Michael Kitces #FinTech

3 due diligence steps advisers should take to avoid costly technology mistakes

Slow down the tech selection process to thoroughly consider how new technology will work with and for your firm

Apr 30, 2015 @ 6:04 pm

By Neal Quon

The pace of technology has changed so remarkably in the past decade that even early adopters struggle to stay on top of what's new. This largely, though not exclusively, has resulted from the widespread adoption of consumer technology in business since the launch of the iPhone and iPad starting in 2007.

Our preferences of systems and software as business users are being influenced by the personal experience we get on these modern devices and apps. Why can't our professional systems offer us the same ease of use?

In many cases, they can. We have seen dramatic changes in financial services technology solutions, like CRM, financial planning, portfolio analysis and more. However, not everything can evolve as quickly due to a much higher burden on developers in our industry to layer in security measures, compliant data storage and robust features for multiple users.

(More tech insight: The biggest mistakes advisers make with their technology)

So beyond keeping pace, what is the issue? As technology emerges more quickly, often with a bright, shiny exterior, it can cause some reality blindness. Even though the tech world spins faster, performing meaningful due diligence takes time and planning. If you try to run those evaluations at the same breakneck speed as technology emerges, the odds of failure and/or disappointment only grow.

THREE STEPS

Here are three steps you can take to ensure you take a big enough pause for due diligence before getting caught making a potentially costly mistake with new technology.

1) Business requirements may be boring, but are an essential ingredient to evaluating technology. These are defined before you attend the first tech demo or launch your first trial. It is important here to do a few things to gather these requirements:

• identify things that you specifically want in a technology;

• do not neglect to bring in your team, as they are often in the line of fire with technology day-to-day and will have feedback on their needs;

• vet these requirements against new rules and regulations to ensure you know what is obligatory for any new technology to support.

2) Compare three different options when evaluating new technology. Even if you have zeroed in on a technology provider based on a conference or other event interaction, bring an additional provider into the mix to ensure you get a solid look at how different providers will satisfy your requirements.

Unfortunately, this is also the time to have a reality check on your requirements. Rarely do we find a solution that will meet 100% of a firm's requirements. That is not necessarily because your requirements are unreasonable. Use this time of discussions and reviews to also work with your team to sort your requirements into “must have” and “nice to have” segments.

3) Beyond the business requirements, remember that we are in a portable world when it comes to how we work and manage our business. This goes beyond just mobile access to technology, and includes considerations around data storage, syncing of information, security protocols and more.

Clearly think through how everyone on your team works — both where and on what types of devices, systems and Internet connections.

(Related read: 5 ways to improve your tech evaluation process)

Ask the following questions of the providers you are evaluating to ensure you have a clear picture of whether they support your needs here:

• Can we work on smart phones and tablets? What is required to do so?

• Can I sync data from my computer to those mobile devices for working outside the office?

• How can we remain secure when working remotely on mobile devices?

Certainly, this is not an exhaustive definition of due diligence. However, these three steps will slow down the process just enough to make certain you are thoroughly considering how new technology will work with you and for you.

Neal Quon is the co-founder of QuonWarrene.

0
Comments

How do you decide what technology is right for your firm?

View comments

Upcoming event

Nov 20

Conference

Future of Financial Advice

An innovative conference dedicated to improving the client experience by enhancing digital technology, mainstreaming healthcare and optimizing wealth management strategies.The Future of Financial Advice will provide a forum for... Learn more

Most watched

INTV

How the 2020 elections could impact ESG investing

Joseph Keefe, president of Impax Asset Management, on the elections and how advisers can build a bridge to the next generation of clients with ESG investing.

INTV

How advisers can be a gamechanger for women investors

Why women defer to men when it comes to finances and how advisers can combat this phenomenon and make a difference for female investors, according to Heather Ettinger, founder and CEO Luma Wealth Advisors.

Latest news & opinion

Schorsch, AR Capital to pay $60 million to settle SEC charges

The former REIT czar and his firm wrongfully obtained millions linked to REIT mergers.

CFP Board postpones enforcement of its revised fiduciary standard

Board's new Code of Ethics and Standards to be enforced next June, in line with the SEC's Reg BI

Charles Schwab reportedly in talks to buy USAA brokerage, wealth management business

The deal would net Schwab roughly $100 billion in new assets.

Advisers scramble to help retirees navigate looming Fed rate cut

The Fed's first interest-rate cut in a decade has advisers warning against chasing the bait of risk over safety.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print