A Case Study for Independent Financial Advisors

The Situation

As a growing independent RIA, my administrative load was becoming overly burdensome.  I wanted professional money managers for my clients, but using third party strategies in SMAs were expensive, required high minimums, and necessitated opening accounts at various custodians. It also took days to establish and days to liquidate these portfolios.  For the accounts I traded internally, it took 3 days to trade them all by the time I entered the account, put in the trade, received the confirm, and then moved to the next account. This made it hard to maneuver during significant market events, like the election. As my firm grew, so did the admin as I was not set up to scale.

How SMArtX Provides a Better Solution

The issue outlined affects several RIAs who have seen growth in their client base, but not in their technology.  What used to work on a small scale is now a yoke weighing down the firm.  SMArtX works with RIAs like these to provide efficiency in their internal systems with:

• “Click to allocate/liquidate” functionality for third party strategies, in addition to research and portfolio construction/analytic tools, all within a UMA structure.

• Automated, real-time trading executed by SMArtX for all third-party strategies

• ‘Advisor as a PM’ portfolio construction and drift parameters that combine third-party strategies and individual securities into a single portfolio and executed simultaneously across multiple custodians and client accounts.

• Cash management tools for immediate and scheduled raising of cash for distribution, as well as pre-set allocation of deposits to eliminate “cash drag” on performance.

• Individual lot tax harvesting to maximize after-tax returns, featuring account householding, automated wash sale rule monitoring, and substitution functionality.

• Individual securities exclusions to prevent an account holding a security due to trading restrictions, SRI/ESG mandates, or existing position concentration.

The Results

By working with SMArtX, the majority of the investment management administration was eliminated.  Processes that were previously manual in nature and took days to complete now take minutes.  However, I was still able to retain control of the platform and not abdicate my responsibility as an investment fiduciary.  This freed up more time for me to be able to grow my business by finding new clients.  I was also able to better serve my existing clients as I have better information flow, more maneuverability, additional options for third party strategies, and I didn’t have to incur the additional expense of hiring more people for things like trading and moving client assets between accounts. To top it all off, I was able to save my clients between 30-50 basis points per year by lowering the cost of investing in third party managers.

There is a Better Solution.