Michael Kitces #FinTech

How to talk to your clients about a tech crisis at your firm

Handled incorrectly, a technology failure can undo the brand goodwill RIAs spend years cultivating

Sep 4, 2015 @ 11:29 am

By Wes Stillman

It seems almost heretical for an IT expert to say this, but registered investment advisers should accept that business disruptions due to technology failures are inevitable. KPMG has reported that financial services ranks among the industries most affected by IT incidents — only the technology sector and government ranked higher in 2014.

All technology is fallible, because of internal failures, security breaches, natural disasters, human error or other causes. And while it is impossible to prevent every technology failure, it is certainly possible to have a communications plan for avoiding a breakdown in client confidence when issues arise.

The RIAs that navigate technology downtime most successfully are those with operational back-up plans that include a protocol for client communication. Handled incorrectly, a technology failure can potentially undo the brand goodwill that the RIA had spent years cultivating.

When considering communication plans, RIAs should take the following questions into account:

Can we reach our clients immediately? Whether on a paper list that is updated monthly or in a database stored with an outside vendor with limited, encrypted, need-to-know access, RIAs need their clients' key contact information updated and accessible at a moment's notice for messages that may need to go out by telephone, email, or other means.

Who needs to be told? Every IT disruption demands immediate attention, but not every glitch impacts every client. In many cases, advisers may want to be selective about who is informed immediately. Client lists that can be sorted by key attributes give the adviser additional control over the communication flow. For example, advisers may want the ability to organize clients quickly by custodian, portfolio management style, communication preferences, or geographic area.

(Related read: How to make sure your data is secure in case of an outage)

Is there a protocol for proactive vs. reactive communications? RIAs should have clear guidelines about when to get in front of an IT-related issue, and when reacting to inbound queries is the better course. For example, when failures like the recent New York Stock Exchange disruption make headlines, an adviser may decide that an email to clients is warranted to explain what is known about the issue and how they are impacted (if at all). In situations where an internal hardware glitch may have caused the external-facing client portal to go down momentarily, the firm may want to reach out only to clients who were on the portal or who were attempting to access it, to explain what happened, the remedy, and the steps being taken for the future.

What needs to be said? It may be impossible to over-communicate in a crisis, but it is possible to miscommunicate. When RIAs talk to clients about any technology issue potentially impacting their portfolios, it is important to use language that is clear, compassionate and responsive. Keep technical jargon to a minimum and focus on how the problem impacts clients and what is being done to address it.

What kind of client response are we hoping to elicit? Advisers should be thoughtful when instructing clients on how to engage with the firm while IT issues are being addressed. RIAs may want to line up a number of alternatives to deploy depending on the nature of the technology crisis. For example, an outside provider can reroute incoming emails to manage the flow for advisers whose email platform is having difficulties, but if the adviser cannot see or respond to the emails because of local network or third-party vendor issues, the client experience will be further compromised. RIAs may want clients to call in and have phone lines rerouted to alternate numbers, such as employees' mobile devices. In some cases, the best course of action may be an email or telephone tree set up to notify clients of the situation and that their adviser will be in touch once the firm is able to transact business again.

Can an outside vendor's cloud or other systems help with damage control? The straight answer is: yes and no. Depending on the third-party relationships in place and the IT issue, RIAs may be able to operate and communicate in a slightly modified form of 'business as usual.' But clouds can fail, and large firms with highly customized systems may not be able to access their applications fully. Further, while third parties may be able to help access information and open communications channels, advisers should not have them communicate to clients on the firm's behalf about IT problems. Messages about technology glitches or down systems must come from the RIA. The firm's third party service provider can help facilitate the communication, but the message needs to originate from the adviser.

(More insight: Advisers: Take charge of your tech, or hire someone who will)

Should we update clients using social media tools like Facebook, LinkedIn, or Twitter? No. When a technology issue is disrupting firm operations, advisers need to contact clients directly. Although social media may have its place in communicating positive messages about the firm, the risk of a social media sound bite on a firm's temporary technology troubles being taken out of context generally far outweighs any potential benefits.

When should we tell our clients about our crisis communication strategy? The best time to talk about contingency plans for communications is when there is no current crisis. RIAs may want to share a client-friendly summary of their plans in hard copy as well as electronically. Notifying clients in advance about how they can expect to hear from the firm in the event of some type of technology disruption will alleviate panic when something happens, and should give clients peace of mind to know that their adviser has thought about these issues in advance.

Most technology issues have one common thread at their core: an inability to access the Internet, either because the RIA cannot get online, or a vendor system is down. In the majority of situations, the RIA may lose two out of three technologies, but it is exceedingly rare that advisers will lose all ability to communicate with clients. When local technology is not running as intended or external forces have the potential to incite panic, advisers need to be able to rely on their pre-established communication protocols until it is back to business as usual.

Wes Stillman is CEO of RightSize Solutions, and he can be reached via email.


What do you think?

View comments

Recommended for you

Featured Research

The 2015 InvestmentNews Adviser Technology Study

This in-depth study provides a blueprint for the industry, providing actionable information to advisers, along with the latest solutions to help them drive profitability, efficiency and growth for their firm.

Featured video


How interest rates have affected different types of insurance

Social media and engagement editor Scott Kleinberg and reporter Greg Iacurci discuss a common theme in this week's popular insurance stories.

Latest news & opinion

Trump said 'you're fired' to this adviser on TV in 2005, then LPL fired him for real in 2018

Louisville adviser Mark Lamkin was terminated by LPL, in part for failing to disclose outside business activities.

What not to do when working with couples

These are moves advisers should avoid when they are working with couples as clients.

Private Ocean grows to $2.2 billion with acquisition of Mosaic Financial

Combined financial planning operation gives the firm an expanded footprint in the San Francisco area.

Joe Duran has a game plan, and anyone can play

The CEO of United Capital built a formula for holistic financial planning that any firm can tap into — for a price.

LPL video about private equity looks like a swipe at Cetera

Recruiting video warns about potential consequences for advisers when a PE firm buys a broker-dealer.


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.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print