How New Technology Generates Revenue and Increases Profitability for Home Offices

Most of us know the “conservation of energy principle,” namely that energy cannot be created or destroyed – it can only be converted from one form to another. While we are quite sure the great scientists who recognized and built upon this concept (Isaac Newton and Albert Einstein, to name a few) were not thinking of how it applies to the financial services industry, nonetheless it does apply. This principle benefits home offices and OCIOs in bringing on top advisor groups and growing the firm.

Innovative technology helps home offices attract advisors

Technology is a compelling way for home offices to enhance the value they offer, helping them to attract new advisors and the revenue they represent. Providing innovative technology helps home offices to do the work (expend the energy) that advisors would otherwise have to do themselves. When advisors no longer have to manage and support their own technology platforms, it frees up time and energy that they can then use elsewhere – to provide a higher level of service to their clients and grow their practices. Home offices with strong technology tools can say to advisors, “We have vetted these platforms for you. We have handled the contract negotiations. We offer turnkey solutions, ready to use on day 1.”

The ability to offer strong technology platforms clearly increases a home office’s value proposition, however, the opposite is also true; home offices that do not keep up in terms of their technology offerings are at a disadvantage in attracting top advisory teams. According to RIAIntel, a growing number of financial advisors are outsourcing investment decision-making (e.g., to home office/third-party strategists)[1], and an increasing percentage are looking for home offices with strong technology offerings.

A case in point: When Bel Air Investment Advisors joined Hightower in early 2021, the President of Bel Air Investment Advisors, David Sadkin, noted “Joining Hightower will enable us to continue to operate and build our platform while leveraging the firm’s strategic advice, scale, technology, and infrastructure. This will allow Bel Air advisors to fully focus on providing distinctive investment advice and services to our clients.”[2]

Focus on fixed income investment technology

With all due respect to the complexities of equity investing, managing the fixed income portion of clients’ portfolios can take a disproportionately large percentage of an advisor’s time, especially compared to its size in the portfolio. Financial advisors with fairly sophisticated in-house fixed income capabilities can easily spend entire days every month on manual portfolio management tasks. For example, it can be onerous to optimize each account for compliance and investment targets or to best allocate primary or secondary market purchases across accounts while staying within compliance restrictions. Even financial advisors that use an outside asset management firm to do their actual investing have to contend with time-consuming reporting for clients.

IMTC helps investment managers streamline fixed income trade allocation and portfolio optimization across accounts. Read how we help fixed income managers with allocation at scale.

A home office that can offer easy-to-use, highly scalable solutions for fixed income portfolio management differentiates itself from the competition and allows them to pursue financial advisory teams with strong fixed income capabilities. It expands the home office’s offering beyond research, model portfolios, and back-office support to include modern portfolio management tools that are specifically designed for the realities of fixed income. With low interest rates and the pressure to charge lower fees, fixed income managers (taxable and tax-exempt) need innovative technology to continue to provide the value they have in the past. Having the right tools allows OCIOs to adjust and develop new strategies as part of their standard services, a capability that adds more value to financial advisors and their clients.

Grow AUM without ballooning headcount

OCIOs want to bring in more assets to grow the firm, but without systems to help scale, it could require the firm to increase headcount at the same pace. With the right technology, an OCIO can expand its capacity without having to add more portfolio managers, and without degrading the level of service they provide to advisors. Teams can scale up quickly, handle more assets, create more custom solutions, and confidently pursue new business without having to inflate the firm’s operating costs to manage a growing asset base.

As we noted in a recent article on the top barriers to performance for fixed income managers, there are no economies of scale when each new client or an increased allocation requires more time spent manually updating portfolio metrics, checking compliance, optimizing, etc. Without scalability, a firm is limited in its ability to increase AUM and handle more accounts profitably.

In sum, technology is a key differentiator for home offices and OCIO teams.

• Innovative technology helps home offices attract advisors – By providing an integrated suite of technology tools (including the requisite contract negotiations and implementation), a home office enhances its competitive positioning and frees up advisors’ time.
• Active wealth management needs to offer customization at scale – Modern, flexible technology to scale active fixed income portfolio management is essential. In order to provide the value-add demanded in the market, OCIOs need to offer strategies tailored to each client’s desires and that’s only possible with technology.
• Grow AUM, not headcount – Technology is not an end in itself. By offering strong technology platforms, home offices and OCIOs should be able to improve productivity, i.e., to increase the number of accounts and AUM without having to increase headcount by the same factor.

IMTC streamlines fixed income workflows and enhances visibility across accounts, giving home offices and OCIOs the ability to manage more accounts efficiently. Our investment management system gives home offices a competitive advantage, providing economies of scale that increase profitability. Being able to offer technology to reimagine fixed income investments helps our clients to become industry leaders and grow more effectively.

1. [1] RIAIntel. Asset Management’s Latest Worry: Advisors. 2020
2. [2] PR Newswire. Hightower Acquires Bel Air Investment Advisors from Fiera Capital Corporation. 2021

Technology is only as good as how it is used. IMTC is designed by and for fixed income professionals, empowering them to take action and make decisions quickly and accurately with real-time data and analytics capabilities. It allows you to future-proof your business; driving operational efficiencies, mitigating risk and delivering performance, to ultimately enable business growth.

This paper is intended for information and discussion purposes only. The information contained in this publication is derived from data obtained from sources believed by IMTC to be reliable and is given in good faith, but no guarantees are made by IMTC with regard to the accuracy, completeness, or suitability of the information presented. Nothing within this paper should be relied upon as investment advice, and nothing within shall confer rights or remedies upon, you or any of your employees, creditors, holders of securities or other equity holders or any other person. Any opinions expressed reflect the current judgment of the authors of this paper and do not necessarily represent the opinion of IMTC. IMTC expressly disclaims all representations and warranties, express, implied, statutory or otherwise, whatsoever, including, but not limited to: (i) warranties of merchantability, fitness for a particular purpose, suitability, usage, title, or noninfringement; (ii) that the contents of this white paper are free from error; and (iii) that such contents will not infringe third-party rights. The information contained within this paper is the intellectual property of IMTC and any further dissemination of this paper should attribute rights to IMTC and include this disclaimer.