We are always telling clients not to throw good money after bad. That advice applies to us as well.
I am a huge proponent of technology. It helps my firm to provide better client service, make fewer mistakes and be more efficient. More than 10 years ago, I was excited about the prospect of automated rebalancing. With under $200 million in assets under management, I made a leap of faith and paid $50,000 a year for rebalancing software. It took two of us 20 hours a week for six months to set up the program. (And we were told we were one of the fastest!) Countless nights dreaming of spreadsheets, $50,000 and 1,000 hours of work resulted in the successful implementation of automated rebalancing. It was great! Once we made the move, there was no going back to manual processes.
Throughout the years, we've added more technology, updated some software and switched to “newer and better” versions of others. In addition to automated rebalancing, we use the full Microsoft Office suite, CRM, remote connections, online research tools, portfolio accounting software, fancy presentation tools, tax preparation software, portfolio construction tools, automated email monitoring, remote meeting platforms, scanners at every workstation and VoIP phones. Although we spend a lot of money on technology, it is truly an investment that has paid off many times over.
After months of evaluation, we decided to replace one of our current technologies with a new and better one. (I won't reveal details.) We jumped in, full of excitement and anticipation. Working with our new provider has been difficult — long response times for emails and phone calls (sometimes many days), errors in data conversion, roadblocks because the program “doesn't do that yet” and endless frustration. Not accidentally, we've been continuing to run parallel with our current technology. After more than six months, we are still far from our implementation goal.
So when is it time to throw in the towel? In my opinion, we need to consider a few points before making that decision:
1) What were the main drivers to moving away from our current technology?
2) Does our current technology now offer those elements or are there ways we can bring those additional functionalities into our existing technology?
3) How confident are we that the new software will actually accomplish what we want within a reasonable length of time?
4) How confident are we that the new software will be supported at the level we need?
There's no quick answer to our dilemma. I could criticize myself and my team for potentially choosing the wrong technology. Unfortunately, sometimes you don't know until you try. At this point, I feel strongly that we must address these questions. We are always telling clients not to throw good money after bad. That advice applies to us as well. Is the new software bad or does it merely have implementation hurdles? We'll soon find out.
Sheryl Rowling is head of rebalancing solutions at Morningstar Inc. and principal at Rowling & Associates. She considers herself a non-techie user of technology.
