From the August 2011 issue of Investment Advisor • Subscribe!

CRM: An Untapped Engine for Growth

Having survived the recession, firms are now looking to grow, but are overlooking one of the key tools for success

While the vast majority of advisors have implemented some form of client relationship management (CRM) software in their practices, most of them continue to overlook what may be CRM's biggest benefit to an RIA business: the ability to fuel and support growth.

There's no question that, after focusing on existing clients during the downturn, growth is once again a key concern of RIAs today. Schwab Advisor Services' recently released 2011 RIA Benchmarking Study reveals that more than half of advisors placed growing the firm at the top of their business initiatives, with nearly nine in 10 planning to grow their firms aggressively or moderately over the next five years. Fifty-four percent of advisors said one of their top three strategic initiatives today is "getting new clients through referrals from existing clients," while another 46% reported "new client referrals from partners" as a top goal.

A robust CRM system is one of the best tools available to help advisors track, capture and convert those prospect opportunities to drive firm growth. Just as important, the CRM can play a major role in enabling advisors to maintain exceptional, high-touch service as they grow and scale their practices. We believe the firms that are most likely positioned for growth will be those that take advantage of CRM technology in two main ways: maximizing the use of the CRM system's most powerful capabilities to drive growth, and leveraging the CRM as the central hub of an integrated technology platform customized for their practice.

CRM: Underutilized by RIAsTapping CRM's growth drivers
On one level, advisors seem to understand the value of CRM: A full 84% of advisors have a CRM system—an increase of 24% over the past three years—and 90% of those users report that CRM is critical to the success of their business.

But the benefits of any technology stem directly from how well that technology is used. Schwab's data show that despite CRM's high adoption rate, most RIAs today are neglecting or don't have access to the very features that can be instrumental in helping them attract new clients and fuel growth—including business development, task management and integration (see chart above). Of the eight popular features in CRM, the average firm uses 5.3 versus 4.9 just one year ago.

By taking advantage of these key untapped growth drivers, advisors can boost their success in three areas:

1. Business development
As advisors' attention shifts back toward business growth and expansion, firms must be able to measure progress with new prospects and maximize the effectiveness of referral strategies. Despite the importance of client referrals to nearly all firms, 41% report that they do not track client referrals as a success metric and 59% do not track client satisfaction in a systematic way.

Similar to previous years, a majority of firms in the study have no documented processes related to prospecting, lead generation or staff training. A CRM system allows advisors to organize and track leads throughout the entire sales process, helping identify which sources of new leads are most valuable and how long it's taking to convert prospects to clients—thus enabling advisors to focus on business development strategies that work and shore up areas that are lacking.

For example, I recently visited a firm that used its CRM's business development features to identify two relationship managers who were bringing in more referrals than other team members and determine some of the key activities that were driving their success. Their methods were then documented in the CRM to create referral best practices that could then be leveraged by the entire relationship management team.

2. Workflow management
While more RIAs today are focusing on workflows—documenting each step involved in various key tasks, like opening new accounts and preparing for client meetings, to ensure consistency—there is still a significant number of advisors who are failing to document mission-critical duties. When advisors do document their workflows, they typically store that information in basic Word documents or Excel spreadsheets where processes can get outdated quickly. As a result, they're missing an opportunity for their workflows to have a major impact on their practices.

Here again, CRM can add significant value by empowering the entire organization. By embedding workflows into the CRM system, tasks can be easily organized, assigned to team members and tracked—in effect, allowing anyone with the right permissions to know the exact status of a task at any moment and what needs to happen next. If a team member who is working on a client request is out of the office, another staff member can pick up the ball and fulfill that request in a consistent and timely manner. One firm I visited realizes that having "live" workflows in their CRM means that an update, made at any point by anyone, is immediately available and never seen as out-of-date.

3. Business analytics
As firms implement more of a CRM's capabilities and house more information in the system, they can gain insight into key business metrics such as revenue per client and time spent on client tasks. This new intelligence can help a firm make more informed decisions. For example, some advisors have used CRM-based analytics to discover that segmenting their service offering or focusing on a particular client niche would result in higher profits. Internally, a firm can determine how long it takes employees or teams to complete their tasks, and allocate work and staff more efficiently.

As a firm examines its CRM usage and looks for opportunities to leverage these three overlooked functions or others that could benefit its business, it's critical that they assess their needs up front. Rather than try to implement all these capabilities at once, it's best to prioritize and start with the one or two capabilities that are most likely to address a significant pain point in the firm. Thoughtful implementation and employee adoption are critical to actualizing the benefits of the CRM, so it's best to focus on these issues first and build from there.

CRM as a portal
The second key step in using CRM to drive and support RIAs' growth strategies is cross-integration—enabling various systems to communicate with each other and work together to help bring maximum value to an RIA business. Technology integration can drive significant efficiency gains, freeing up employee time for more value-added activities. However, it's a major hurdle for today's RIAs—55% of whom told Schwab that integrating technology with existing systems is a top challenge.

The key to effective technology integration is to identify a system that can be the hub of the business—the application that will serve as the primary "desktop" for the majority of your employees. Once this hub is identified, you can gather important data from other key technologies in the office, including the portfolio management system, custodial system, email system and document management system, and feed it to the hub.

We believe that the right hub for an RIA is the CRM, for several reasons. RIAs' biggest value proposition is their expertise in client relationship management. CRM, of course, is the tool that provides them with the most comprehensive view of their client relationships—not just assets, but their communications and interactions, their life events, key relationships and investment decisions. What's more, CRM is probably used by more members of an advisory firm's staff than another technology, thanks to the vital client information it contains. In many ways, it's already the go-to technology for the majority of advisors' teams.

The ultimate goal is to make the CRM the window to all the other technologies in the office—a first stop for team members to find the key information they need to provide timely, high-quality and consistent client service across the board. With this, virtually anyone at a firm can get a holistic view of clients' financial pictures in one central location immediately, and address requests quickly and efficiently as a result.

Consider, for example, a situation in which negative news breaks about a major U.S. company. An important client sees the headlines and calls your firm, worried about whether he owns shares in the company and, if so, the size of his position. In a typical non-integrated office, addressing this request might require transferring the client to someone else or calling the client back after cobbling together information from the portfolio management system and other technology tools. In an integrated office where the CRM serves as the hub, the advisor can immediately pull up the client's CRM record and see positions data, real-time account balances, updates from custodians and other information needed to answer the client's question with no delay.

Clearly, the value of a CRM-centric approach increases substantially as firms grow, add staff and assign multiple team members to each client. With the CRM serving as the hub, all team members are always on the same page and able to provide superior service. The bottom line: As firms grow, they can maintain—even strengthen—the high-touch, personal connections they have built with their clients over the years.

In the end, it's important to remember that CRM—like any technology—is not a magic bullet that will solve all the issues that advisors must address. Due to its robust, cross-firm capabilities, any technology must be selected carefully, implemented thoughtfully based on a firm's needs, and adopted widely by employees in order for practices to experience the benefits. However, there is no question that advisors who fully leverage CRM's extensive capabilities and integrate it with other key technologies will put themselves in the best possible position to grow their practices, maximize their efficiency, and deliver world-class service to their clients. Ultimately, those advisors can build highly successful practices positioned to thrive for years and decades to come.

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