Come on in and sit back relax, you’re listening to Episode 163 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting and this podcast features interviews, news and analysis on the trends and best practices all around Wealth Management Technology.
Before we get into the interview, if you are listening now you’re an executive at a broker dealer, an asset manager or an enterprise RIA you should run not walk to a website, EzraGroupllc.com and fill out the Contact Us form on the homepage to meet with us about your technology platform issues. Our experienced team can assist with software vendor evaluations systems integrations, improving operational efficiency, software implementations and a whole lot more. You can take advantage of our free initial consultation offer by going to EzraGroupllc.com.
Topics Mentioned
- Innovation Through Integration
- Software Buying Decision Criteria
- Software Vendor Red Flags
- Get the Consultant’s Perspective
Episode Transcript
Craig: I’m excited to introduce my guest for this episode. It is Pete Clemson, Chief Digital Officer at Advisor Group. Pete, welcome to the program.
Pete: Morning. Great to be here.
Craig: I’m happy you can make it. I know you got a very busy schedule. I’m so glad you agreed to give us some time. We are talking about broker dealer enterprise software buying decisions, horror stories, advice, best practices and really glad you could spend some time with us. So you’re the Chief Digital Officer at Advisor Group. Where are you calling from?
Pete: So I’m joining you from Evanston, Illinois, first town north of Chicago. And I’ve been in Evanston for over 25 years
Craig: That’s a great part of the country. I love the Chicago area. I’m in New Jersey myself. But the power of Zoom brings us together. So at Advisor Group being the Chief Digital Officer, how long have you been at Advisor Group? Not very long, right?
Pete: Correct. I joined about 20 months ago,
Craig: Nearing your two year anniversary. I’m sure it’s like drinking from a firehose. Advisor Group has been our client in the past, there’s so much going on there.
Pete: It’s been it’s been quite an experience, just really learning a ton. And also having a lot of fun applying all the different experiences I’ve had in the past to this one job. So it feels like one of those Capstone moments where an awful lot of great stuffs been coming together.
Craig: That’s terrific. And just like a quick introduction, you’ve got 20 years of experience in just fintech. 25 years in FinTech, can you just give us a quick little overview of how you got to Advisor Group?
Pete: Absolutely happy to talk about that. So I I had one of these careers where I’ve been all over the place. And back to that idea of bringing it back together. So started with a consultant at Price Waterhouse, worked at Freddie Mac got exposed to mortgage finance, 10 years at Bank of America, finance MBA out of Kellogg. I ran IT for Options Express, which was an online retail brokerage company that was then purchased by Schwab and then spent six years at Schwab, running a huge chunk of their tech so I reported to the CTO there and ran the schwab.com property, the retail mobile apps and their retail trading apps. Then had three of what I think was the most fun years of my career today running a startup and after that joined Advisor Group in January of 2021, and now really enjoying this next phase as we put together all these different FinTech business and tech type experiences.
Innovation Through Integration
Craig: What a great career so far fantastic. I mean it’s always exciting to hear from people and how they’ve moved to the industry and what they’ve learned and it’s always interesting. So going back to our topic, at Advisor Group or other companies you’ve worked at, we’re talking about enterprise software. It’s hard to implement, it’s hard to decide on so what in your experience how do you know what some of the things you look for when you think it’s time to replace a major software application?
Pete: So it really depends on the company and where that company is in the journey. And part of why I’m so excited to be with Advisor Group right now is we’re in a phase where we have achieved significant scale. With that scale. We have tremendous momentum and so we’ve gone through a very rigorous progress process by which we’re setting as you would expect, but that doesn’t happen as often in life is when we think is a very clear long term strategy. And with that long term strategy, we’re then very carefully applying all of our different decisions around enterprise software against that strategy. So we’re very clear goals internally. We’d look at those goals. We look at our different software experiences today. We have a very rigorous model by which we’ve looked at where do we feel we are absolutely leading, where we kind of middle of the pack and where do we think needs the most investment and then very strategically going through and applying that and then as we look at those different pieces, really, with every single one, it’s always that classic buy, build or rent the solution. And we use those models to then drive our decisions forward.
Craig: So what are some of the key aspects we’re looking at buy, build or rent? That’s the kind of project we work on a lot with with companies as well. What are some of the things you look for in deciding whether to buy build or rent?
Pete: Yep, so it gets back to, again, very standard models of when you’re looking at what you do as a business. What’s going to differentiate you? Where do you need the most control? And then where do you believe you can tap into either internal economies of scale versus external economies of scale? And so to that very clear examples, strategically, we’ve said, we know we want to be right in the middle of our core data to make sure that we’re connecting all of our different systems. So we focus a lot on the idea of innovation through integration. And that gets to the notion of building an enterprise model that looks at all the different fintechs that are out there, and says there are certain areas such as getting in and really managing your core client account data, where we know we have to be doing that internally. Similarly, we want to make sure as our clients come in every day and do their work, the way we need to position ourselves to help them grow faster, is to make sure that that’s easy. So we’re driving to one single pane of glass by which they’re starting their business day and using that to look at their business metrics. Jump into different apps or get into the core process of client account maintenance. So those are things we know we have to build and control.
Pete: On the other side of that we see tons of great innovation in a number of different areas. So we’re always looking at more of a plug and play type situation in those areas. And similarly when there’s enterprise solutions out there obviously CRM is a space where there’s just been tremendous investment across different platforms. Those are areas where we believe we want to outsource that type of functionality, obviously build key connection points into the different platforms, but really give our clients the financial professionals, the ability to choose what they believe is the best product for them and then plug that right into our platform.
Craig: So things like the Core Data Platform, clearly internal, gotta manage that that’s going to be a requirement for advisors to use, but things like CRM, maybe they can pick and choose which CRM they like to use.
Pete: Exactly. So pick those similarly, when you’re looking at financial planning and looking at different software to assist with that process. Again, we want to give the ability to put those different products that they can plug into their overall process.
Craig: Mentioned innovation through integration, what are some of the ways you look for specific integration capabilities when you’re evaluating enterprise vendors and what some of the things that that might be a red flag, we say, Hey, we’re not going to work with these guys because of this.
Pete: Absolutely. So at its simplest sense, the first part of that is the level of integration. And so we will look across and you have just a simple jumping, it’s the single sign on a new package. Are you bringing in widgets from the more sophisticated more further along fintechs where you’re literally loading a widget onto our financial professional dashboard or onto the end client dashboard? Or are you doing significantly deeper integration with API’s where you’re making data calls out, and really doing deep integration with these different platforms. So that’s that first level is the level that we want to integrate.
Pete: Then what you also talked about, there’s obviously a very rigorous review just around, we live in a world where data is everything. And you have to be incredibly careful about how you manage and control and protect that data. So huge other piece to that is making sure that you’re working with groups that we’ve gone through the right diligence and review process, really vetted out their security and platforms and gotten comfortable that this is a partner that is absolutely performing at the level that’s required to maintain the security we need in this industry.
Software Buying Decision Criteria
Craig: All very good. Things do you want to do, and something we know a lot about with integration we’ve built out, we just launched our wealthtech integration score to help vendors and help firms like Advisor Group, look at different applications and compare them their integration capabilities. So it’s something we’re definitely on top of just like you guys. So let’s talk some more about buying decisions. So when you’re making a buying decision on an application, that’s that’s going to be affecting the entire enterprise. Something that we all know is not an easy decision to make. But some of the criteria you use besides of course, the recursive use of security and integration. What are the some of the other criteria you look for when making a buying decision? We’ve got two vendors are both very close. It’s an application you’ll be using for many years. What’s the criteria helps you decide which one to pick?
Pete: Yeah, I think it goes to all the things you would expect so kind of first and foremost, especially given my bias having a career really focused and digital experience is, is it giving you the experience that you want and expect and within that experience? Also, there’s a huge momentum element sort of the classic when we think back to the days when people do comparisons of the different video games, you look at the 80s, 90s, 2000s and each certain different player in those industries leapfrogged the prior one, right, so you want to be getting on the platform that is the one that’s really going to be setting the trends going forward. There’s a balance there, because again, you also want to be in a proven platform, back to kind of what we do in an art industry is it’s essential that we’re building the right software that’s meeting the needs of our client. To do that. You want to be right in that sweet spot where you’re in a positive moment until you’re seeing real growth, but you’re also not taking outsized risk risk and potentially picking sort of the flavor of the month type solution or a flash in the pan and really connecting in with long term groups that you believe are going to be on that path to success that will really partner with us. As we’re growing, moving forward and building all of our next gen platforms.
Craig: Oh, excellent advice. When you’re talking about positive momentum. Can you describe that a little bit? How do you know when a firm has positive momentum versus just marketing hype?
Pete: Yep, so easy way, right is to look at where they are in the industry, right? Are they expanding their footprint? Are they clearly on a growth path? Do they have a significant role today in the industry, and when you assess them against their competitors are you seeing that they are a leader and moving forward? Because back to our model, we view ourselves absolutely as the leader in the industry and we want to be partnering with similar institutions.
Craig: So how do you know when something is a trend that there are a couple of that they’re not proven yet? But it’s something you think, is ahead of the curve and could really provide a differentiator for your firm?
Pete: Yep. So one simple way is to look at the broader data. So one of our pushes right now is to make sure that from a service model perspective, we’re evolving to a true omni channel experience. We want to make sure as we move forward, that when we’re giving service to different groups, that they’re getting that through whatever means is their preferred mechanism to have that information. That kind of decision is really based out of much broader industry research. So we’ve gone through as I mentioned, at the beginning of a call a very rigorous process to develop our long term strategy and element of that process that was run by our head of strategy, who recently joined us was to go through and really look at the industry research both at a broad based level, so pulling data around how are different customers using different channels today? And then we also hired an external consultant to then specifically also help us assess hey, let’s look specifically at the industry and at the different trends in the industry to the different players. All of those pieces come together where we validated it’s common sense, but it’s always good to validate it with data that you can see these shifts to this clear omni channel expectation. As people are getting more and more involved in tech at all levels. They expect that they can connect in through these different ways. And then we can see it inside the industry as well as as we move forward which validates and therefore you want to then pick a partner that’s really helping you in all of those elements and in those ways.
Software Vendor Red Flags
Craig: Excellent. Let’s talk more about red flags. So this is something that can jump right out at you. You’ve got a vendor, they’ve got a great product. But what are some red flags you’ve seen in the past that would make you shy away from working with that vendor?
Pete: Yep. So I think the first place back to it is having had these experiences in the past with certain vendors. You can certainly see moments in time when people place the wrong bets, right? And and groups get entrenched in these places that that are not surviving. So if I went all the way, way back in my history, clear red flags early on were next servers.
Craig: Steve Job’s company next.
Pete: Yes, that’s the one and interestingly, the trading companies that I was involved within that time, were very heavy users of those next servers. And that process pretty early on there was writing on the wall that that business was was basically not viable yet. There was huge installed bases of those servers. That’s a problem, right? And that’s a great example of when you need to look and you would think this company is going to be around forever, and in reality, it’s not and they’re oddly even all the way 10 years after next was out of business. There was a huge secondary market of people buying and selling next servers. As they were trying to deal with these problems associated with very old tech that was clearly not supported by any current company. And so simple example, but it plays out in much more subtle flavors as you’re looking at Partners and going to pick them.
Craig: So can you go a little more deeper? So what you’re looking at partners, what are some of the other subtle things you see, besides old technology running? Nowadays you don’t have that right? Everything’s in the cloud, pretty much. So hopefully I don’t see that anytime soon. But what are some of the more subtle ones that you’ve seen in your history that raised red flags with vendors?
Pete: And interestingly, I think there’s huge parallels to how when you’re when you’re looking as as an organization, I’ve always picked groups that I feel really believe in invest in their talent. And when you think about talent, and that group, a huge element, obviously is is recruiting which is really building a partnership, and then validating what you’ve learned from that experience process, which gets into the reference checking. And so again, one of the subtleties but it seems obvious yet I think people often get caught up and don’t realize this really understanding how different installations of that technology has been applied to different areas in the industry today, and through decent research, it’s pretty easy to find out with prior installations prior partnerships, are those good partnerships or those bad partnerships to people truly value in view, the sort of company that you’re looking at, that is somebody you want to be doing long term business with, or was there a total mismatch in pre sales expectation versus actual implementation and experience? And so it’s that detailed research processes you’re looking across, and really understanding how has this worked with past models that that I think leads to the best purchase decision.
Get the Consultant’s Perspective
Craig: All great advice. And one thing you can also do is talk to consultants, which you guys have done you brought in some consultants so we tend to know a little more you were a consultant as well. We tend to hear a lot of things. I describe the consultants kind of as priests, people tell us everything, and we try to keep a lot of secrets. But we will tell you some things if you need to know things we don’t like or things because we want you to be successful. And we wouldn’t want our clients to be working with technology that we think is not right for them. So we will give you the stories if you’re asking us for them.
Pete: I mean I think that’s a fantastic call out because to your point in that group, and I refer to some of the research we’ve done in other spaces. This industry, the level of complexity is off the charts. And within that, and due to that complexity, solutions tend to be far more unique than one would guess. And within those solutions, understanding how they apply to our business model. When you live in a very complex space that is highly regulated. With just vast numbers of third party partners out there playing different roles in the different value chains. Having that experience from a consultant can really change the game in to your point, especially as you build long term relationships with different consulting groups that are value add partners. You really do get a perspective that can help you make the right decisions. And just as importantly, really avoid making the wrong decision which can be disastrous.
Craig: I agree build long term relationships with consultants. I support that 100%.
Pete: There’s real value there I believe deeply you have to know how to use them, right, back to the process. You should be looking for expert advice and advice that’s really going to be giving you an outside perspective. And in my mind, that’s the perfect place to be applying and leveraging a consulting model.
Craig: So let’s say you have decided that a certain technologies isn’t cutting it. It’s not helping you differentiate, maybe the maybe the vendor is losing positive momentum, even though it’s an existing proven product. How do you decide whether you should give them a chance and let’s see if they will upgrade it or replace it or build something internally or enhance it?
Pete: Yeah. So this comes all the way back to our broader strategy. And part of our strategy is when we’re looking at all of the different areas where we want to invest, right and it’s a classic, invest, maintaining, divest type model. You look at that model, and then you look at the different areas of your platform and what’s going to move your business metrics the most. And at the end of the day, the simplest thing that we always come back to is, what’s the next thing that we can do? That’s going to help our clients growth faster? Right, that is the core of who we are into our mission statement is we want to support an entrepreneurial spirit. So when you look at entrepreneurialism, and fast growth, we then take that model, look at our current infrastructure and our current experiences. And then it becomes simpler than one would guess. Because you can look at certain places and say, Hey, this is not working. And this is now having the most acute impact on these metrics. So that’s the next area we’re going to focus and we’re going to change that out and back to having lived through this especially my Bank of America days, being in a highly acquisitive industry, right across all the platforms I’ve always been engaged in. Similarly, running it for Options Express, which was then absorbed by Schwab. In each of these experiences you see that all of these financial services companies really are this bringing together multiple different acquisitions and mergers, that creates very complicated infrastructure with parallel systems. And so you have to be very thoughtful about when and how you consolidate which pieces you put together. And all of those decisions again, at least in my experience, should really be driven by which next piece of investment is going to give you the most lift to further improve your clients experience.
Craig: How do you measure lift? So obviously you you want to have the investments that provide the most benefit to your clients. I know just to tune an Advisor Group sworn you guys built out your own tech combination of vendor tech and your own tech called equipped which was an onboarding tool, which was brilliant. I wrote about it. Just really well done. You’re taking the best of your external vendors and building on top of that to make it your own. But how do you know when you’re when you’re looking at these different applications? Which one which what kind of measurements do you use or metrics do you use to measure lift?
Pete: Yep. So it’s both pure data and anecdotal data. So on the pure data side, it’s really easy. What’s your adoption level? What level are people using? You’re straight through processing, you refer to equipped, great example there. It’s a product that in under 15 minutes, an advisor can go through a digital process where they’re doing in office work, but using digital platforms go through straight through process open that account, their client can digitally sign in that process, funding instruction submitted the whole thing. Easy to know that that’s better than filling out a paper app. But the metrics behind it are what race are you seeing a people transitioning their businesses over because back to habits there’s some people who love paper so to that process, how you walk them to that space, how we get more and more people to be in that digital world because long term, I think what we will all evolve to and see as it is built right, thoughtfully with the right levels of security, things like multi factor authentication, having all of those worlds controlled tightly in a digital realm versus pieces of paper floating around in the mail and in the trash and all these different places. It’s a better model. It’s a more efficient model saves a whole bunch of trees, measuring the process by which you’re getting to that place. And then ultimately, really back to measuring feedback from your clients. And again, that’s a lot of conversations. We build very tight relationships, meet with our different clients take their feedback and verbal you know live format, but also through surveying them to make sure that we’re focusing on the right areas, and very active listening and then through that listening, just constantly focusing on Hey, what’s the next area of friction, where we can be helping to move the needle?
Craig: Active listening is definitely a consulting consultant skill set. Got to do that. So I’m sure super valuable and what’s the next area of friction that’s a great buzzword mean it’s a it’s a buzzword friction used, but a frictionless experience. But do you find that sometimes these these buzzwords get used too much?
Pete: For sure. And the the real part with that right is they’re often oversimplifications. And then they evolve into kind of views that that I think can lead to misunderstandings. So, back to my own personal evolution. And an example of that is the world get very caught up in the idea of robos. Right, and a robo advisor is going to solve everything. It’s frictionless super fast. But what you quickly realize is when you’re in a world like ours right now, where you’ve got very high inflation Fed is cranking interest rates like there’s no tomorrow and in the middle of that there’s still a lot of cash floating around unemployment is low but yet we’re seeing the markets do just insane things right. These gyrations up and down are off the chart. Well, you want to talk to somebody, you want a person.
Pete: Back to kind of my view in reality is it comes all the way back and it was I was in grad school. Very cool experience. Bill Gates came and spoke to our class. And he talked about reaching a day where you’ll know we’ve evolved to kind of that next generation where computers have become so ingrained in our experience that you don’t even notice they’re there. And back if anybody’s test driven some of the most recent digital cars, and EVs is just in one of the Kia Ev6s is to try it out. The amount of tech in those cars is unreal. And you almost forget that you’re basically sitting in a computer.
Pete: Well, to that process into our industry where I think it’s very different is the tech should really be facilitating more and better conversations between an end client and their advisor. And that’s where this friction idea gets a little misleading because what you’re really doing is you’re getting all the noise out of the way so that you can get to the real conversation. That drives how are we really going to create a holistic wealth management plan. In that process of doing it, how are we going to pull reams of data together and then display it in a very easy way? And I think that’s where tech places huge role that it just makes the conversation easier. Makes it easier for the financial advisor to get out to a broader set of clients and have much better, more effective conversations with them, that then tightens that relationship. So it’s kind of a funny play that you put more tech in, but if you’ve done it right, you’re building a relationship versus what I think was a false kind of step and view in the industry of hate. We’ll live in a world where computers will do it all and that’s not the answer, in any shape or form.
Craig: One thing that I wrote about a while back when robots were first starting was it’s an it’s an inevitability in every industry that technology is coming we’re taking over the lower end tasks. And working that up, but what’s gonna forces humans to do more of value to find new ways to add value, whether it’s travel agents, or shopping, whatever you’re doing? And same thing with advisors. So as you mentioned, you’re building a deeper relationship because it’s forcing advisors to get out and do more and find more value and be more holistic because they can’t do what they did for many years, which is build a basket of mutual funds or ETFs. and be done with it. That because that’s basically free now.
Pete: That’s right. I think when you get to that right place, where people are running broad sets of models that have been built by very experienced people and using those models, just as a piece of how you’re having a conversation with your client, and then you’re putting that time into those next pieces and really thinking things in a forward looking fashion. I just think it’s exciting. And great and where tech really is helping.
Craig: If you were to give advice to an executive, maybe a new executive coming in or just got promoted to head of digital at another company or CTO or CIO, what’s something you would say what’s a couple of pieces of advice you’d give maybe your top three things to think about when you’re buying, deploying evaluating enterprise software?
Pete: Number one is deeply understand your clients and their needs. Really go out and listen. Because again, every business in my mind, your decisions are all about the context of where you are. And the best way to know where you are is to hear from your clients. Next piece is understand your business itself. Right? What are the drivers of that business model? Because when you understand the incentives and drivers of the business and the needs of your clients, then you can find a way to build a path and then ultimately, the third piece is make sure you set that strategy that really is aligning your client’s needs, with the way that your business can support those needs. And then relentlessly drive and build to that strategy.
Craig: You’ve set it all you really did a fantastic job. We are out of time. Thank you so much for for talking to us and sharing some of your experience in the industry. If people want to find out more about Advisor Group, they can go to advisorgroup.com and learn more about your offerings and financial services. And really appreciate your time Pete hope to be working with again in the future.
Pete: Likewise, Craig, wonderful to connect with you and just appreciate the conversation. Always fun to talk to somebody who’s been in this industry a long time brings a lot of their own expertise and experience and in person. I just love talking about this stuff. So I really appreciate you inviting me to come and join you for this conversation.
Craig: Happy to, I like talking about it too, which is why I do it every week and I love talking to people like you Pete, so thanks so much.
Pete: Thank you.
