Taming the Beast

The desktop software is better and using the Web i

Illustration By Bill Mayer

Does the name "PlanMan" sound vaguely familiar to you? If you are a planner of a certain age--say one who started practicing during the late 1980s or early 1990s--PlanMan, software from a company called Sterling Wentworth Corp. (now part of Sungard Expert Solutions) might have been your first technology partner. It was one of the first pieces of software specifically designed to help a financial planner do his or her job. Using an "expert systems" approach, PlanMan was powerful but not very flexible, and one planner likened the software to using a cannon to shoot a fly. However, there weren't many other options.

For a planner starting out these days, that first technology partner might well be the services offered by a company like TechFi. This Denver-based company's offerings are AdvisorMart, a Web-based service bureau for advisors, and TechFi Financial Office 2001, which includes Portfolio 2001, a Windows-based portfolio management system with a Web-based counterpart, and Trader 2001, a trade order management, asset allocation, and automatic rebalancing product. Founded in 1998, TechFi's target customer at first was the small advisor who couldn't afford big technology investments right away, though now company founder and CEO Matt Abar says the company is eyeing the larger advisor as well. Regardless of the size of your practice, TechFi's service bureau approach is meant to remove the tech burden from your shoulders so you can concentrate on serving your clients and building your business.

For that's what it's all about, of course: staying competitive. Technology has come of age concurrent with the independent planning profession, and while

Web of Knowledge
The folks from ForeField Inc., a Worcester, Massachusetts based technology company (www.forefield.com), seem like a throwback to the time when software developers were in the game for love of the product and followed the traditional entrepreneurial path. ForeField's product is ForeMost Advice; its database of advice is called the Knowledge Bank. Founder Ronald Newton is a CFP who previously was a trainer with American Express Financial Advisors. His company's goal, says Newton, is "to deliver the highest quality advice," to institutions like AmEx and Fidelity as well as to independent advisors. Originally available only on CD-ROM but now fully Web-enabled, ForeField's business model is a combination of people power and technology. The company uses a team of in-house legal and regulatory experts to produce compliant documents for use by the independent planner and big financial services rep. It will also deliver content to advisor Web sites.

both industries could be considered mature, that doesn't mean each won't continue to grow. While planners interviewed for this article all said that the software that they use in their practices has gotten better and that they're more comfortable with using technology to help serve their clients, there was an undercurrent of dissatisfaction with what's available. While all use the Web to some degree in their practices, most do not see it as a panacea for their technology ills.

Thus we present this special section of Investment Advisor. In the following pages, we'll help you lasso the technology monster, with reports on what your peers are using, what they're spending on technology, a survey of just about every product on the market (page 48), and a look at online managed account providers.

When it comes to technology, many planners feel challenged. Most do not get into this business because of their tech skills, but rather out of a desire to exercise their people skills. So how does a planner keep abreast of the changes in technology that might affect his practice? How can you hope to compete with wirehouses and banks and insurance companies that have not only the marketing muscle but also proprietary software and data sources?

Most planners have found a middle ground where they can supplement people skills with the appropriate use of technology. And there are resources available to the independent planner--from product demos at planner conferences to user groups to online communities--that will allow you to stay current on technology development. But you'd better be comfortable at some level with the computing power that's available to you. Failure to do so will make you vulnerable on several levels, not the least of which is that your clients may expect it of you. And you'll have to spend money to stay competitive.

There's a theme that runs through conversations with experienced planners who have built successful practices over the past 10 to 15 years: they're not afraid to experiment. Specifically, that means not only taking a chance on newly developed software, but customizingexisting technology tools, even as mundane as Microsoft Excel, to meet specific practice and client needs. In fact, most planners do not rely on only one piece of software to meet all their needs.

Like any modern-day business, finding the right technology partner--whether online or standing alone on your desktop--is not a one-time experience. You can't investigate the possible portfolio management software packages out there, settle on Centerpiece, say, then rest assured that you'll use that same software until the cows come home. New packages are being developed, versions of the software are moved online, and new solutions providers develop their own approaches to meeting specific advising and financial planning needs.

Just as you might take on partners whose interests and skills complement your own--you enjoy financial planning, partner #2 has experience in picking investments, while partner #3 is a CPA--many multi-planner practices include at least one geek, or near-geek. When forming a partnership, keep that in mind, or at least bite the bullet and hire a consultant at first to help you wire your office and build a presence online. Then, as your practice grows, bring a full-time IT person on board who not only can keep your color LaserJets printing smoothly, but also can address the bugs and upgrades that software requires and run the demos and trials of new software that you might want to buy.

Tracking Mackensen

An example of a planner who has made technology work in his practice is Warren Mackensen. Mackensen has three other planners and several support staffersserving 150 clients out of his office in Hampton, New Hampshire. Vice chair of NAPFA, Mackensen regularly speaks at industry gatherings--you might have heard him at the FPA Retreat 2001 last month on a panel on succession planning.

From Paper to Web
If Morningstar with its Principia Pro is a mutual fund research factory, "then we're the research cabinetmaker," says Steve Savage of Litman/Gregory's Advisor Intelligence Web site (www.advisorintelligence.com). More than an online version of Litman/Gregory's No Load Fund Analyst newsletter, Advisor Intelligence is a subscription-based service that provides targeted research on mutual funds and a raft of other tools and services to help the advisor.

Part of what sets it apart from the competition, according to Savage, is its pedigree: Litman/Gregory is an advisor to high-net-worth individuals, families, and institutions that's been around for 15 years. Its research is based on an investment philosophy that many advisors share, Savage says. L/G's analysts spend much quality time at fund companies, doing due diligence. For Michael Genovese, a partner in the Sacramento-based Genovese, Foreman & Burford, using AdvisorIntelligence.com to help make decisions is a matter of having faith in the research. "Being a firm of advisors themselves, they understand exactly what being a manager is all about," says Genovese.--Josh LeBaron and James Green

In his office he's got a network of 10 PCs running off a couple of Dell servers and employs the standard range of Microsoft Office applications. He uses Principia Pro from Morningstar for mutual fund and stock research, Centerpiece from Performance Technologies Inc. as his portfolio management software, and NaviPlan Extended from Emerging Information Systems Inc. (EISI) in Winnipeg, Manitoba (list price, $1,000 per year), as his financial planning software. Not an uncommon suite of tools for a planner, and the packages he uses in 2001 are definitely not the ones he was using when he founded Mackensen & Company in 1991.

But this fee-only planner is more than a passive user of technology. Perhaps his greatest claim to fame technology-wise is ProTracker, Microsoft Access-based software that Mackensen began working on in 1995 when he became frustrated with the contact management software that was then available. Released to the planning public in 1997 and now up to version 3.2, Mackensen says ProTracker grew out of his desire to "get out of the spreadsheet business," particularly when it came to producing accurate net worth statements for clients. With ProTracker, Mackensen can produce those statements in a jiffy and deliver them to clients. ProTracker is used most regularly in his own practice, Mackensen says, to produce what he calls "task lists."

These are documents that remind the client of what jobs the client must do to implement his financial plan, to meet his goals and objectives. On a practice management level, Mackensen uses ProTracker to provide to-do lists for his employees.

Overall, Mackensen says planning software has improved greatly, with portfolio management software in particular having gotten much better over the past 10 years. But for those planners who have been hesitant to embrace the latest in technology, Mackensen warns, "they're wasting their time." Intelligent use of technology makes a planner more efficient, he believes, reduces the likelihood of introducing human error into the planning equation, and thus makes a better planner.

Manage Those Contacts

Fred Burgess of Livada Securities in Portland, Maine, agrees that the software these days is better, that access to more accurate data has been improved, and that technology can lead to better service for clients. But he also thinks that what the profession needs is good contact management software "for under $10,000." Burgess is one of those veteran planners with a wirehouse background who is converting to a fee-based practice. He has customized existing technology to meet customer needs. He still uses an Excel spreadsheet that he wrote to run against a weekly download of his Media General Financial Services database to find winners among his preferred investment vehicle of value stocks. Indeed, Burgess remains one with an independent approach to financial planning, despite being part of a full-servicebrokerage that's now owned by the Bangor Savings Bank.

Burgess has pointed self-directed clients to Financeware's Web site to use its online tools because he thought the clients would enjoy the visit. That's his take on technology: it will enhance a client relationship, and might even serve as an agent to woo new clients, but it won't ever replace the personal relationship he has with clients. Even so, in the topsy-turvy investing environment of 2000, he suffered. Of his 175 total clients, "I've lost only four over the past nine years; all of them last year." The reason? "It was all performance-related," he says. "They wanted to run their accounts themselves online," pointing out that the defections occurred in the early part of the year, before the bear came out of the woods.

Is Burgess's experience typical? Are you losing clients to the Web? There's been much speculation over whether the proliferation of online advice-givers

In Your Corner
George Tan has a plan. In December 1999 he founded PortfolioCorner.com (www.portfoliocorner.com) with several fellow Berkeley and MIT Sloan School alumni. The intent? To provide a one-stop shopping site for the growing financial planner. With an advisory board of independent advisor luminaries like Norman Boone of San Francisco's Boone and Associates and Louis Stanasolovich of Legend Financial Advisors in Pittsburgh, Tan and his partners will offer the small but growing advisor a package of services, all online. First up is a referral service that was launched in December 2000 and for which, after a trial period, advisors will pay $100/month. This program, Tan says, will intelligently match client needs with appropriate advisors, not just geographically allocate referrals.

In development is a suite of institutional-strength software packages for asset allocation and research. In addition, the San Francisco-based company will be happy to host your Web site. Furthermore, Tan says the company is looking at developing account aggregation software.

There are other companies that offer similar services, of course, but what makes PortfolioCorner special, according to Kevin Condon of Baltimore Washington Financial Advisors, is that the company is actually listening closely to its advisor advisors, and is not rushing to market with half-baked products and services. Tan promises that the company will make several announcements by early April that will showcase the seriousness of its commitment to the advisor market.--James J. Green

poses a competitivethreat to independent advisors. The consensus seems to be that the threat is overblown. The most appealing clients will always seek out the warm, personal embrace of a flesh-and-blood advisor. And there's some anecdotal evidence at least that in stormy market conditions such as we've been experiencing for the past 12 months, high-net-worth consumers are even more likely to head for the cozy port of experienced, insightful advisors.

As founder and president of AdvisoryWorld.com, Phil Wilson believes that planners who fail to embrace technology are doomed to failure. He argues that planners must provide what he calls "companion tools" to clients, either directly on their desktops or, more appropriately, off the advisor's Web site. He believes that clients will demand this, and that many potential clients are already using online advice sites now and will expect to get the same or similar tools from any planner worth his or her salt. Co-opt those clients and their do-it-yourself tendencies by providing those tools on your own site, Wilson counsels, or lose them to the online purveyors. "We're two years away from having the Internet take away a good part of [many advisors'] business," he says.

To position his business for this sea change, AdvisoryWorld.com's overall strategy is to have "an integrated system that [clients] can use on a personal computer or Internet basis, and provide companion tools as well for the client." Unless advisors are willing to share their knowledge and capabilities with their clients, he says, those advisors will no longer be competitive. "The time to control the tools is gone; the time to share the tools is here."

Three Technology Paths

So if Wilson is right and the industry will rapidly move to the Web in the near future, what's the current status of planning technology?

There are three basic planning technology approaches. First is the local-only model, using software that runs on your Windows 2000 PC or your local server. This model is clearly fading. Second is the online model, using tools and research available only on the Web. This is the model used by a range of information and service providers, from Internet companies like Financial Engines and Financeware to the one-stop-shopping site being built by San Francisco startup PortfolioCorner.com.

There is also a hybrid model, which uses technology that may reside primarily on your desktop in the form of a CD-ROM, for instance, or on an Internet server. Your desktop is not a static place, but instead is Web-enabled in some way. The major software players--such as Centerpiece's GenTrade and Advent's My Advent--already offer Web-enabled versions of their software, or are heading in that direction. Being "Web-enabled" might mean simply being able to seamlessly upload or download data to your PC desktop. Or it might mean being able to share data between online and offline applications. It would include applications like TechFi, which has desktop and online offerings.

It also would include the ways that advisors interact with their custodians, all of whom are offering services over the Web that go beyond data downloads and account access. Schwab, Fidelity, and Waterhouse see technology as a way not only to retain current advisors, but to attract new ones. For instance, Accountlynx from DATAlynx, the fourth largest custodian for independent advisors, addresses an oft-cited advisor desire: giving clients online access to accounts. It also addresses a concern advisors have with providing such a service: Accountlynx makes sure that the client sees that access as a service provided by the advisor, not the custodian.

The experience of the members of Baltimore-Washington Financial Advisors in Ellicott City, Maryland, is typical in many ways of how technology can shape a planning practice. Technology has partly driven the fee-only firm's growth and efficiency, especially through its employment of Lotus Notes, a software system that is usually found only in much larger organizations. Kevin Condon of BWFA says Notes has helped the firm grow, and partly due to the tech expertise of partner Sax Birdsong, the firm has made a habit of customizing off-the-shelf software to "meet a market need." Even so, Condon voices some frustration with trying to stay current with technology. "Everything around us changes all the time," he says, referring to such basics as the ever-shifting tax code.

Nevertheless, BWFA clients can view accounts online. The firm has sent out its first newsletter to clients as an Adobe Acrobat PDF file, and soon the newsletter will be in the form of an electronic mail note with links to Web sites for more information.

The way David Kotok, of Cumberland Advisors Inc. in Vineland, New Jersey, uses technology is also worth noting. The firm's principals are "totally wireless," Kotok says, right down to their Blackberry RIM e-mail devices. Kotok's voicemail is also integrated with his e-mail, so he can forward a client's question to another staffer who can find the answer and respond directly. But Kotok makes sure to blend high touch with high tech. Periodically, Kotok will call each client simply to check in and say hello. Even if he has to leave a voicemail with the client, Kotok believes the sound of his voice is still music to the client's ears. And that, of course, is a key lesson in taming the tech beast. Technology works best not in abstract, but when it enables you to do the job your clients hired you to do.

Keeping Current
Here's how some of your peers stay on top of the technology beast

By Josh LeBaron

How can you, as an independent advisor, hope to stay current in a market inundated with an ever-changing lineup of standalone software packages, Web sites, and new service delivery platforms?

You may be searching for that elusive all-in-one package that turns your firm into a powerhouse. But if that package existed (which it doesn't), you might be missing out on the real art of financial planning: piecing together the right tools to help you get the job done in the most efficient way possible.

Taking advantage of the profession's tradition of sharing--going to planner conferences, putting software and Web site exhibitors through their paces--are all staples of staying informed. Other good ideas are to show up at your local FPA chapter meeting, register with an online user group, and read this magazine for the insightful reporting of Andy Gluck, for example, who focuses on just this facet of the advisory business (there are other good media sources out there as well).

These planners shared their approaches for staying current.

John Wing, President, Quantitative Advantage

"I heard about TechFi's Advisormart.com when making the switch to Fidelity and getting my license upgraded to an individual license. The people at Fidelity mentioned Advisormart and said it would really help, that it's Web-based. They also mentioned it had the backing of Morningstar, which made me feel comfortable."

Wing's firm, located in Eden Prairie, Minnesota, has a staff of three advisors who currently manage $70 million in assets. Over the last several years, Wing found himself frustrated with certain aspects of the planning process--such as spending most of his time on portfolio management and research while his client relationships began to suffer. To remedy this he started outsourcing much of the time consuming work using Advisormart.com, the Web-based service bureau offered by Denver-based TechFi. "I'm good at building relationships," says Wing, who seems more than willing to let Advisormart do the dirty work. "It saves me the headache of scrubbing data, it adds integrity, and it's easily accessible from clients' homes." As for his own business, Wing relies primarily on word of mouth to get his name out there, the same way he became aware of Advisormart in the first place.

Deb Wetherby, Partner, Wetherby Asset Management

Wetherby Asset Management in San Francisco comprises 10 planners who manage nearly $500 million in assets for individuals, trusts, pension plans, foundations, and nonprofit endowments. The firm has been proactive in its quest to stay up-to-date with technology. "We have a staff engineer who does software reviews internally," says Deb Wetherby. "We also wrote our own stock options planning software using Excel."

Like other planners, Wetherby relies on as many sources as she can to help make informed decisions. "I feel it is really a challenge to stay on top. I look at such sources as Investment Advisor magazine and The Journal of Financial Planning. Sure, it would be great to find a system that does it all, but that isn't realistic. Finding things to use in combination with one another is part of the art of planning."

Jonathan Pond, President, Financial Planning Information, Inc.

Pond is an individual advisor in Boston and the author of 11 books on personal finance. His firm manages just under $50 million in assets. Pond relies on word of mouth and direct mail to stay on top of new technology. Like Wetherby, Pond doesn't feel there is one technology answer to planners' questions. "There is a lot out there that can help advisors, but it's tough to figure out what will work best for specific needs." In picking mutual funds for his clients, for instance, Pond says he doesn't like to go with one research source. "I like to look around to see if I can find two or three positive reasons why I would recommend a fund to a client."

Harold Evensky, Chairman, Evensky, Brown & Katz

"We volunteer to be a beta-test site for new products," says Evensky of his planning firm's approach to staying ahead of the technology curve. Evensky's firm, which recently added a branch called The Evensky Group that will target smaller independent planners, is located in Coral Gables, Florida, includes partners Deena Katz and Peter Brown, has more than 220 clients, and manages $360 million in assets.

Evensky considers his firm to be very involved in keeping current with technology. "We look at various media outlets, go to major industry shows, and rely on the experiences and recommendations of friends. While you have to evaluate the costs involved in making big changes, we've found that the right technology can really help in reducing overall costs and building profit margins."

Got your own approach to staying on top of the technology beast? E-mail staff editor Josh LeBaron at jlebaron@ia-mag.com, and we'll share the wealth.


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