As the financial services industry faces a new wave of disruption with AI, it begs the question of whether this will give a competitive advantage to the smaller, more nimble firms.  We at Illuminate would love to see the underdogs come out on top, and this might just be the precursor for it. 

As noted below, we need to keep in mind that Artificial Intelligence stems from Data Science; using statistical modeling to “train" a model that then ingests data to derive meaningful insights.  The natural language component allows users to interact with language, rather than parsing through the data set it is built upon.  

If you aren't sure where to start with AI, there are a lot of free or low cost AI tools you can start by exploring.  If you know you need it in your business but don't know what options there are, we love educational conversations.  Or, if you are ready to start generating better leads and increase client retention, we can help with that. 

RIA firms producing client performance should strive to follow GIPS compliance policies, even if they are not pursuing verification. Things like treatment of dividend income (e.g. accruals, foreign withholding tax), net of fee performance showing the highest fee applicable for marketing materials, using TWR vs IRR to match benchmarks, etc. are documented in GIPS.  Exceptions to this can and do occur and should be consulted with your compliance officer.

If you are using factsheets, but are not GIPS verified, having clear policies and procedures for your firm that outline composite membership (entry/exit dates), treatment of large cash flows on the composite, pricing policies especially with any alternative investment types or foreign securities, should all be well documented for when a regulatory audit occurs.

Additionally, if you have growth plans for your RIA, the institutional investor space may not have the ROI you are looking for as it can take years to land clients in this space given the additional scrutiny.  Make time for a strategic planning conversation into your growth goals to determine the best ROI for the investment of resources. 

Benjamin Franklin is quoted having said, "By failing to prepare, you are preparing to fail."  When it comes to launching an RIA, having a solid Operational Plan will save you time and money down the road.  Many articles out there will point you to options of utilizing a TAMP or becoming an external IAR for the other RIA to manage this component for you.  Before you brush this decision off, take time to consider your options. 

TAMPs (Turnkey Asset Management Programs) can be very beneficial if you don't have the ability to hire in-house and are looking for an existing team to manage your operations, trading, and portfolio management. This can be especially true if you are getting Compliance Support from the firm. The downsides include slow onboarding, client repapering, higher expenses, and changes to software, custodians, and processes you may already be used to. When you have outgrown your TAMP or are no longer satisfied with their performance, you will most likely walk away from years' of client history due to portability constraints (e.g. costs to transfer performance, time to map and reimport to a new system, or the TAMP rejecting to assist you with your data - yes they can do that). 

If you are expecting fast growth, you might be better suited to join a custodian that offers native tools in their website for portfolio management, trading, and reporting. If you have an existing client base your are bringing on-board, opting for a strong CRM and portfolio management system are critical for scaling. These tools can integrate the onboarding and e-signature processes directly with the custodians, as well as help keep your operating expenses down on the team. 

In our work with hundreds of RIA's over the years, the number of firms that change their tech stack the first three years is astounding.  Save yourself a headache later and make time for this critical component of your RIA planning. 

If your firm is using Eclipse trading system through Orion, household level modeling and rebalancing is a breeze.  Read below on why your firm should consider switching.  Connect with us for a tailored project plan to migrate from account level to household level modeling.  

Being tax-efficient when trading can leave more money in your client's pockets.  If your firm has not implemented tax loss harvesting into your investment strategy for clients, you may be at risk from competitors offering this service as part of their sales strategy.  

If your firm is new to Eclipse and ready to jump on the tax alpha bandwagon, be sure to consider the following first.  Eclipse is a powerful tool to utilize for tax loss harvesting, but keep in mind the settings within the system are robust and complex.  For a tailored plan on Eclipse implementations or revamping your investment management strategy within the system, contact us for support.  We take pride in being among the first users of Eclipse during their Alpha and Beta testing periods, years before it was offered to all Orion users.  In fact, the tactical tool has features built specifically off our feedback.  Contact us today for more information.