Advisers rate top technology concerns

Areas needing improvement include compliance, customer relationship and portfolio management

Jan 24, 2010 @ 12:01 am

By Davis D. Janowski

Simplifying and better integrating compliance tasks, improving customer relationship management and developing more-robust portfolio management tools are the top technology concerns among financial advisers affiliated with independent broker-dealers, according to an online survey conducted by InvestmentNews this month. In the survey, which had more than 1,000 respondents, advisers were asked to rate the importance of CRM, document management, portfolio management, practice-management tools, financial planning tools, client self-service tools and compliance integration/simplification. They also were asked which areas they'd most like to see their broker-dealers improve and, in a separate question, how they ranked these same areas in terms of their own spending. The two technology areas that advisers deemed most important for their broker-dealers to address were compliance integration and CRM systems — rated as very important by 38.7% and 38.2% of respondents, respectively. The third-most-important area was portfolio management, at 31.7%

<b>John Egan:</b> His firm switched to Securities America in 2009.
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John Egan: His firm switched to Securities America in 2009.

John Egan, principal of J.M. Egan Wealth Advisors LLC, which manages $200 million in assets, said his firm changed broker-dealers last year and that the ability of a broker-dealer to help him streamline his business processes and compliance workload were important considerations. He said that he had simply outgrown his previous broker-dealer, Capital Analysts Inc., a subsidiary of Columbus Life Insurance Co. “They are a very good B-D for the right person, but I was looking for more fee-based product programs and technology to help me grow,” Mr. Egan said. He considered many of the larger, more sophisticated independent broker-dealers, including Cadaret Grant & Co. Inc., Cambridge Investment Research Inc., Commonwealth Financial Network and LPL Financial, but ultimately settled on Securities America Inc.

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“Compliance is just far easier with them,” he said. “For example, just yesterday, we did a pension plan, and I had 37 applications that we scanned and submitted electronically. By the time we got to the 10th one, we were already seeing them in [Securities America's] account management system,” he said. “The fact that their straight-through processing works that well with a turnaround in hours, and not days, and that they do all the retention in terms of books and records, is a tremendous benefit for us,” he added. Analysts who study the broker-dealer business agree that the ability of small firms to grow is enhanced when broker-dealers can support the firm with more-efficient processing and faster compliance reviews. “In the independent-broker-dealer space, as much as 50% of the annuity and mutual fund account opening and initial purchases are being done with a paper application and a check,” said Doug Dannemiller, a senior analyst in the wealth management practice at Aite Group LLC.

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He said that while many broker-dealers use technology appropriately, very few have robust straight-through-processing systems in place that would improve small-firm efficiency and reduce costs. When it came to their own spending on technology, advisers responding to the InvestmentNews survey selected the same three areas of emphasis they had for their broker-dealers, although in a different order. CRM took the top spot, with 50.9% of advisers rating it as their most important area for investment in 2010, followed by portfolio management at 35.3% and compliance at 30.6%. Darren Tedesco, vice president of innovation and strategy with Commonwealth Financial Network, said that these results don't surprise him in the least. His company is well-known in the industry for having invested heavily in its proprietary technology platform, Client 360, over the years. “If you told advisers they could only have two technology tools to run their business, the vast majority would likely choose CRM and portfolio management,” he said. “Pushing the limits on those two systems can create greater efficiencies and more satisfied clients than any two other tech combinations you can come up with in the financial services industry.”

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To get a sense of their outlook for 2010, the InvestmentNews survey asked advisers whether they plan to spend more on technology this year than they did in 2009. Advisers overwhelmingly responded in the affirmative — 63% indicated that they will be spending more, while 37% said they won't.

In terms of how much they plan to spend as a percentage of revenue, advisers were split fairly evenly. Just under half, 44.7%, plan to spend up to 3.9% this year, while 45.6% are planning to spend from 4% to 7.9%. The remainder plan to spend more than 8% of revenue on technology.

E-mail Davis D. Janowski at


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