From the November 2013 issue of Investment Advisor • Subscribe!

October 28, 2013

Are You Too Emotional About Technology?

Step back and make sure your technology purchases are based on what you need, not what you want

Illustration by Ellen Weinstein Illustration by Ellen Weinstein

It is fun purchasing new technology solutions, right? Of course, it really depends on what you are purchasing and how cutting-edge and expensive the technology may be. I hope your firm is very thoughtful in your process for making technology purchase decisions. However, it is all too easy to overlook the emotional aspect of your technology purchases. Often, I encounter firms that are focused more on the emotional aspect of the evaluation—without being aware of it—rather than on other areas that deserve more weight and attention. Let’s discuss the areas where emotion can have too great an influence over your technology purchases and how it sometimes can lead you to make a poor decision.

The first area where emotion can easily influence your technology purchases is in the time it takes to make your decision. Often products are very complicated and involve many parts that need to be configured or customized prior to being deployed. Because of this, it is common for advisors and their staff to get weary and slightly impatient during the evaluation process. Then, one fairly irrelevant factor can lead to a rash decision. Another example is when you receive the latest invoice for an existing system and use this single event as the catalyst for switching to a new system. It’s OK to plan for this event and then make the switch so that you don’t have to pay for two similar systems. However, receiving the latest invoice on its own should not dramatically move up the purchase timeline on a new product without doing a full evaluation to determine its merits.

Do you listen to the primary users of the product when it is time to make a technology purchase? You should weight their input heavily. This is particularly challenging when the system being purchased is used across your entire firm. The reality is the “complainers” in an advisory firm are the ones who generally get the most attention, but that certainly doesn’t mean that their voice should have more weight in the purchase decision. For example, just because your trading desk thinks your CRM is terrible and refuses to use it, it doesn’t necessarily mean that you should purchase a new CRM system. I know that this is a simple thought, but it unfortunately happens all too often that a firm essentially gives in (or more appropriately gives up) to the complaints on a specific product and starts a whole new effort in finding a replacement solution. Don’t be surprised here: Sometimes the complaints about a technology product have more to do with training and understanding the system than they have to do with the actual functionality of the product.

It is always fun to purchase new technology when the demo of the product looks great, the salesperson is very engaging, the price is competitive and the overall company appears easy to do business with. However, the expectation for achieving these criteria is low when you are replacing a system that clearly doesn’t meet your firm’s needs. At the risk of stating the obvious, new systems always show their best before you write the check. Otherwise, you wouldn’t move forward. The goal is to make sure that you have the same opinions and feelings in the months and years following the purchase of the new system. Therefore, you need to isolate your negative experience with the existing system from overly influencing your new purchase decision criteria. Be sure about what it is that you want to replace. This is not easy to do, especially when you are unsatisfied with your current technology product and would love to get rid of it and whatever troubles it causes you as soon as possible. Take the time to really evaluate a new solution, or you may be out of the frying pan and into the fire.

Another way to minimize or at least moderate the level of emotion in your technology purchases is to “stair step” the big changes. The core systems in your firm (e.g., portfolio management system, CRM, rebalancing or trading) require a very thoughtful evaluation and roll-out strategy when you are thinking about switching providers. Sometimes the euphoria and excitement of making the switch can easily lead you to underestimate the time and effort required for achieving success. Just as you might approach a home remodeling project by spreading out the payments to the contractor as work is completed, you might consider using the same approach for a significant technology conversion and implementation project. This approach is especially valuable when you are paying for custom development. Just as your contractor must finish painting the baseboards before receiving the final check, you want the same leverage when it entails fine-tuning your custom development requests.

There are certainly a number of positive emotional factors involved in your technology purchases. The positive emotions can create momentum, excitement and a desire to improve and be more efficient, all of which are important when you are asking your staff to use a new system. Take advantage of the positive emotions and try to remain clearly focused on avoiding the pitfalls that accompany rash decisions and unproductive emotions in your technology purchases.

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