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You’re Not Demanding Enough of Your Vendors

Give vendors problems, not specs. You’ll be glad you did.


You’re not demanding enough of your vendor.

We don’t just mean other vendors. We sometimes think our own clients don’t ask enough of us, and we bet other vendors feel the same. Most wealth managers view their vendors as, well, vendors. They’re there to deliver a product or service. A good vendor is one that does this well and reliably and at low cost. This is all good, and true as far as it goes, but it’s actually a pretty limited view of what the relationship can be.

If you want to get most out of your vendors, challenge them to solve your problems. This is not a new insight. You may have noticed that few vendors call themselves vendors. They’re all “partners.” Vendors sell product. Partners provide solutions. This is so universal that it’s crossed over into cliche, but there’s a core of truth in the “partner” label -- or at least there ought to be.  

We really do think we’re speaking for all vendors when we say this works better for everyone. Here are examples from our own interactions with clients of “starting with a goal” vs. “starting with a spec”:

The Right Way: Starting With a Goal

Here was the a problem: a wealth manager wanted to be able offer each investor customized asset allocations and multiple product choices for each asset class. At the same time, they wanted the ability to quickly implement tactical asset allocation changes and updates in recommended products across all their accounts. They had no way to do this -- when asked how long it took them to implement tactical shifts, they responded “somewhere between two weeks and never.” They asked if we could come up with a solution. We proposed an approach and met with our client almost weekly to get feedback on successive designs and prototypes. The process was efficient, and, frankly, fun (and the functionality we developed, “Target Templates,” became one of our most valued features).

The Wrong Way: Starting With a Spec

A client asked us to round all trades to the nearest 100 shares. It was a simple and clear spec that would have been easy to implement. But the request was made in a vacuum. Why round to the nearest 100 shares?  When we asked, it turned out the goal was to mask that their trades were being generated by a computer (you might wonder why this was important, but that’s another story). The problem with this spec was that rounding everything to 100 shares was not, in fact, something a human would do: you wouldn’t want round trades in Berkshire Hathaway, at $250,000/share, nor would you round trades in a very small portfolio; on the other hand, you might round a penny stock trade to the nearest 1,000 shares. So we built a system that rounded trades to the largest round number that didn’t substantially distort the portfolio, just as a human advisor would do. This was more work for us than simply building to our client’s specification, but it did a much better job of meeting the client’s true goal.

So, on behalf of all vendors, challenge us more. You (and we) will be thankful you did.


For more on this topic, check out The Three Types of Wealth Management Firms.


President, Co-Founder