Your Best Partners
More and more, advisors are using technology tools to offer additional services and become more efficient
By Andrew Gluck
Financial Planning Technology Directory compiled by Liana Roberts
From the April 2006 Issue of Investment Advisor Magazine
Technology for financial advisors has come a long way in recent years, but probably remains the most complained-about aspect of running an advisory practice. After a decade of covering technology for independent advisors, I don't know of a single technology product that has not been the subject of complaints. Even software that gets favorable comments from numerous advisors is often the subject of derision among others.
So in providing you with our annual directory of technology companies, it's fair to explore the yin and yang of advisor technology and professional software. We live in an era in which technology—whether it's your cable TV system, network server or e-mail system—is consistently imperfect. Even Microsoft, the world's largest, most profitable software company, with technology that everyone uses on their desktops daily, does not provide a fantastic customer experience.
Is it fair to expect more from a financial services technology company that has just a couple of hundred customers and a few million dollars in sales than you might for companies many times larger? Many advisors will probably say it is.
Technology problems, like the ones you experience in consumer products, are more than mere inconveniences when it comes to business. In business, your income is at stake. Client service is on the line. So tech companies selling business products to advisory firms should arguably be held to a higher standard.
Many advisors say they are willing to pay the cost for superior service and reliability, but in the real world, there is not much evidence to support this contention. Advisors time after time choose the lowest cost route in selecting technology, but still expect it to work just as well as they would a more expensive product. Advisory firms are often frugal to the point of hurting their businesses.
For example, most RIA firms seem to be jury-rigging their e-mail compliance solution. They print out all their e-mails to and from clients or they occasionally back up their Outlook "pst" file and think that is sufficient. They don't have a written procedure for dealing with e-mail archiving, or people assigned to carry out a routine process for following the procedure. Many RIAs would be unable to retrieve e-mails in the event of a rigorous audit by a Securities and Exchange Commission examiner. While many e-mail compliance products built specifically for RIAs are out there, many, if not most, RIAs don't want to spend $3,000 a year on the technology, which is about what most e-mail compliance tools cost.
In addition to being frugal, the independent advisor channel is a major challenge to tech vendors because of its fragmentation. The market is segmented between registered reps affiliated with B/Ds and RIAs.
The independent B/Ds generally don't buy technology for their reps. They usually sign deals to market software for "approved" vendors in exchange for discounts for their reps, or for a cut of the sales by the technology company. For instance, most independent B/Ds leave it to each rep to pick from two, three, or more planning or CRM applications. Each rep is essentially buying directly from the tech companies, and the tech companies are selling and servicing one user at a time. There are some B/Ds that have done some enterprise-level technology adoption, but for the most part only a handful of B/Ds cut deals with vendors to buy an application enterprise-wide for all their reps because their reps are independent and want to choose their own technology.
The RIAs, meanwhile, are totally independent. Their technology choices are not limited to the approved tech vendors selected by the B/Ds. Consequently, the RIAs are using different combinations of software products. Providing customer service to RIAs who are each unique in their business processes, software applications, and hardware is not easy for a tech vendor.
With that huge caveat in defense of technology companies, let's look at some of the problem areas that tech vendors will need to address in coming months. Keep in mind, the criticism does not make the companies mentioned bad. All of the companies have problems.
