The vast majority of financial advisers see technology as critical to driving growth. And 73% of the advisers who responded to the
InvestmentNews RIA Technology Study rated their return on investment for technology spending as medium to high.
However, ROI and hard quantitative measures of tech impact are only part of the equation.
Some firms are doing a better job with technology than others, seeing stronger benefits and reporting higher satisfaction. But the types of firms and the reasons for their tech success are surprising.
Top-performing firms take a very different approach to tech investment. As a percentage of revenue, they actually spend slightly less than other firms: 5.5% for top performers versus 6.6% for all other firms.
They also are more likely to say that their systems are “adequate but not leading-edge” and much less likely to say that they use “leading-edge” technology in a majority of business areas.
So if it isn't spending that determines success with technology, what does?
Good advisers work with new clients to set objectives before investing one dime of their clients' money. And technology works the same way.
Successful firms start by setting clear objectives.
I have heard over and over from advisers that it makes no sense to invest in technology if the firm's key decision makers haven't set clear objectives for the operational benefits that the technology is supposed to deliver.
What tasks need to be automated? For what purpose?
How does it enhance service delivery and the quality of the client experience?
Rather than buy technology first and figure out what to do with it later, successful firms develop a game plan of where technology can help improve performance and then find systems with the appropriate functionality that can deliver.
“Increased productivity” is far and away the most common consideration in tech spending. But it raises an important question: Where is the time savings being reinvested?
Top-performing firms have a deliberate plan for how and where to reinvest their time savings. Most are reinvesting in adviser productivity — that is, helping advisers spend more time in front of clients and prospects.
This enhances the client experience and supports both retention and growth.
ONLY THE BEGINNING
Survey data suggest that successful firms also don't take a “set it and forget it” approach to tech investment. They invest in their investment, in terms of time, budgeting and training.
For example, they review their tech systems only once every two years or more, compared with annually for most other firms. They invest much more heavily in training, which gives them higher satisfaction with their software systems and a lower likelihood that they will blame the systems themselves for any problems encountered during implementation.
Their longer and more intense implementation process means that these firms deploy their new systems more fully, improving the productivity impact and generating more time savings for reinvestment. It also prevents the firm from moving on too quickly and looking for expensive new bells and whistles that it may not need.
PLANNING IS KEY
Based on these study results, we think that no firm should feel pressured to rush into new technologies or follow the crowd. Successful firms show that, at any level of spending, firms can get more from their investment through proper planning before making a purchase and proper follow-through afterward.
Technology isn't just another expense item. It is a long-term investment that can generate growth and higher profitability. It should be evaluated not on short-term criteria but from a total cost of ownership over the life of the system in your business.
Kelli Cruz is the director of research and consulting for IN Adviser Solutions. For more information about the 2011 InvestmentNews RIA Technology Study, click here.
