Independent advisers ready to ramp up tech spending

After several years of heavy cost cutting by advisory organizations, a small majority of advisers surveyed by InvestmentNews plan to spend more on technology this year than last

Feb 10, 2013 @ 12:01 am

By Andrew Osterland

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Independent advisers are loosening the purse strings for tech budgets, according to preliminary results of the 2013 InvestmentNews Adviser Technology Study.

After several years of heavy cost cutting by advisory organizations, a small majority of 331 independent advisers surveyed — including both broker-dealers and registered investment advisers — plan to spend more on technology this year than last.

Fifty-one percent of the respondents (68% of whom are RIAs) said that they expect to increase their technology spending this year; 8% plan to cut their tech budgets, and 41% expect to keep spending at 2012 levels, according to the study, which will be released next month.

Though reliable and efficient technology has become

increasingly essential to advisory practices, financial advisers don't view it as key to expanding their business. In fact, just 6% of those surveyed ranked “technology” and just 2% cited “increasing technical competency” as the best way to foster growth. The highest-ranking factors related to generating more business were marketing (33%) and improving client relationships (28%).


Firms' more practical objective in tech spending is to improve pro-cesses and work flows.

“We find the more savvy financial advisers don't want to be on the bleeding edge of technology,” said Raef Lee, managing director of platform solutions for the SEI Advisor Network, which provides a range of services for RIAs. “They're focused on improving their productivity.”

Indeed, productivity gains were the top consideration of advisers (43%) when they were deciding whether to invest in new technology.

When evaluating technology already in place, 37% of the respondents said that they gauge impact based on process efficiency. Just 5% said that they look at employee satisfaction, and 8% cited client satisfaction.

More than half of the advisers said that using the firm's existing technology fully, as opposed to acquiring new or emerging systems, was most critical to accomplishing their goals for growth.

“Top performers have the same objectives [with technology investments],” said Bill Winterberg, chief executive of FPPad, a technology consulting firm.

“They want to free up more time to work with their clients and to solicit new ones,” he said. “If businesses looking at the costs and benefits of technology aren't considering that, they're missing the point.”

A large percentage of advisers continue to view software investments as the best way to realize productivity benefits. Last year, such expenditures accounted for 44% of the average adviser's tech budget, and 68% of respondents said that software now has top priority in their budgets.


More advisers are looking to third parties for help deploying software and other tech assets. Training ranked lowest in terms of where advisers intended to spend their tech dollars.

What's more, just 18% of the respondents said that they had dedicated information technology staff.

Fifty-one percent said that knowledgeable staff with separate nontech roles were their primary resources to handle implementation, maintenance and support. Tech outsourcing was the No. 2 most-used staffing resource (41%).

With the proliferation and fast-changing nature of tech products and services geared to the advisory market, the move toward outsourcing probably will continue.

“Our partners are increasingly outsourcing their technology functions,” said Richard Gill, a managing director for Focus Financial Partners LLC, who works on tech and operations issues facing the independent adviser partner firms within Focus. “Very few of our partners are still building proprietary systems, because they ask themselves, “Am I an advisory firm or a tech firm?”

The growth of cloud computing has accelerated the shift as advisers can more easily access software applications and securely store data through the Internet. Sixty-three percent of respondents said that their firm used some form of cloud computing.

With the range of apps expanding — including account aggregation, compliance, customer relationship management, document management and portfolio management and re-balancing — the need for effective integration has increased.

CRM systems are the most likely to be integrated into advisers' business (72%), followed by portfolio management (59%) and financial planning applications (51%).

Thirty-seven percent of the respondents said that they plan to address integration issues by adopting best-practice apps and developing interfaces internally or via a third-party system. Another 23% said that they intend to use third-party interfaces presently available.

Just 8% said they plan to operate and maintain separate systems.

“It's so much more appealing to have a fully integrated system,” said Alois Pirker, a managing director at consultant Aite Group LLC.

The deepening complexity of apps and maintenance is another factor pushing more advisers to move to the cloud.

“Any vendor that wants to make money in the RIA space has to have the ability to host their own services,” Mr. Pirker said.

And mobility is hot.

Ninety-two percent of the survey participants said that they use a smartphone. Apple iPhones have the greatest market share (60%), followed by Android-based phones (31%).

Tablets are on the march, too, with 63% of advisers owning one.

Apple dominates with 84% of that market, based on the survey.

The devices are used most often to conduct client meetings (41%) through services such as go2meeting and Skype, followed by client communications via social media (24%).

Just 4% said that they use tablets to open customer acc-ounts, and 7% said that they use them for trading.

Mobile security is an emerging concern. Forty-four percent of the survey participants said that they access core business apps through mobile devices, particularly CRM systems (69%).

However, just 38% of advisers had mobile archiving capabilities, and just 33% had any extra security or virus protection for the devices.

The most significant impact of mobile device usage was adviser and staff productivity (30%), followed closely by improved client communications (29%). Industry watchers expect the mobility trend to continue gaining momentum among advisers.

“More and more clients want to engage their advisers through mobile devices,” Mr. Winterberg said. “Over the next couple of years, advisers will be buying more [tablets] and more smartphones to be able to do that.” Twitter: @aoreport


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