Without careful planning, your technology can become more of a “ball and chain” than a means of growing your practice. Before you know it, you'll have several very different applications, a web of data passing between systems and a list of impressively marketed features you don't really need. You can handle this situation in a more effective, inexpensive way.
Having been a former business owner of a technology consulting company to large, fast-growing RIAs, I have insight into the industry that a typical technology manufacturer doesn't. Technology is about solving problems and creating efficiency — not just about bells, whistles and integrations; those are the means to the end. My experience has been that each RIA is unique and has business requirements driven by numerous factors that were developed without consideration for the current technology landscape. The burden of selecting the correct technology for an RIA requires sorting the unique from the mundane, the efficiency creators from the web of complexity and the necessary from the unnecessary. Using the following steps can help ensure a successful technology selection:
1. Understand what makes your firm unique and create a specification.
You can include the firm's business model, growth projections, samples of current reports, descriptions of processes, future goals, details on client services, billing methodology and attributes of historic data. You want to document your tech requirements in the same way a business analyst would document a development specification for a developer. Include how you would like to enhance current workflows, but keep them simple and don't over-engineer new complex processes. The obvious advantage is the more you can provide in advance, the quicker you can accomplish the due diligence and arrive at a short list of solutions.
2. Select more than just a technology provider, but a long term business partner.
Favor a series of short conversations with open questions (or “scrums”) over an initial demo. The majority of modern sales professionals are demo pros and can knock your socks off if given an unstructured hour to tour their platform. Demos typically lead you to see and hear a lot of detail that is probably not relevant. A better approach is to start with your requirements and study how the technology provider internalizes your needs. Watch to see if the technology vendor dismisses your needs and races to have you fit their model. You'll find that the more specific you are in providing requirements, the quicker the vendor will support your due diligence. This process also allows the technology vendor time to digest your requirements and develop the proof on how their technology will meet your unique needs.
3. Ask for a scripted demo which covers each area in your specification.
Ensure that the technology vendor focuses their demo on your requirements, not the bells and whistles of their software. It is easy to fall in love with cool software functionality and forget the requirements you were solving for initially. Give the vendor time at the end of the demo to show what their software can do, and what makes them unique from others. You should be leaving the demo with a complete understanding of how the technology will specifically work for you. Oftentimes, custom work is involved in a technology deployment, so have the expectation that the custom report you are requesting may be mocked up, rather than be in actual production, or a discussion to modify existing functionality may be required. Also, although it may cost a little more, don't be afraid to ask for important software customizations.
4. Do your due diligence on the provider and understand how they can help meet your current and future goals.
There may be a time your firm will want to outsource routine tasks such as account onboarding, client reporting or billing. Can this technology support those services? Do they have the ability to support more complex services such as trading, client service request processing or access to money managers? In today's market an RIA needs to think beyond the basic technology offerings. Evaluate the company's customer support and ongoing account management. Ask for the phone number and randomly dial to see if anyone answers. Review the company's technology roadmap. Ask where they are focusing their available development horse power. Understand what they have released in the way of new functionality in the previous six months, as that will be an indicator of expected future development.
5. Focus on your “production go live date."
Be realistic about your firm's investment, implementation and data conversion. The more energy invested here by your firm, the more success the implementation will enjoy. Make sure you are prepared to invest a significant amount of time in deployment and training while taking into consideration the timing of data conversions. As a consultant, it was helpful to shrink big projects through sequencing and prioritization. Meet the vendor's implementation team, expect a project roll out plan, and work with them to refine the timing to be as realistic to your circumstances as possible. Finally, don't dismiss a full data conversion. Having that data available in our overly-regulated environment will support audits and keep regulators satisfied.
Nathan Berk is the CEO of Interactive Advisory Software, and is a former chief information officer with RIA Hanlon Investment Management.