The RIA industry continues to embrace technology and its ability to increase efficiency, but the ability to reduce risks may be of greater importance. One advisor technology that can significantly reduce business risk and save time is an order management system (OMS).
Currently many Financial Advisors manage investment strategies across clients’ portfolios with Excel spreadsheets and a manual process for trading. This workflow provides unparalleled flexibility but can also expose an advisor to potential business risks, and be a cumbersome process.
The easiest way for an Advisor to reduce risk is simply by reducing the amount of human intervention. An integrated order management platform will synchronize account values automatically each day and then calculate trade recommendations based on the most current information, preventing cash overdrafts or duplicate trades.
Another benefit of a trade order management system is real-time information. Advisors using rebalancing only systems only have access to previous end-of-day data. These rebalancing platforms limit an advisors ability to rebalance more that once a day and does not provide real-time cash balances. With a true OMS advisors can view accounts with each step of the process, taking into account pending and executed trades.
Manually processing trade files is another limitation to pure rebalancing systems which required manual intervention. Electronic trading using an OMS eliminates the need to create a trade file and upload it to the custodian.
An additional risk is often referred to as the “Bus Factor.” If an RIA has one person with all of the information about an operational process there is a business risk that a key person could leave, get hit by a bus, or be unable to go on vacation if a standardized process is not implemented. By developing a defined workflow process based on a technology platform RIA’s reduce the bus factor risk.
In summary, advisors using trade order management systems with a defined workflow process can reduce business risk, respond quicker to market conditions and deliver a consistent experience across all of their clients’ accounts.