Uncertainty clouds advisers’ view of technology

When it comes to implementing new technologies, a number of financial advisers are discouraged by poor results and inadequate returns on their investments, according to a study that was released at the end of July by the Financial Planning Association of Denver.

When it comes to implementing new technologies, a number of financial advisers are discouraged by poor results and inadequate returns on their investments, according to a study that was released at the end of July by the Financial Planning Association of Denver.
Titled “FPA Practitioner Technology Report: Leveraging Technology Solutions,” the survey is based on responses from 291 advisers, including registered investment advisers, dually registered independents and independents affiliated with a broker-dealer.
The report indicates that some advisers and firms are having a tough time quantifying an actual return on their technology investments, while others are simply staying away from them.
The study revealed that 48% of respondents were not using any account aggregation software, 39% were not using any document management software and 13% were not using any report generation software.
In addition, software integration continues to be a major bugaboo.
“Most of the stuff doesn’t talk to each other — that’s the No. 1 challenge we face with our technology and in becoming more efficient,” said Lisa Kirchenbauer, a CFP and the president of Arlington, Va.-based Kirchenbauer Financial Management & Consulting, which manages $50 million in assets.
These results don’t surprise Mark C. Connell one bit.
“They’ve identified symptoms, not the problem,” said Mr. Connell, the principal of Mark-Christopher Wealth Management of Addison, Texas, who is an FPA member but did not participate in the survey.
“Those are business-owner challenges — not being a financial adviser or wealth manager. They need a good operational person or outsourced person to handle these issues, and many firms just don’t have that,” Mr. Connell said.
He started his firm a year ago after years of working on just such operational issues, first in the banking industry and later with a Dallas-based certified public accounting and advisory firm.
Mr. Connell was not alone in raising the survey’s results as more of a business management issue.
“The minute you start looking at your practice as a business, it really puts things in perspective. You’d be surprised at how much time you spend on administrative tasks,” said Craig DuVarney, a sole-practitioner certified financial planner and registered investment adviser in Concord, Mass., with $55 million in assets under management.
“You are spending all this time doing $10- to $15-dollar-an-hour work, versus just buying that work from someone else,” he said, citing as an example the outsourcing of functions such as scheduling.
Outsourcing is a growing area of interest highlighted in the report. The survey found that respondents either already outsourced or would consider outsourcing a wide variety of technology functions. Such functions include management and maintenance of their information technology infrastructure, performance reporting and archiving of client data, among others.
Mr. DuVarney said he attributes a lot of his six-fold increase in revenue over the last six years to his efficient use of technology and outsourcing.
“I’m living proof that a one-man shop can work from home and be extremely profitable,” he said. While he maintains an office in Concord, he works much of the time from home, and the many Internet-enabled applications he uses that allow anytime/anywhere access are key to that.
While both Mr. DuVarney and Mr. Connell said they have gone to great pains in picking a mix of technology that works together, many respondents to the survey said that the integration of client account information and integration of their software were among their top three technology challenges.
Laurie A. Siebert, an adviser with independent broker-dealer Valley National Financial Advisers in Bethlehem, Pa., which manages $163 million in assets, said she understands these findings firsthand, and that is largely why her firm selected the system it did back in 2002.
“We use IAS [from Interactive Advisory Software LLC in Marietta, Ga.] because it’s the most integrated software out there. It provides us with [customer relationship management], rate-of-return information, financial planning, marketing, books and records, asset aggregation, you name it,” she said.
Ironically, Ms. Siebert said, her use of the software also highlights another of the report’s key findings: A number of firms are challenged by how to improve their efficiency and get the most out of the technology they already own. In fact, 34% of advisers responded that “time savings” was the main criterion they used to judge the cost/benefit of technology investments.
“The biggest hurdle [we face] is tackling [IAS’] power and sophistication,” Ms. Siebert said.
“I’m not sure we’ve taken the steps to quantify our ROI,” she added. Like many of the professionals cited in the report, Ms. Siebert regarded the time saved in day-to-day processes as a chief measure of success.
Generation of client reports was one area where technology had improved the firm’s efficiency, she said.
“A client report that would have taken 20 minutes or longer to generate a few years ago now takes literally a couple minutes, thanks to how well-integrated our software is,” Ms. Siebert said.
This is the FPA’s first study focused on technology challenges for advisory practices. It was sponsored by Albridge Solutions, the Lawrenceville, N.J.-based enterprise data management unit of PNC Global Investment Servicing Inc. of Wilmington, Del.
The study is available to FPA member firms for $995. An abridged version is available free of charge to current FPA members at fpanet.org.