requests coming in, we want to make sure and log all of those to see if any of them are on a list that they're not supposed to be on. And then the same thing with websites and other areas that the advisors are trafficking. And then the third area is encryption. We would prefer as much as we can encrypt again, going out, especially if it has client information. So there's a lot of focus on encryption and then software where we can push out updates and we can push out any antivirus patches or any other updates in the cybersecurity platform. All of that is important when you have as many outside locations as we do.

Okay. And tell me about the impact of AI in this area.

Yeah, it's, I think this is one of the most exciting times to be in the world of fintech because I think AI is a game changer, you know, in a number of different ways. I think advisor experience, I think client experience, I think it'll enhance all of that, but, One of the areas that we're actually testing right now and we're hoping to roll out in the next couple of months is not going as far as the end client or the investor at this point, but how do we use AI to enhance our advisor experience and the way we train our advisors and our home office staff? So we're testing out a piece of AI technology very similar to a ChatGPT-like functionality. It takes unstructured data. So we are inputting all of our manuals, all of our knowledge center with the various pieces of technology that we use into the system. And this allows our home office, our advisors, and their support staff to just go to one location, ask questions about any of the pieces of technology that we use, and it'll generate not only an answer as reviewing all of that unstructured data, but will also show you where the source is. So again, one of the challenges of a, you know, decentralized tech stack is if you want to learn more about Black Diamond, you need to go to Black Diamond. If you want to learn more about Practify, you need to go to Practify. Well, hopefully in the next couple of months, we'll be rolling out this system utilizing AI where you only have to go to one place. So that's just one example on how you could use it internally to benefit your business.

Okay, and when advisors are picking their tech stack, what are some common mistakes that you see that are kind of easily preventable?

Yeah, another great question. I think a couple areas are the— I don't believe we're in a world where all-in-one is better than decentralized. So I think sometimes when we're doing due diligence on the various pieces of technology, one of the mistakes we make is, oh, we can get this done with this one piece of technology. We can check off 5 different boxes. It might be the better option for your business, again, depending on what the vision of your practice is. But if you're at that point, I would take a step back and I would look at all the different pieces individually in a decentralized, way, and I think you might be surprised that that might bring a lot of advantages to your tech stack.

Any other words of advice?

Embrace the innovation, as I said earlier on before. I think, you know, some of the technology that we're hearing about, I do believe even, you know, AR and virtual reality, augmented reality and virtual reality, I think generative, I'm sorry, yeah, generative AI, Spatial computing. I believe all of these are actually going to hit us sooner rather than later. And so embrace that change and embrace the evolution of the financial technology world.

Excellent. Well, thank you so much for joining. I greatly appreciate it.

Excellent. Thank you.

Thank you. My guest has been Joe McQuaid. For more podcasts and the latest wealth management news, visit barons.com/advisor. For The Way Forward, I'm Greg Bartalus.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.