How advisers are winning the technology war

The following is an edited transcript of a Sept. 11 webcast, “Winning the Technology War,” moderated by Investment- News reporter Davis D. Janowski.

Mr. Janowski: Can you give a brief overview of your services?

Mr. Bhalla: I run a solo firm providing comprehensive financial planning and investment management to technology professionals.

Mr. Schembri: Clarfeld is a wealth management company. We take a holistic approach, offering insurance, tax, investment and financial planning services. We have offices in Westchester [County, N.Y.] and New York City, and in London. We currently manage just over $4 billion.

Mr. Janowski: InvestmentNews just completed its second annual technology survey. Participation broke down into 30% independent broker-dealers, and advisers and registered representatives with those firms; and 38.6% independent registered investment advisers. We also had a large number of what I call pure planners and a mix of others from wirehouses, and banks and trusts.

Of those who responded, 85.5% of those who own a tablet use the Apple iPad. Android-based tablets broke in the double digits. Sunit, what do you use your iPad for?

Mr. Bhalla: I've used NetX360 app [from Pershing LLC], and the Black Diamond [Performance Reporting LLC] and Redtail [Technology Inc.] apps. But I use a whole host of other things for reading, consuming and generating documents.

Mr. Janowski: What about you, Anthony?

Mr. Schembri: We were pretty early adopters of the iPad. Initially, all the managing directors were given them. Whenever there was a meeting and someone had a deck to hand out for discussion, instead of printing it out from the color printer, everything was done in the Dropbox and accessed on the iPads. It really cut back on paper and made meetings a lot more efficient.

Mr. Janowski: A firm your size, how many color copiers do you have?

Mr. Schembri: Across all our business lines, we have two full-blown color printers.

Mr. Janowski: That could end up being a lot of color copies you aren't making anymore.

Mr. Schembri: We don't print decks anymore. It's almost taboo.

Mr. Janowski: I'm intrigued at the growing number of Salesforce.com and Microsoft Dynamics users out there. Anthony, your firm uses Salesforce?

Mr. Schembri: That's correct.

Mr. Janowski: I think this is partly representative of the overall customer relationship management market — not just the advisory industry — that Salesforce is a massive company and is in dozens, if not hundreds, of industries, from health care to financial services, similar to Microsoft Dynamics.

Mr. Schembri: These are companies that are going to be around awhile.

Mr. Janowski: Moving to financial planning, I was surprised to see Money Tree [Software Ltd.] not on the list this year. What do you guys use?

Mr. Bhalla: I use MoneyGuidePro [from PIEtech Inc.]. It fits me and how I work with clients very well.

Mr. Janowski: What about Clarfeld, Anthony?

Mr. Schembri: Our financial planning software is called Exec Plan [from Sawhney Systems]. We've been pretty much tied to it because we do a lot of sophisticated tax planning that Exec Plan allows us to incorporate into cash flow models.

ARE ADVISERS REALLY HAPPY?

Mr. Janowski: I get numerous calls from advisers who are unhappy with the level of integration, but overall, whether it's CRM or financial planning, they seem pretty well-satisfied with what they're using. How would you explain the very high level of satisfaction?

Mr. Schembri: I would suspect a lot of advisers get complacent with what's working, versus stripping down systems to try something new.

Mr. Bhalla: I think when we shop for software, we consider integration, but when we're entering surveys about software, we typically don't think about that as being a feature. I would love a world where integration isn't a feature but an expected characteristic.

When I buy a DVD player, for instance, I don't look at the spec sheet to see if it's going to work with my receiver or my TV. I know that it will. I hope that someday, we can choose software based on functionality and price, and not worry about whether it integrates.

Mr. Janowski: Portfolio re-balancing is an area where we see low adoption, with 62.8% of advisers surveyed saying they don't use anything. Any theories about that?

Mr. Schembri: This is surprising to me. Automating the re-balancing process is the single thing our firm adopted in the investment platform that improved our operations and efficiencies, and allowed us to keep pace with the markets.

Mr. Janowski: Clarfeld uses iRebal [from ThinkTech Inc., a subsidiary of TD Ameritrade Inc.]?

Mr. Schembri: Yes. We thought it was appropriate because we are custodian-agnostic. And iRebal is driving the engine of re-balancing portfolios from the portfolio-accounting-software standpoint. We've cut down our re-balancing process from three weeks to hours.

Mr. Janowski: Total Rebalance Expert [from TRX] and Rebalance Express [from RedBlack Software Inc.] are examples of less expensive products more suited to a smaller advisory shop.

Mr. Bhalla: The challenge for me is that I've got certain restrictions. I'm using Black Diamond and need to feed Black Diamond data. My custodian, Shareholders Service Group, clears through Pershing, so I need to work with Pershing. And I want it to be purely cloud-based, where I can run on my Mac running Safari. It's hard to find a solution that meets those three criteria. But the prices have come down, and it is now very feasible for a smaller firm to purchase and use a re-balancing solution.

Mr. Janowski: Are you familiar with any of the newer ones? Would any of those work with your setup?

Mr. Bhalla: I've talked to both RedBlack and TRX. Neither are perfect for my situation yet, though I think they're heading there. I could run TRX, but I'd need to run it on Windows on my Mac using Parallels Desktop for Mac [from Parallels IP Holdings GmbH]or Fusion 5 [from VMware Inc.]. I can't run it natively on my Mac yet.

Mr. Janowski: Already getting a few good questions from audience members. First one is for Sunit. Can iPad print out? Are there print drivers you can install on an iPad?

Mr. Bhalla: You can buy printers. The newer ones have built-in functionality where you can just print from an iPad. There are a couple of apps. I think Printopia lets you print from an iPad. But I can print directly to my HP Office Jet without a problem.

Mr. Janowski: Account aggregation is another area that has not been more highly adopted. “None” is the largest response by far — 62.2%. Sunit, do you use a third-party account aggregation provider?

Mr. Bhalla: I am using AllData [from CashEdge Inc.] as part of MoneyGuidePro and am moving to ByAll- Accounts [Inc.]. I love the ability to see my clients' whole financial picture. I need that to do a proper allocation and re-balance. What CashEdge doesn't give me is the ability to get performance-level quality data. The move to ByAll-Accounts is necessary so that I can feed that into Black Diamond; that will then feed into my re-balancing solution when I have it.

Mr. Janowski: With ByAll-Accounts, are you paying for reconciled data, as opposed to just getting the raw feed that you would have to reconcile yourself?

Mr. Bhalla: Right.

Mr. Janowski: What are you getting with CashEdge?

Mr. Bhalla: On any given day, I can pull up the balances, holdings and transactions for that day. It's great for when I want to feed that into my financial planning program. It's not great if I'm helping to manage a client's 401(k) and want to get account balances from the previous day or performance numbers for the previous year.

Mr. Janowski: A lot of folk use nothing for document management, which isn't that surprising, except that it makes an audit much easier to complete. Still, 41.8% say they don't have anything in particular. Are you using anything special, Sunit?

Mr. Bhalla: I'm not. One of the advantages of being solo is that I don't need to share documents between people. But I do need to [share] across computers, so I have a paperless office and have designed a folders structure that works well for me. But if I were to add staff, I definitely would look at something. Of course, then I'd need to worry about ensuring that my documents are backed up and stored securely.

DOCUMENT MANAGEMENT

Mr. Janowski: You're using Dropbox for some aspects of your work?

Mr. Bhalla: I do use it for almost all my documents, but I don't rely on Dropbox security. I encrypt the data on my Mac before it gets to Dropbox. So it's safe there but also synced between my computers.

Mr. Janowski: Anthony, what does your firm use for document management?

Mr. Schembri: We've been using software called Alchemy [from Capterra Inc.] for some time. We changed our processes several years ago from photocopying and filing documents to scanning and shredding them. Across all our business lines, the paper can become overwhelming, so we made the decision to go paperless. We have a pretty good system archiving and backing up that information. And we've linked all these scanned documents to our CRM, so we have access to them whether we're in the office or on the road.

Mr. Janowski: Compliance is also fragmented, and RIAs have different needs than registered reps and independent broker-dealers. Do you use anything in particular?

Mr. Bhalla: I don't.

Mr. Schembri: We don't have anything from a technology standpoint where we're managing compliance.

Mr. Janowski: Sunit, I'll hand it over to you here, to give us an overview of how you've set up your technology and how the data move. I'm always intrigued to hear you talk about your “zero touch” philosophy. We'll interject to get Anthony's input.

Mr. Bhalla: I use an online questionnaire, PreciseFP. This allows clients to go to a website and enter information about themselves, their spouse and dependents. I'm going to send this information to Redtail, my CRM, and then when I want to open an account for the client, I can use Laser App [from Laser App Software Inc.]. It lets me create PDFs of my custodian's account-opening forms.

Mr. Janowski: I have heard advisers complain about having to change an account's passwords two or three times a year. How is that handled with CashEdge and ByAll-Accounts?

Mr. Bhalla: It is a challenge. When a client changes, say, a 401(k) account password, I don't see things getting updated. I need to figure out what's happening and what changed. It's also harder with banks that are using rotating questions and challenge answers. CashEdge doesn't handle that great, right now. ByAllAccounts is different in that when a client changes a password, at least I'll know by an e-mail.

Mr. Janowski: One audience member asked what you are using to encrypt documents before sending them to Dropbox. Is it something native to Mac or a separate product?

Mr. Bhalla: The Mac OS Encrypted Disk Image. I create the disk image, throw files in and close it out. To open that encrypted disk image, I click on it and type in the password. On the Dropbox server, these aren't seen as anything but an encrypted file.

Mr. Janowski: Could you tell us about zero touch?

Mr. Bhalla: Initially, I had a goal of entering a piece of information only once, but my new goal is to have what I call a zero-touch system, where I'm typing in almost nothing. Joel Bruckenstein [publisher of the Technology Tools for Today newsletter] has said that up to 40% of the cost of making a financial plan is related to manual data entry. The more we eliminate, the better off we and our clients will be, because we'll have fewer mistakes. So many errors occur with typing: incorrect trades, account balances, or birth or retirement dates.

Mr. Janowski: Anthony, you have about 80 employees?

Mr. Schembri: Correct.

Mr. Janowski: How many are still doing manual data entry for clients? Are forms entered electronically or do you still have to have some manual touch?

Mr. Schembri: That's still a main pain point for us. We have nearly 1,100 or 1,200 accounts we report on for our clients that are inputted manually to our portfolio management system. Part of the reason we maintain those is because we report on everything, whether we can get a download or not. Clients want to see it; we're going to make sure we provide it. We are in the midst of switching to a new portfolio management system, which will be Black Diamond. Then we'll probably go through those accounts and see if we can streamline, using ByAll- Accounts wherever we can.

But there's still a lot of data clients want to see. Whether it's home value, private equity, deferred-comp plan, restricted-stock units — all need to be inputted manually, and it is a pain.

NO GREAT FIT YET

Mr. Bhalla: The big goal of my software infrastructure is re-balancing. Again, I'm looking at a couple of solutions but haven't found a great fit yet. I can copy and paste account balances from Black Diamond to my spreadsheet, so it's not a horrible step, but is something I want to avoid.

Mr. Janowski: An audience member asked: Where is most of your client data stored, Redtail?

Mr. Bhalla: All the demographic information is in Redtail. I also keep my meeting appointments and notes from client conversations there. My custodian, Shareholders Service Group, doesn't offer me an off-the-shelf integration solution, but it does offer me best-of-breed software at a discount. The people there know me and my practice, so they're able to give me personalized advice.

For example, the minimum price for Black Diamond — a great portfolio management system — is $15,000 or $20,000 a year. That's affordable for a big firm like Anthony's but not for a smaller one. SSG offers Black Diamond to its advisers at a low per-account fee. It provides three solutions for re-balancing software. NetX360, great for re-balancing individual accounts; Rebalance Express from RedBlack and Total Rebalance Expert from TRX are also offered at steep discounts.

Mr. Janowski: I assume SSG maintains a list on its site of what is available?

Mr. Bhalla: Yes. To summarize, it's possible for a solo firm to use technology to be efficient and scalable. Though there's work involved in setting up the infrastructure, SSG lets me run my practice with world-class software at a reasonable cost.

Mr. Janowski: Here is a good question from an audience member on a topic we were going to talk about anyway: Which functions in CRM make advisers most effective?

Sunit, you were just talking about your own system and Redtail.

Mr. Bhalla: Redtail's usefulness extends to integration with other software. For instance, I can have clients go to a website and use PreciseFP, and have that all electronically moved to Redtail, which exports it to Laser App. Redtail also integrates with IPS AdvisorPro [from Blips Partners LLC].

Mr. Janowski: Anthony, you embarked on a 17-month odyssey to resolve this for your firm. Could you elaborate on what led you to it? One of the big factors was that Clarfeld had some 20 systems for different parts of the business.

Mr. Schembri: We've always used a contact management system. Initially, it was Microsoft Outlook. Then we wanted to start recording client phone calls and meetings so that we had a record, a historical trail across all business lines. The aim was that each person in the firm would have access if, for example, someone was out sick or on vacation. We moved to Goldmine [from FrontRange Solutions Inc.], where we started recording client activity, and linking scanned document images. We hired a consultant on work flows and began documenting whenever we placed a trade or did a client transfer.

A mechanism was built for us within Goldmine to record that activity, so everything was automated. But as updates and upgrades are made to these server-based systems, whatever proprietary systems you build to work with the CRM fail. When the partners wanted to talk about revenue projection or top-grossing clients, people representing the business line had to go back to their desks and access the spreadsheet or database. At a certain point, you say, wouldn't it be great if all of this information was scored and accessible from one place?

This was a big driving point when we wanted to get our CRM off the server and into the cloud. We wanted to do more than just the work flows, more than just the Rolodex.

We wanted to build in practice management, the ability to access business metrics and integrate with other systems. We decided to go with Salesforce. It's highly customizable and compliant in that you can limit access based on your user.

When you combine everything, it really makes sense.

From a cost standpoint, you cut a lot of the management involved with all these ancillary systems. We wound up moving about 20 databases. We had a few proprietary databases, one that tracks our insurance business, when premiums are due, client history with different products. We also have a trust and estate business, and are tracking all the information associated with that.

We had two consultants build out the proprietary programs, which we rolled into Salesforce, and we eliminated the management of the other databases. We eliminated having to deal with different consultants on those programs. Managing it in one place allowed all the partners and relative management access to the data remotely.

Mr. Janowski: You were evaluating CRM products before Schwab or TD Ameritrade Institutional rolled out their own versions or customizations to Salesforce. Was that because you just couldn't wait for them? And are they capable of handing what you needed?

Mr. Schembri: TD Ameritrade sponsored a white paper three or four years ago that did a very good job of analyzing and consolidating all the information on probably two dozen CRMs. That's where we started our search. The custodians were adopting the CRM-centric model and building integrations around the CRM, so it was difficult to make a decision before the big announcements about who the larger custodians were going to partner with.

What you find is that whichever CRM you use, there is a certain amount of customization if you have been in business for a while and have complexity across business lines.

If you are a startup without a lot of systems, it's easier. Something like Intelligent Integration [from Schwab Intelligent Technologies] would probably work for a newer or midsize firm that doesn't need to integrate 15 or 16 systems into the CRM.

The Schwab CRM solution through Salesforce wasn't necessarily the answer for us, although it is part of our solution.

Mr. Janowski: Do you ever think you might have considered adopting one of the platforms under development?

Mr. Schembri: To a certain extent, yes.

Mr. Janowski: Sunit, do any audience questions leap out that you would like to answer?

Mr. Bhalla: There were a couple of CRM questions. Somebody asked how I store my client communication. I use Redtail's e-mail archiving feature. And because much of what we do is process-oriented, I use checklists or work flows as part of my CRM in Redtail to make sure I don't miss any steps.

Mr. Schembri: A question about which version of Salesforce we're using: the Wealth Management skin. We've customized it to accommodate a few of the other business lines.

Mr. Janowski: And that is provided by Salesforce proper — not an offering from one of the custodians?

Mr. Schembri: Correct. I don't think there's any additional cost.

Mr. Janowski: What is something that you guys find missing in what you are using?

Mr. Schembri: There are still things you need to go to the website for. You need client 1099s. You need past and current statements.

You're not going to get every bit of information that you would get from a custodian's robust website. But you decide what data you need most. You poll your firm, you find out what questions you're asking most, and those are the items you highlight and bring in from the custodian right into your CRM.

Mr. Bhalla: The re-balancing solution is sort of a whole — integration on a data level. There's also a user interface integration that I don't have today.

So if I'm trying to plan for my next client meeting, I'll have a document open to take notes. I'll have MoneyGuidePro open to look at the financial plan. I'll have Redtail open to look at the last meeting's notes. I'm going to have Black Diamond open to look at account balances and performance.

There's a tension between wanting to pick my own software, based on what I want for my practice, and having an integrated solution where I can just run functionality, not worrying if it is Redtail or MoneyGuidePro or Black Diamond functionality.

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