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 When it comes to picking technology for your practice, it is easy to get overwhelmed by the multitude of choices. Servers, desktops, laptops, phone systems, firewalls, back-up systems, customer relationship management software, performance reporting, accounting tools, financial planning systems, and compliance and reporting systems are all among the things you’ll be choosing as you set up shop. Even the most tech-savvy advisors might find their heads spinning when it comes to sifting through the choices. Yet, according to a 2008 study by Boston-based Cerulli Associates, independent firms that spend more on technology have more productive advisors. Whether you’re starting from scratch or making tweaks to existing systems, read on for some valuable advice on how to make the best choices for your business. Define the need.
Buying technology is a lot like buying a car, said Bill Winterberg, a former software engineer who consults with financial advisors on technology issues. You could learn everything you could about every car on the market, but that results in information overload. Instead, he tells advisors to focus on what’s important for their particular business. “For folks that are starting up a business for the first time, it can be very intimidating to navigate all the offerings that are on the market—to differentiate between the solutions that are essential to an advisory firm verses some of the options that are more like heated windshield wipers—not a requirement, but more like flash in the pan,” he said. Figure out how you’re going to use it.
“The biggest mistake advisors make is letting the vendors show them all the bells and whistles without understanding specifically how that vendor or vendors enables you to deliver your value proposition to a client,” said Spenser Segal, chief executive of ActiFi, a Plymouth, Minn.-based consulting firm for financial advisors and institutions. Require that the vendor show you precisely how the technology will work for you by creating “use cases” based on typical clients. Have the vendor walk you through the specifics. Don’t rely on assurances that it will work the way you expect it to. What’s more, don’t select particular tools in a vacuum. Ask the vendor to show you how the data flows from one system to the next so you don’t have to do it all manually, which is a nightmare, Segal said. Also, make sure you know how one system will integrate with another. When Lisa Roth, chief executive of Keystone Capital Corp., was looking to add a customer relationship management system, she chose something that on its face seemed to meet her needs, only to discover after implementation that it wasn’t compatible with the other systems the San Diego brokerage had in place. Luckily, Roth, who is also the past chair of the National Association of Independent Broker/Dealers, was able to break the original contract without any recriminations, but not all firms will be so lucky. And buyers beware: There is no uniform definition of what integration actually is. “Never assume your definition of integration and the vendor’s are identical until you’ve validated that,” said Segal of Actifi. Also know that when it comes to technology, there is such a thing as too much. For example, Lorraine Bishop, a financial consultant with Partnervest Financial Group LLC in Pasadena, Calif., found it more cost-efficient to pay someone to build the hardware for her office as opposed to buying commercial models, which had all sorts of game, music and photo capabilities she didn’t need. Instead of overbuying on hardware and software, “function-specific” is what you should look for, she said. Consider bundling.
When Roth of Keystone was looking for a CRM system, she never even thought to ask her firm’s clearing firm or e-mail archiving provider if they had a CRM platform. Had she done that initially, Roth says she probably never would have gone with the other provider. Ultimately, Keystone chose to use the CRM platform offered by its e-mail archiving provider and was able to negotiate a far better deal as a result. Now Keystone is incorporating document retention into its systems and Roth is reaching out to its current providers first. “I won’t make the same mistake again,” she said. If you are using more than one company, let the experts work together to make sure everything is compatible. It is far more effective for your providers to talk instead of being a middle man, Roth said. “I may not catch the one fly in the ointment.” Compare.
Make sure you do a detailed comparison of all the different offerings to determine which of the available solutions will best meet your needs. And be sure to budget enough time for decision-making—ideally one to two months. “If you haven’t gone through the particulars of your business and how the systems you’re buying will work for you, all the nuances you assumed will be there and aren’t can be very frustrating,” said Actifi’s Segal. Also make sure your contract is written in a favorable way. Consider carefully, for example, the terms of break-up in case something doesn’t work out with a particular vendor, said Roth of Keystone. Don’t be afraid to ask for help.
“Determining what the right tools are can be an overwhelming job for many advisors,” said Dennis Gallant, president of Gallant Distribution Consulting in Sherborn, Mass. You don’t have to do it alone. For starters, there are many consultants who specialize in helping advisors choose the proper technology. Your custodian, broker/dealer or professional association may also be able to provide some guidance. Also talk to your peers and read trade magazines for ideas, Gallant said. What’s more, to help advisors wade through the array of technology issues, the Financial Planning Association and ActiFi are collaborating on a series of seven in-depth reports and analyses that will compare and contrast the attributes of various software and technology offerings and help firms determine which package is best for them. These reports, planned over the next two years, will cover financial planning software, customer relationship management, compliance, report generators, document management, portfolio rebalancing and portfolio management.  
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