Adviser technology is now all about the client

Concentration on costs and on tech's impact on profits is giving way to client concerns and overall productivity

Feb 8, 2015 @ 12:01 am

By Mason Braswell

Financial advisers are addressing how best to invest in technology from a fresh perspective, according to the 2015 InvestmentNews Adviser Technology Study. A myopic concentration on costs and on the immediate impact on profits is giving way to client concerns and overall productivity.

Lars Phillips, a 27-year-old financial adviser with Avier Wealth Management in Seattle, for example, wanted to evaluate some software the firm had recently integrated. The next time he was opening an account for a long-distance client, he brought out a stopwatch.

Mr. Phillips clicked “start” as soon as the Laser App software began automatically filling out the client's forms with information taken from Avier's customer relationship management database. He then sent them to the client electronically with DocuSign. She reviewed, signed, initialed and returned the documents, which were submitted to the custodian to open the account.

(Don't miss: Our full 2015 Adviser Technology Study special report)

The whole process took 14 minutes and 30 seconds, versus the day or more it may have consumed if the material had to be sent overnight.

“A lot of clients are in their 60s and 70s and are not as comfortable with it, and that's fine,” Mr. Phillips said. “But we have this wave of tech-savvy 30-, 40- and 50-year-old clients who are comfortable with that route, and it makes life easy for everyone.”

For him and others, spending on new technology has become a matter of making processes more efficient for the firm as well as easier on clients, according to the InvestmentNews technology study.

Results show that advisers are beefing up their budgets, and paying less attention to back-office functions and pure cost-gain trade-offs in favor of the so-called middle office. That includes systems for account opening and aggregation, and document management.


Though not a common term, the middle office is becoming a hot space for investment as firms open their wallets for tech expenditures. Fifty-five percent of the 310 respondents in the InvestmentNews study said they plan to increase tech spending this year, up from 50% in the last survey two years ago. Thirty percent said their top consideration when deciding to make investment is the expected benefit to the client, up from 22% in 2013.

“We've morphed our development process — instead of starting with the adviser, we're thinking about the end-investor experience,” Robert Dearman, senior vice president of advisory practice and platforms strategy at National Planning Holdings Inc., said in a recent InvestmentNews technology round table.

On average, firms spend about 5% of their annual revenue on technology, according to the study. Those with $5 million or more spend about 3%. Firms with $1 million to $5 million spend about 4%, while those under $1 million spend about 5.4%, according to the study.

When firms are deciding to buy technology, productivity gains (selected by half of respondents) remain the No. 1 factor. In considering a change or upgrade, meanwhile, 64% said improved workflow was the main impetus.

(By the numbers: How advisers are using technology today)


Firms are realizing that a better client experience usually goes hand-in-hand with enhanced productivity, according to Brad Matthews, founder of the digital advice platform Trizic Inc.

“If I can invest in technology to improve the digital experience for customers while improving efficiencies and margins for the firm, it's a win-win,” said Mr. Matthews, previously a private banker at JPMorgan Chase & Co.

Financial advisers want to make the wealth management experience as efficient and high tech as other banking and money management services their clients use, he added. As a result, they are spending more on updating their websites, or using smartphones and tablets to connect with clients.

The most significant impact of smartphone and tablet usage in the next one to two years will be better client communication, according to 39% of respondents in the 2015 survey. That's up from 24% in 2013 and ranked highest overall, just above the 38% who said the main impact will be enhancing staff productivity.

A tech-savvy firm is especially important to next-generation clients.

For Mr. Phillips, the middle-office upgrades coincided with a name change for his firm, which is converting to the trendier Avier from Retirement Asset Management.

“It fits together perfectly,” he said. “We're getting more efficient and more effective at serving a younger demographic, and you can see that not just through our technology but our name.”

At the same time, the technology itself has matured. A number of software firms have risen in the past couple of years on the promise of improving the client experience.

Transforming the traditional risk-tolerance questionnaire, for example, companies such as Riskalyze Inc. and PocketRisk have devised new ways to help clients measure and visualize their portfolio risk.

“All of a sudden, all kinds of horsepower became available to advisers everywhere, thanks to the very same computing and cloud revolution that's been responsible for advancement in nearly every other field, from medicine to architecture to CRM to logistics and supply-chain optimization,” Josh Brown, a financial adviser with Ritholtz Wealth Management, wrote on his blog, The Reformed Broker.

Mr. Brown last year gave the new technology a vote of confidence, bringing on Riskalyze's software for his firm — as well as providing the company with venture capital and serving on its board.

Better middle-office technology also helps smaller firms compete, according to Russell Blahetka, founder of Vestnomics Wealth Management. He began with the basics, adding CRM software and other back-office functions. But he screened for systems that could make clients feel as if they were working with a national firm.

“I was looking for technology to help contain costs and allow me to provide the type of services that would usually come from a larger company,” said Mr. Blahetka, a former broker at Waddell & Reed. “How do I make the company ubiquitous but easy enough that a client doesn't know when they call if I'm sitting in my office in Cupertino [Calif.] or in Chicago visiting my children?”

He chose the Morningstar Office platform and CRM because it allows him to send mass mailings to clients with up-to-date guidance and information about their portfolios when markets are volatile, a common practice at larger firms.

Mr. Blahetka said he plans to spend about 10% of revenue on technology every year, even as revenue rises. Next, he will invest in Kwanti, an application that lets advisers use “what if” scenarios to test portfolios in front of clients.

“When I'm looking at new technology, the first thing is, will it enhance the client experience, and if it doesn't do that, does it make me more productive?” Mr. Blahetka said. “Those are my two main things.”


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