Your success as an independent adviser depends on a unique blend of financial expertise, relationship management and business acumen. Good technology can enhance each of those skills, but as we all know, the best offerings can be expensive.
Small to midsize businesses that rightly focus on maintaining a healthy pace of revenue growth might not pay as much attention to how technology cost overruns weigh against profitability. Unchecked expenses related to
customer relationship management, portfolio management and business administration tools may divert attention from other important development efforts.
Analysis paralysis
The quiet killer that lurks in the shadows is the cost — either in hard dollars or lost productivity — of overcomplicating the choice of technology. Too often advisers become enamored of developments at bigger companies or in tech marketplace news.
Advisers are notorious for spending too much time stressing about this and falling into analysis paralysis. They let
perfection get in the way of progress while pursuing infinite customization, which wastes an incredible amount of resources. Yet the more complex a product gets, the lower the percentage of full functionality most users get out of it.
For instance, if you have fewer than 15 people in your business and there is significant overlap in their workflow processes, chances are there is a better solution for you than the most cutting-edge and high-tech CRM on the market. It can take well over a year of R&D and twice as much money as should have been spent to learn that lesson.
Don't settle
The common alternative — settling for cheap but subpar technology — risks eroding the efficiency of your practice in the short run, while suppressing its value over time, which could have grave implications when it comes time to sell. Plus, with tech playing a near-indispensable role in the lives of many younger clients, an adviser with antiquated tech solutions would likely set off alarm bells for them.
So what is the lone shop with a small team of advisers and support staff supposed to do? After all, the most coveted fintech providers have little economic incentive to give special treatment to a practice with less than $500 million in AUM when their services are prized by a host of billion-dollar firms.
Shop with purpose
The answer is to know what you need in order to provide your desired
client experience and hit your own goals. Clearly define your metrics for accumulating assets, offering new services, hiring top talent or expanding office space. Technology can help with these goals, although many advisers should adopt tools covering 80% of their basic tasks at a reasonable cost instead of expensive platforms with irrelevant features.
You can find suitable tech vendors by talking with adviser peers whose practices resemble yours in service model and size. You can also find industry groups that offer discounts on vendors. You can even find consultants to recommend the appropriate peers and industry groups. But perhaps the best technology shopping tip around is to recognize what your practice does not need.
(More: Should CFP Board require technology training? Advisers seem to think so)
Christopher Giles is chief information officer of the Chalice Financial Network, a provider of technology and business solutions to independent wealth advisers.
