Our From the Desk of the COO series features stories, strategies and solutions from GeoWealth’s Chief Operating Officer, Jack Hannah. This ongoing series will provide insights for those working in, or heading up, back and middle offices. Enjoy these views from our resident Operations Guru, Jack!
Jack, when is it time for RIAs to consider leveraging an outsourced trading partner?
Over the course of my career, I’ve seen what feels like every single scenario imaginable for communicating trade instructions.
I’ve seen advisors send trade details through email and via spreadsheet. I’ve seen them walk trade instructions down the hall, written on a piece of paper and handed directly to the firm’s trader. I’ve seen them write trade instructions on a piece of paper and then take a picture of that piece of paper, and then email it to the middle office team.
As firms grow in complexity, add new advisors, and introduce more sophisticated investment strategies, managing trading in-house can become cumbersome at best and risky at worst. The potential for human error to impact trade execution increases along with the number of communication styles and channels your middle office team has to interpret.
GeoWealth set out to solve these challenges by developing the Service Center within our platform, a dedicated communication hub through which we receive instructions from and execute trades on behalf of individual advisors and home offices.
With guardrails put in place to eliminate as many errors as possible in the trade instruction process, even novice investment advisors can easily submit trades, operating with the confidence of knowing we’re double-checking along the way to ensure, for example, the account is tradeable, a minimum has been met, and there is enough cash to execute.
Once the trade ticket is submitted, our team aggregates and blocks all orders before we send them to the custodians. When an order needs to be worked, it’s GeoWealth that handles the interactions with the custodians. This holds for all types of trades – much more than just a new investment request, we can also handle injections of cash, extractions of cash, automatic investing, and systematic withdrawals to name a few – all advisors need to do is submit their order through the Service Center with a few clicks.
I think it’s important to note that as a Registered Investment Advisor ourselves, GeoWealth has a fiduciary obligation to trade according to the client’s best interests, which may not always be the case with an outsourced trading partner.
If you’re on the fence about whether to outsource trading or keep it in-house, my best advice would be to ask yourself this: Where is your time best spent?
The answer is almost always with your clients, developing their financial plans, or working on prospecting efforts – and almost never on the phone with a trade desk.
Until next time! Thanks,
P.S. Got questions? Want to chat through your current operations headaches? Hit me up at firstname.lastname@example.org.
MORE IN THIS SERIES:
- PART 1: My Path to COO and What I Learned Along the Way
In the first installment of this series, I detail the journey from my very first job right out of college on the bottom rung of an RIA firm to my position now as Chief Operating Officer at GeoWealth and everything in between.
- PART 2: The Top 4 Operational Bottlenecks at RIA Firms
In this article, I identify the four most common operational roadblocks I’ve seen get in the way of RIA scale and growth, as well as how to address them.
- PART 3: 3 Operational Risk Factors Creating Liabilities for RIAs
Operational risk factors can cause significant – and expensive – liabilities for RIA firms. Here are the top three biggest offenders.
- PART 4: The Evolution of RIA Operations
I take a look back at the way it used to be (PortfolioCenter, anyone?) and highlight the major strides we’ve made in trading, billing, and client experience.
- PART 6: The Power of Sleeving and Unified Managed Accounts
Sleeving, or housing multiple models in one account, enables advisors to consolidate a client’s investments, reducing their operational challenges and simplifying reporting.
- SEE ALL