Advisers need to be proactive about making technology changes if they want to keep up with the competition and take advantages of opportunities to improve the client experience.
"Advisers should be looking to move one new major technology system every year or they'll get behind," said Alan Moore, co-founder of the XY Planning Network.
Practically speaking that means replacing or revamping a firm's client relationship management system one year, the financial planning software the next, the portfolio management and performance reporting systems over the next two, etc. Keeping core systems up to date will allow firms to add tech pieces that improve business efficiencies and the client experience, such as electronic signature or mind mapping tools for better data visualization.
Firms that don't adopt new technologies on a regular basis will find that down the road they're paralyzed to implement new features and innovations because their systems are so antiquated, Mr. Moore said.
It can be challenging, though, to know when a system needs to be replaced. Advisers and experts recommend looking for certain signs, such as if the vendor hasn't been keeping up with innovations.
If a technology provider hasn't offered an update in a year or 18 months, "that may warrant unplugging from that system," said Bill Winterberg, a financial technology expert who runs the FPPad site.
J.D. Bruce, president of Abacus Wealth Partners, has a less formal approach.
"My main metric for when it's time to make a change, and it's not very scientific, is the whining factor," he said. "When almost everyone's whining about it, I know it's time to replace it."
Another sign is when a particular tool has become a "legacy" system, he said.
At that point, it's time to start again because the company isn't going to be investing in making that software better and ensuring it integrates with other leading-edge tools, Mr. Bruce said.
His firm faces that situation with iRebal, a TD Ameritrade Institutional tool for rebalancing portfolios. Abacus Wealth Partners is using the old version and doesn't like all the features of the new cloud-based product, so it has to decide whether to find a new provider or make the newer version work.
Meanwhile, Abacus Wealth Partners is in the midst of a two-year process of revamping its Salesforce CRM system.
"That's our biggest change this year," Mr. Bruce said. "In any given year we look at all of our systems at some level, but usually only do one big tech project in a year."
Mr. Winterberg has a slightly different spin on changing up a firm's technology.
Sometimes it's better to "rip off the band aid" and switch out multiple systems at the same time, he said.
"Time and money should be allocated at least every year to do an assessment and make sure the company has the technology it needs to help meet its goals," he said.
But if that assessment shows more than one system is too outdated, replacing both can be the best solution, even if the process may not be the most pleasant experience.
Doing it all at once and dealing with short-term service issues is better if it allows the firm to get to the point where it has the technology that supports where the business owner wants to be in the next couple of years, he said.
But changing major systems is not fun, advisers said.
Mark Brinser, financial adviser at Stewardship Advisors, said his firm recently changed out its portfolio management system, performance reporting system, financial planning system and its custodian when it created its own RIA.
"No one really likes change, but its best to get staff on board with it and let them know the goal is to make everyone's job easier," he said.
He recommends that advisers ask their technology providers a lot of questions, and to ask for specifics.
For example, one of the biggest issues with making changes is bringing over historical information.
For Stewardship Advisors, retroactive client data could be seen after the conversion, but it could not be used in any reports.
"Ask them exactly how the information will come across," he suggested.
Also, don't be fooled by schedules that sound reasonable.
"However long you think it will take to implement, it will take twice as long," Mr. Brinser said.
Finally, advisers should recognize that keeping a financial planning firm up-to-date with technology is no easy task because of the speed at which change occurs in fintech.
Consider that 10 years ago, all the biggest advisory firms were using ACT! and Goldmine for their CRM systems, Mr. Bruce said.
"In the past five years I haven't even heard those names, and they were the most popular 10 years ago," he said.