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.


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.


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

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