The process of shopping for new technology can be daunting for advisers, not only because there is so much to learn about the software itself, but also because there is a lot to learn about the companies providing this technology, as well. As any adviser who has researched software vendors knows, there simply are a lot of choices out there.
What follows is a short primer to help advisers through the process of adopting new technology, focusing on the key issues that should be addressed with prospective vendors.
1. Look at your portfolio accounting system first
Your portfolio accounting system generates and maintains the most critical data for your firm, including those used to monitor your client portfolios, make trade decisions, generate reports, billing and more. Many other portfolio and client management software applications are reliant on your portfolio accounting data, so it's essential that your portfolio accounting system will support the needs of your firm as you scale and upgrade your systems. When you do implement a new portfolio accounting system, it's important to go through one quarter with the two systems running in parallel. This allows you to compare the output of both systems and correct any gaps.
2. Timing is everything
Well, it's maybe not everything, but timing is a big thing. Don't start looking for new software when your contract comes up in two weeks. It's a project that takes time, both from an evaluation perspective and an implementation perspective. When it comes time to replace a legacy application, you should be in the process, at least mentally, in the last year of your contract. You maybe aren't reaching out to any vendors yet, but you're reading articles, going on websites, asking other advisers and understanding what's out there until you begin to narrow it down. You should have a contract in place about six months before you plan on ending the current one, at a minimum.
3. It's all about client engagement
Especially in light of the recent growth in “robo-advisers,” it's more important than ever to invest in technology that enables your firm to demonstrate its value through a rewarding online interface — such as a client portal. Advisers need to be available 24/7 and offer mobile access via tablet and smartphone to attract and engage the next generation of investors. Make sure your future technology partner provides for these tools and is committed to innovating in this area at the pace your future target audience is adopting it.
4. Know the people behind the technology
Get to know the background of the vendor, but also make sure that the staff that will be supporting you has relevant financial industry experience. A vendor could be really smart about technology, but its staff should also have spent time in advisory practices and know how those offices run. There is a lot of specialization required in this industry and you should have people who understand your business — both from a differentiation perspective and from product direction. There are pros and cons to any technology, but it's really the people who are helping you to implement it, and supporting you long-term, that make a big difference.
5. Compare apples to apples — and oranges
Comparing a reporting system to a reporting system is great, but consider also if there are optional integrated add-on applications that will support your efficient growth, should you choose to incorporate them. Some vendors offer an integrated suite where you can start with one application and add on more as you need them. A given vendor may support a range of third-party applications that also integrate with the software you're evaluating. Make sure you clearly understand your software add-on options as your business automation needs increase.
6. Vendors define “integration” differently
Many vendors tout “integration” between their applications and with third parties. However, there are several types of integration and it's important to get clarity from a vendor regarding what you really get from its integration. The most basic level of integration is “single sign-on” between applications. This isn't really integration, but simply an exchange of log-in credentials to save a couple clicks. The next level is data sharing between applications, which can require a manual upload or may be automated. The top tier of integration is “cross-product integration” which seamlessly and contextually shares data and functionality where you need it most to streamline business operations that require multiple applications. A simple example would be when a client uploads a document to an adviser's online portal. That triggers the firm's client relationship management system to schedule a task for the adviser to review it. A platform that utilizes the highest form, cross-product integration, will enable advisers to work seamlessly across all of their applications including CRM, re-balancing and performance reporting.
7. Think about the future of your firm
It's important to evaluate whether this technology will support you as you scale your business. You could be a small shop, but does the vendor have range in the number of clients that it supports? For instance, we work with close to 700 independent RIAs utilizing our integrated platform. Some are as small as $20 million, while others are north of $10 billion. It is our belief that it's better to invest in technology that will scale with your business growth than it is to risk selecting technology that your firm may outgrow.
8. Look for a support system
When you're evaluating technology vendors, it's important to dig into how they will support you. Is there a clearly defined implementation process with a dedicated team to see you through the process? Does the vendor offer consulting services? Online and in-person training and support? Do they have an annual user conference? The more a vendor can show you that they continually invest in their customer support, the more value your firm will receive from your technology investments.
9. Top-level buy-in is important
If your executive team is a fan of the new technology, it will help encourage the entire firm to embrace it. You are making a significant investment, so have the owners lead the pep rally for its adoption and continue to beat the drums. You should also have trained representatives in the firm who will be the trusted central points of knowledge and information for others. After all, some advisers will be open to change, while for other advisers, it takes a little bit of time and coaxing.
Stuart DePina is group president of Envestnet | Tamarac and manages the long-term growth strategy of Tamarac, a division of Envestnet Inc.