Numbers Game

Top-performing firms invest big in technology — a critical driver of success

Major emphasis on tech spending and utilization helps leading advisory firms stay ahead of the curve

Feb 11, 2015 @ 12:01 am

By Matt Sirinides

As we dive into the results of the 2015 InvestmentNews Adviser Technology Study and begin analyzing the data, one of the first steps is to identify the "top performers." By focusing on this group we can gauge how their success, typically defined primarily by their financial prosperity, separates them from the rest of the pack. For our technology study, we measured firms by profit margin, productivity ratios and revenue growth; created a composite ranking; and then labeled the top quartile as our Top Performer cohort.

Early analysis of the data shows that the most financially successful firms stay well ahead of the curve when it comes to their technology, allocating more of their resources to technology (11.3% of their overhead versus 9.4% for all others), with no plans to slow down in the future. Fifty-six percent of Top Performers say they will increase their tech spending in 2015, with just 2% planning to decrease it, versus 55% and 7%, respectively, for all others.

(More: Industry trends to watch from the 2015 InvestmentNews Adviser Technology Study)

It's not just about resources. Tellingly, the Top Performers believe technology will prove critical to their future, with over two-thirds reporting that "fully utilizing my firm's current technology" will be critical for achieving the firms' goals for growth. Just 51% of all others said the same. And only 7% of Top Performers said "Technology will not play a significant role in my firm's ability to grow." The portion selecting that response for all others was an alarming 22% — a large contingent of advisory firms don't figure technology will play a big role in their future success.

(Infographic: How advisers are using technology today)

Top Performers also were more fixated on efficiency (related to workflow) when evaluating their technology — 51% vs. 41% of all others — while other firms were more likely to look at productivity (tied to revenue and other financial measures). Top Performers also, unsurprisingly, were less concerned about the cost of technology, with zero reporting expected cost as a primary concern when deciding whether to invest in a new technology.

The worry-free approach to the cost of technology may be a luxury born of financial success, but firms should note that added investment in technology may come with another benefit: Advisers at top-performing firms reported spending 85% of their time on "core" activities — developing business and serving clients — while the rest reported that number at 73%.


What are your firm's technology plans for 2015?

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