RIA Compliance and Practice Management Blog

How to Select Technology For A New RIA Firm: Step 4 (General Software)

Posted by RIA in a Box

Mar 27, 2015 2:49:00 PM

When helping an advisor launch a new registered investment adviser (RIA) firm, we are often asked what technology is needed for a new advisory firm. We like to address this question with a 5 step process: 1) review a firm's specific business operations to determine particular needs, 2) establish an initial monthly technology budget, 3) determine the firm's desire to "build" vs. "buy" 4) decide on general small business applications and other infrastructure, and 5) select specific RIA technology and software solutions.

Following up on our previous blog post on step 3 of the process on how to decide whether to buy or build an RIA technology system, we now discuss step 4 of the RIA technology evaluation process: selecting general small business software applications. We generally define general small business software applications as technology that was not designed for the investment adviser industry, but can complement RIA industry-specific technology to complete an investment advisory firm's full technology suite.

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While RIA firms have many unique technology needs, they also share many generic technology needs with many other similar small businesses. Some of these general software and infrastructure needs include:

Per Firm Costs
  • Office internet
    • The options will vary based on a firm's geographic location. While much more expensive and robust solutions exist, we generally see small firms (3 or less employees) spending around $100 per month on an office internet connection. When considering options, be sure that the connection has enough upload speed especially if the firm is utilizing cloud software applications and a voice over internet protocol (VOIP) phone system.
  • Website hosting
    • We see many firms consider Smarsh Sites or other RIA-industry specific providers. Most firms will spend around $50 per month on website hosting. It's also important to remember that an RIA firm's website content needs to be archived.
  • Accounting software

Per User Costs

  • Phone system
    • Most firms now utilize voice over internet protocol (VOIP) providers. There are a number of different providers out there. Costs and the quality of service will greatly vary but we see many firms paying around $40-50 per month per phone user.
  • Email hosting
    • Microsoft Office 365 charges $5 per month per user ($12.50/month/user when combined Microsoft Office applications). Office 365 is a cloud-based solution and allows users to access email via an application such as Microsoft Outlook or via the web. Google Apps is a solution also growing in popularity and begins at $5 per month per user.
  • Desktop software
    • Microsoft Office desktop applications are still the mostly widely utilized in the investment adviser industry. Firms can choose to pay one-time license fees or pay monthly at a cost of $8.25 per month per user ($12.50/month/user when combined with Office 365 email). This package includes the Word, Excel, PowerPoint, Outlook, Publisher, and OneNote applications. 
  • Document storage
    • Most RIA firms today are utilizing cloud storage solutions. There are a number of solutions in the marketplace including Box. Costs will greatly vary from free to upwards of $25 per user per month. When considering such solutions, be sure that the solution has the proper cybersecurity safeguards and user audits and controls.

In addition to the above more common general needs, some RIA firms will also explore these types of technology:

  • Electronic signature
    • There are a number of providers, but the most popular solution in the investment adviser industry appears to be DocuSign. Pricing starts at around $20 per user per month. However, it's important to note that there has not been any clear guidance issued by the SEC or the states as it relates to an RIA firm's use of electronic signatures from a regulatory standpoint although industry adoption continues to rise.
  • Online meeting software
    • Solutions range from free solutions such as Join.me to a more traditional provider such as GoToMeeting that starts at around $40 per month and includes more advanced features.

As RIA compliance consultants, we also want to remind all investment advisory firms that is crucial that the proper due diligence is performed on all 3rd party technology solutions. Performing such due diligence is part of an investment adviser's ongoing fiduciary duty to its clients.

In our next blog post, we will further discuss how to select specific RIA-industry software applications which is step 5 of our 5 step process when selecting investment advisory firm technology. In particular, we will be discussing customer relationship, portfolio management, billing, client portal, financial planning, archiving, and portfolio rebalancing solutions.

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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