Challenges and Tactics to Scale Your RIA, OCIO, or Institutional Investment Firm

Growing an RIA, OCIO, or Institutional Investment business is becoming increasingly complex, especially as allocations to private and alternative investments continue to grow. You could spend 60,000 man hours and $3,600,000 per year ($60 per hour on labor to process 50,000 documents a month) to manage the recurring reporting and performance documents, according to recent research

Most RIAs and OCIOs are still employing manual processes to manage all of the data and reporting workflows for their alternative investments. As you can imagine, as firms grow their businesses and add more clients, scaling these manual workflows presents significant challenges. Below, we outline a few of the challenges we’ve heard our clients and prospects articulate. We also provide some insight into how some firms are beginning to explore automation technologies in order to scale more efficiently, ultimately allowing them to provide better, more reliable service and experience for their clients. 

Challenges to Scaling

Here are the three major obstacles we see most often: 

Human Resources

When dealing with alternative investments that require manual performance reporting, most RIAs and OCIOs believe that increasing employee headcount is the only way to support growth. It’s simple math: more clients mean more alternative investments to manage, and that requires more people to manually process reporting documents. 

With additional investment in human capital, it becomes almost impossible to scale your business while maintaining both employee and client satisfaction. Moreover, with fee margins continuing to be compressed, firms are faced with the difficult choice of hiring a new employee or team or dumping more work on existing individuals at the risk of reduced quality of work and employee dissatisfaction.

Unfortunately, most firms choose the latter option in the near-term (pushing more work to existing employees), and this results in employee turnover and churn. Operational professionals don’t see any way to escape a growing amount of data entry work, although investment professionals are hired to manage investment portfolios, not punch keys and enter data.  

Technology Adoption

In the recent past, technology vendors and service providers have offered a variety of solutions that aim to reduce the burden of manual reporting, but these solutions are highly fragmented. There has never been a one-size-fits-all solution for the unstructured information that comes along with investing in alternatives. 

Many RIAs and OCIOs feel burned by technology providers and systems that quickly become obsolete as their portfolios grow. This painful fact makes it difficult to obtain buy-in internally to implement newer products that solve this particular challenge. Firms can get caught up in adopting the hot new technology while losing sight of the specific problem at hand. 

All of these factors have led to a greatly enhanced skepticism throughout the procurement process, making it more difficult for operational teams to gain internal buy-in for the products that can really have a positive impact on their businesses. 

Scalable Processes

With a business built on managing custom portfolios for HNW individuals or Institutional Investor portfolios, most of the work is bespoke. The reality is, there is little room for standardization that could provide improved service for your entire book. Each new client brings with them a unique set of needs, challenges, and data. 

As competition increases among those who serve alternative investors, firms increasingly market the ability to provide highly customized advice and service, which is expensive and difficult to scale. Behind the marketing hype, it simply means they hire more people to handle the manual processing that is required. 

Tactics for Scaling

In light of the challenges facing RIAs, OCIOs, and Institutional Investment firms when attempting to scale their businesses, we recommend the following tactics: 

Evaluate Human Resource Costs and Alternatives

Evaluate human resources and the time and money spent on managing alternative investments reporting. For decades, firms have built teams to manage the documents and data associated with alternative investments. How much does this really cost? Until now, this has been difficult to determine. 

Through conversations with hundreds of allocators and alternative investors, Canoe’s team has an intimate understanding of how to estimate the true costs associated with these traditionally manual processes, including document ingestion, categorization, extraction, validation, and delivery.

Canoe is the first technology that automates highly frustrating, time-consuming, and costly manual workflows related to alternative investments. Powered by AI and intelligently built specifically for alternative investments, Canoe can ingest, categorize, extract, validate, and deliver important investment data to control your workflow and efficiently grow your business.

Turnover is costly to RIAs, OCIOs, and Institutional Investment firms. Employing smart automation frees up human capital to focus on growth opportunities, not mind-numbing data entry tasks.

Locate Weaknesses in Current Tech

Look for weaknesses in your current tech stack and understand the available options. Due to the unstructured nature of reporting documents from different alternative investments, the task of separating, collating, analyzing, and recording this data by hand is quite cumbersome. 

Moreover, firms are generally looking for tech solutions that solve specific problems or perform specific functions in their workflow. Due to the problems with tech in the past, any new product, especially one that boasts to perform several tasks, is viewed with skepticism. But that’s what makes Canoe different. It was developed by allocators and investors who have faced the same problems, and it solves a particular complex problem we know all allocators face. 

With Canoe, you can ingest any reporting document, categorize it, extract relevant data points, validate those data points, and deliver the data to the relevant systems of your firm. Instead of purchasing individual tech tools for each step that require complicated steps to pass data between them, there are solutions that encapsulate all the functionality of several tools in one. 

Streamline Client Relations Activities

Identify client relations activities that can be streamlined. These are typically the manual components of managing client portfolios, especially managing documents and preparing the final, client-ready performance reports that are so crucial to firm-client relations. 

With the right software tool, your firm will also gain the ability to quickly and easily reference the original investment documents, which are often mislabeled and saved in inaccessible locations. They can all be stored securely, accessed easily, and collated to prepare the necessary reports for fast and accurate client service. 

While firms may market their customized reporting as a differentiated offering, the sheer amount of data at scale that must be fed into these reporting solutions is often the most time-consuming part. There are useful portfolio reporting and accounting solutions available, but they require the data to be reformatted before they can perform their tasks. Automating the data delivery into these systems allows firms to focus on curating the truly customized experience their clients need. 

Next Steps

By implementing the three steps above to truly evaluate your current human resources, technology stack, and current processes, many RIAs and OCIOs have experienced efficiency gains and/or seen a path forward to expansion without hiring additional staff.

Are you ready to explore the advantages Canoe Software can provide to your RIA, OCIO, or Institutional Investment firm? Contact us today to schedule a demo of Canoe tools and services.