Vendor Management Best Practices for RIAs

October 26, 2020 - Samrat Malakar

Good vendor management is about reducing complexity, and RIAs can minimize hassle and control costs by keeping a close watch on all systems and service providers.

We have long advocated the benefits of leveraging third-party vendors, as RIAs can enjoy cost savings, increased efficiency and scalability.

And advisors have taken notice. According to a TD Ameritrade study, 71% of advisors outsource at least one function.

Furthermore, there are all kinds of cloud-based systems and applications to help firms become more efficient, like our turnkey asset management platform, TAMP1.

How well you leverage third parties is key to overall efficiency and ultimately achieving organizational objectives.

However, if you don’t manage your vendors well, you will waste resources and see little or no improvement in processes. Consider these vendor management best practices below.

Vendor Management Tips for RIAs

Periodically Review Your Vendors

Within an investment organization, there are a lot of moving pieces. You’re working with different software and service providers, and RIAs should always do their due diligence.

As we mentioned above, these vendors can certainly be helpful in reaching organizational objectives, and their presence can be of utmost necessity.

But from time to time, it’s important to review the vendors. Are you still getting the value you expect?

For instance, have you ever purchased access to a database or an investment research platform? How often are you using it?

Are you using legacy technology? Does it fulfill all functions you need performed?

Do you work with third parties in investment strategy, sales, marketing, or compliance? Are they delivering?

Is there any risk associated with these vendors? Are they operating in a way that is compliant with industry requirements? Think about areas like licenses/certifications, security, transparency, and references/testimonials.

Put time on the calendar and have conversations with team members who use these systems and work the providers. Decide who and what to keep, as well as what to move on from.


Converging arrows

There are a lot of solutions out there, but if you’re not managing vendors well, you might run into a host of problems:

Find vendors that can help solve these pain points. Let them know your pain points and what you’re trying to achieve.

Consolidate as much as you can. As part of vendor management best practices, it’s better to manage fewer moving pieces in as centralized of a manner as possible.

Keep Track of Renewal Dates

If you no longer need of a system or service provider, keep track of when your contract ends. Do this with all vendors. If there is a certain timeframe you have to notify the vendor of your wish to discontinue, put a note on your calendar or set a loud reminder to take action.

So often what happens with a piece of software or application is that it might be used a lot at the beginning, but then over time, usage falls. Soon enough, the system is out of sight and out of mind.

If you’re not careful, your subscription or account membership will automatically renew for the next year. And because the new billing cycle has already started and the fine print said you can’t be refunded, you’re stuck.

Learn more about how some third parties take advantage.

Keep Cards on File Up to Date

Maybe you are happy with your third-party solutions.

It would be terrible to have services disrupted because of an expired credit card on file.

An expired credit card could deny you entry into systems when you really needed access. In other cases, like a website, the page will be taken offline. Prolonged site downtime is bad for business, as we mentioned in a previous post.

And if you fail to renew the domain after a certain period of time, that URL is back on the market, ready for a new buyer.

Just as you keep track of dates when contracts expire for services you’ll no longer need, you also want to track expiration dates for things you do need.

Put a reminder on the calendar for when a new payment is needed or set up automatic payments if you prefer. Put reminders in your calendar or CRM system for when any cards on file are set to expire.

Sure, activities will resume once the new card is on file, but why allow for disruption when it can be avoided?

Maintain Control of the Relationships

Reducing complexity is a key component in vendor management best practices.

RIAs can do that by reviewing vendors periodically, determining who and what is really needed. In addition, they can consolidate systems and look for all-in-one solutions.

Tracking contract and credit card expiration dates are also important steps for managing vendors. You don’t want to end up pay for things you don’t need or lose access to services you are willing to pay for.

By following these practices, investment advisory firms will keep minimize costs, maximize efficiency, and avoid unnecessary hassle.

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