This content is from: Wealth Management

‘The Consulting Model for a Recession’: A New For-Hire Service to Replace RIA CTOs

F2 Strategy wants to partner with RIAs for life.

As an executive, Doug Fritz found management consultants to be expensive and not all that helpful. Regardless of how good their recommendations were, they left behind huge bills and the burden of implementing their suggestions fell entirely onto clients.

For large companies, with huge budgets (management consulting fees can total millions of dollars) and a lot of resources, recommendations might be enough. But most wealth managers need consultants at a lower cost or ones that will help execute some needed changes. In 2016, Fritz founded F2 Strategy, a technology and marketing consulting firm to wealth management firms, to do just that.

F2 Strategy’s core business, a project-based consultant to wealth managers with typically between $20 billion and $120 billion in assets, is doing well, according to Fritz, who was previously the CTO at First Republic Private Wealth Management and worked for Wells Fargo. But over the last year, the consultant found another group of potential clients was underserved. 

Now, F2 Strategy is launching a new offering for smaller wealth managers — albeit still some of the largest companies — with $1 billion to $10 billion in assets.

“This is the consulting model for a recession,” Fritz told RIA Intel.

The new outsourced chief technology officer, or OCTO (which F2 Strategy trademarked), service is intended to help firms that lack an in-house chief executive or team dedicated to innovating and continuously improving its technology.

Unlike most temporary, project-based management consulting relationships, OCTO is intended to be an indefinite one. Clients retain F2 Strategy starting at $10,000 per month and the consultant lends its expertise and oversight on a rolling basis. In addition to creating a roadmap for changes, F2 Strategy manages the budget dedicated to technology, negotiates and interacts with vendors on behalf of clients, and would see improvements through the end.

The consultant has already prepared to scale its staff up or down as needed, depending on the number of OCTO clients and their ever-changing list of projects.

Companies that work with F2 Strategy more than 30 hours per month will get a reduced hourly rate. Even at $10,000 per month or more, an RIA could save a substantial amount of money compared to the annual salary needed to pay a highly-qualified CTO, Fritz said. “I want it to be cheaper and cheaper the more that they use us.”

Clients might find themselves saving money in other ways, too. In one case, Fritz said F2 Strategy evaluated a client’s technology and found they were paying for features of performance reporting software they weren’t using. After an adjustment, the client saved enough to cover the cost of a retainer.

But OCTO is not just about potential cost-saving. In recent years, there’s been a surge in new software companies out to build the most sophisticated products and services useful to every wealth manager. But what they built is so complex, too few wealth managers want to use them. Consultants can help firms navigate that.

The idea for OCTO came out of an existing relationship with a client, Cresset Asset Management, a Chicago-based RIA founded in 2017 that primarily works with high-net-worth individuals and manages more than $6.5 billion.

The fast-growing RIA was lining up projects with F2 Strategy, looking to create internal and employee-facing tools and infrastructure that would rival even the biggest competitors. To save Cresset money, the relationship turned into an ongoing one.

Cresset does not comment publicly on its relationships with vendors or consultants, a spokesperson said.

They represent a small percentage of all RIAs, but hundreds of firms manage at least $1 billion and are potential OCTO clients, Fritz said. He expects many clients will be wealth managers that plan on acquiring other firms or practices and need technology that will attract sellers.

Some large companies have embraced continuous changes and are routinely improving their technology, such as Bank of America’s Merrill and Fidelity, where “new changes aren’t objected, they’re expected” by employees, Fritz said.

“Normal is change, normal is innovation.”

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