If you work at a wirehouse — or work as an employee for any broker/dealer — chances are good that you don't have to worry about custody, clearing or the asset managers available to you. Your computer workstation comes completely equipped with client relationship management programs, performance analytics and all kinds of good stuff. When a snafu grips the computer, you simply call your firm's help desk.

But independent contractors or registered investment advisor reps, you are on your own — you have to outsource these functions. But to whom? Unless you are a devotee of all things technological, back-office and tech issues are something you'd rather not face. After all, most financial advisors prefer to spend their time running their businesses: creating financial plans, meeting clients or gathering assets. To alleviate tech hassles, you need to find a b/d platform or, if your are a registered investment advisor, it's important to find the right partner to handle all your wealth-management back-office needs — from separate accounts to compliance issues.

“The thing to remember is that you're not just making technology decisions for today, but for several years,” says Dan Skiles, vice president of technology at Schwab Institutional. “No one wants to buy a system, then realize a year later that you need capabilities it doesn't provide. Not only are those mistakes an inconvenience for your business, but they're expensive.”

The tricky part about analyzing potential wealth-management platforms is that you can't just look at, say, the investment products they offer. You have to try to divine if the company has the capacity to support your business as you grow. Scalability is the overused jargon, but it's essential. Some wealth-management platforms may look appealing on the surface, but once you “pull it out of the box” you may find that it doesn't have a proven interface, and has only a few custodians using the system or other problems.

“An RIA may be producing $25 million today, but wants to grow his business north of $100 million or $500 million in the next few years,” says Pat Jansey, senior vice president of product management for Charles Schwab. “Those individuals need to make sure that the partner they align with will be able to scale their business.”

Who's Your Data?

Sounds boring, but the quality of the platform's data is paramount. “One trap that a lot of people fall into is that they evaluate systems based on fancy reports,” explains “Jake” Rohn of Albridge Solutions in Lawrenceville, N.J. “‘Can you do this report? Can you do this function?’ These are the questions that often serve as the basis for which people buy systems. Yet people typically stop using systems because of data quality. At the end of the day, everything else doesn't matter if the underlying data quality is not accurate.”

Another area to address is the service component of the system. Unfortunately, this often goes unchecked during the evaluation process. There are several important questions you should ask, like what are the platform's service measurements?; is help available outside business hours?; how long does it take them to respond?; and what about training? You should also expect support staff to monitor the system, and they should be in communication with the service side of the platform.

Of course, one of today's top priorities is compliance. The brokerage industry spends an estimated $1 billion on compliance technology, according to industry consultant The Tabb Group. That money is easy for the Merrill's of the world. But for RIAs, off on their own, it's doubly tricky: They aren't Merrill and their needs are somewhat complicated. “In my experience, RIAs usually desire a little more flexibility in their platform, particularly in the areas of portfolio management and investment selection,” says Eric Jones, vice president of integration partnerships at Thomson ONE. “It's usually because they want to set up their own approach to managing money, and this impacts they way they use technology.”

Schwab, for instance, uses RIAs' varying technology needs as a selling point. “When we sit down with reps, we recognize that no one size fits all when it comes to technology,” Skiles says. “For example, one rep may be into equities, while another deals mostly with managed accounts and ETFs. If they're doing all the management of the equities themselves, they may need trade order management, whereas managed accounts may not need that capability.”

Important Trends

In the past, the most important trend among technology platforms was the ability to offer customized reporting. That still is a concern. “Traditionally, performance reporting was limited to accounts that were big enough to cover the overhead necessary to perform the calculation,” says Rohn. “Because of this, the focus was on high-net-worth clients or managed accounts, very specific areas. What we're doing is bringing these capabilities to the masses. It's one of the most important areas for clients, and, so, we're now able to show them how they performed — not the underlying vehicle — based on things like asset allocation, cash flows and other factors.”

One lingering problem is that not all software packages interact together well. “To date, no one vendor has been able to offer a product that masters all the areas of an advisor's business,” Rohn says. “People buy all these databases and systems that they have to log into, yet there's no flow between them. We believe the other trend that's coming is the ability of these systems to work seamlessly together.”

The all-inclusive platform is the illusive goal. “Advisors are looking for the all-in-one system, which is why we're developing a CRM that ties into the back office,” says Michael Voigt, vice president of Raymond James' Advisor Select division. “The idea is to make it as simple as possible.”

Raymond James, for example, is developing an in-house solution to the technology needs of independent reps and RIAs, and recognizes that the integration of customer relationship management platforms continues to be an issue for firms, since there isn't a unified CRM platform among independent reps and RIAs.

“A lot of brokers use Broker's Ally, ACT and others, and we've supported it, since it was approved, but there was no tie-in to our back-office system,” says Matthew Sines, vice president of business development at Raymond James. “The idea is to do your whole business, everything from prospecting to customer review to internal accounting on one unified screen, which will avoid multiple screenshots.”

Despite these ambitions, compatibility continues to be a primary issue. “People want everything to be compatible with everything,” says Voigt. “At some point, that's not possible, but we're working toward that.”

But don't forget about old-fashioned customer service. Unfortunately, it's one area that's overlooked by many advisors. Raymond James, for example, regularly sees advisors working with other firms asking for technology assistance and help. According to Sines, advisors seek their input at conferences, frustrated by the lack of tech support they receive from their current b/d. “[Disgruntled advisors] often refer to their clearing firm as a ‘virtual b/d,’” Sines says. “Everything was outsourced. Technology would be handled in one area, compliance would be outsourced to another state and resources would be all over the place.”

As for shared data, advisors should determine whether a platform makes it easy to integrate with other applications. Ideally, you should only have to enter data once, and that data should easily be exported to all other applications you use. Furthermore, there's far fewer portfolio-management platforms than there are CRM systems, so you should have clear expectations of what you want your CRM system to do. Some firms, such as Schwab, will attempt to drill down to those issues, discuss those expectations with potential users to ensure they can provide what the advisor needs.

Brokers who plan on becoming independent reps may find that some independent b/ds develop technology platforms in-house, while others outsource their technology needs. These individuals are often forced to compare the pros and cons of proprietary systems, and their decision is often influenced by the individual's desire for either customization or ease of use.

“If you bring your software in house, what you really get is flexibility in that the data can be exported into Excel,” explains Rohn. “So, if you're someone who has to tweak every little corner of your report, then Excel is where you should go. Yet that approach is incredibly labor intensive in terms of creating what you want, as well as keeping the data clean. With an outsourced system, you get to alleviate some of that time and energy, with a tradeoff in customization.”

Therefore, a desire to have complete control over reporting and other functions of the software you use may affect the platform, as well as the independent b/d you select. Yet regardless of your expectations, the worst thing an independent rep can do is try to become an IT professional. So if you prefer highly customized reports, inputs and/or other areas, consider hiring an IT professional to assist you in setting up your business. It may add an additional cost to your business, but can be a great help.

The Importance of Conversion

No matter which system you select, one of the most important issues for any advisor or rep making a technology switch is proper data conversion. Errors in the data conversion process can be devastating, so be sure you conduct a data analysis before you select a system. Compare the data you currently use and think through exactly how you would like it to improve in the future.

“Expect any company to help you do data analysis,” insists Skiles. “If they tell you, ‘We can convert the data,’ without working with it, be leery. Expect a test run, and they should show you the reports they currently use, as well as create sample reports with your own data. Compare those reports to your own.”

Also, recognize that the actual conversion process may differ from independent reps to RIAs. When an independent rep transfers his accounts from one b/d to another, usually an automated transfer takes place. As an RIA, those transfers traditionally take place one account at a time. Therefore, RIAs can expect an intensive process that requires a lot of handholding to ensure a small margin of error.

Many companies take extra precautions to ensure that your data is converted correctly. Albridge, for example, has developed data conversion software, which is used in conjunction with an in-house service unit specifically for this purpose. After Albridge converts clients' data into its system, its service people review client account data for accuracy and approve each individual account. “We felt that was critical because we didn't want to slam every account into the live database without allowing our service bureau and the rep to review it before going live,” says Rohn.

Despite the importance of conversion, many advisors and independent reps ignore the importance of this issue. “I see a lot of underestimating when it comes to the conversion process,” says Jones. “A lot of people don't realize that the process of actually doing a conversion can take longer and be more difficult than people expect.” For b/ds, Thomson does mock conversions over a weekend, then evaluates the process. Then another round of conversions occurs a few weeks later, and the process is repeated until the problem areas are addressed. As a result, the actual conversion process often goes smoothly. It's a pity that so many advisors, deluged by all the technological offerings, don't take time to examine their options with such painstaking detail.