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Taking Charge

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“My God, it’s full of stars,” reads the last line of Arthur C. Clarke’s novel 2001: A Space Odyssey. Though not heard in Stanley Kubrick’s 1968 film rendition, the message is the same: it’s a big universe out there, and men must either morph into greater beings or submit to a higher power. Financial planners, like the characters in A Space Odyssey, find themselves on a journey of technological challenges and discovery. And while in 2003 our world only partly resembles Clarke’s 2001, his take on man’s dependence on technology certainly rings true. Unlike Clarke’s characters, however, there is no need to despair: many of your fellow planners are successfully meeting the challenges of technology in their practices.

Interviews with a number of planners and results of an exclusive Investment Advisor reader survey found that when it comes to technology, there are two types of advisors: those who continually update their practices and stay current on the latest developments; and those who would rather stick with the status quo. You might think that most advisors stand somewhere in the middle of those extremes, but our survey found that more than half of all financial planners rely primarily on themselves to stay current in technology, a feat nearly impossible to achieve while juggling so many other priorities.

“People who tend to get into this field are Type A personalities,” says Carl J. Kunhardt, an advisor with Quest Capital Management in Dallas. “Type As think they can do it all, but the reality is we are not technology gurus. If clients are going to retain planners for their planning expertise, then planners have to be willing to retain technology experts for their technology needs,” he says. Yet many planners still take technology into their own hands: Of 562 advisors who responded to our survey, 64% of independent RIAs, 60% of broker/dealer reps, and 81% of wirehouse brokers said they depend on themselves to stay current in technological developments.

Though advisors do find technology to be necessary and helpful in their practices, they find it equally taxing on their time, their nerves, and their profit margins. Among survey respondents, 41% of planners cited time as their biggest challenge in staying current, while 45% noted cost and lack of expertise as their biggest technology issue. “If you are a planner, why spend your time learning how to integrate technology?” Kunhardt asks. “We are not network administrators or technology consultants. So utilize someone else’s expertise to leverage your time.”

While those technology tools are always evolving, a truly paperless office is still more a dream than a reality for most planners. With hundreds of software and outsourcing options (see our technology directory on page 51), it can be frustrating to find the right software. To help ease the process, we asked several planners to share their experiences about the tools they use in their practices, particularly in portfolio management, contact management, and mutual fund research. Their stories can give you insights on ways to tame your own technology beast.

Take A Long-Term View

Gayle Buff, Buff Capital Management

There are many issues a planner must consider when starting a practice: the emotional and financial costs, getting clients, finding the proper office space, accessing the right investment research, providing adequate levels of client service, and finally, buying and using the appropriate technology. Gayle Buff of Buff Capital Management in Newton Highlands, Massachusetts, says that when picking portfolio management software, “explore all your long-term needs and pick something that will work not just for the short term. Do an analysis for what you expect for five to ten years down the road.” Shifting from one piece of portfolio management software to another is notoriously difficult, she notes.

To manage her 65 clients, Buff uses Advent Axys. “When I first started my practice, I was using Centerpiece, and I switched to Advent because I found it more flexible and intuitive. It offers historical pricing, performance, and current positions, as well as tax reporting information and many other features too numerous to catalog.”

Centerpiece was more cumbersome to use, though she notes that Schwab has since updated that software. “When I was looking into software, I didn’t consider Advent until I saw the program at the office of a colleague of mine and I realized it [gave me] more of what I wanted. I decided to change sooner rather than later because the longer you wait, the harder it is. There is no easy process to transfer from one system to another,” she says.

For contact management, Buff uses ProTracker. “It was written by a financial planner [Warren Mackensen], so it is very oriented toward financial planners. But it has good and bad features.” Though it is more thorough than she needs it to be, Buff says it is more useful than the basic database she was previously using. “Perhaps some day Warren will offer different versions of ProTracker customized for different advisory practices.”

One of the features Buff says she wishes ProTracker offered was more flexibility in tracking client retirement contributions. “I would like more detail on tracking cash flow contributions and distributions in each account,” she says.

For mutual fund research, she starts with Morningstar, and then goes to the fund company’s Web site. “It would be nice to know what the managers are investing in in a more timely way,” she says. According to Ryan Tagal, Morningstar’s product manager, the company is trying to stay current with portfolio and manager changes. “In separate accounts, qualitative due diligence is a very important part of manager searches, so in a few weeks we are launching a due diligence center with collective information from separate accounts managers,” he said in mid-March. “We are trying to do this with our mutual fund managers as well, but only a few are participating now.”

Buff uses a computer consultant, though the consultant helps more with hardware issues than software.

When asked if she ever saw herself converting to a paperless office, Buff answers no. “I find I do need hard copies of documents, and the move to a paperless office is still kind of wishful thinking. I know some people have been able to implement that, but not me. And it is not because of a weakness in technology as much as it is needing hard copies. I don’t know if I will ever be able to get past that.”

Hire A Professional

Bryan Lee, Strategic Financial Planning Inc.

“When it comes to contact management, you can either go very simple, go very advanced, or go somewhere in between,” says Bryan Lee of Strategic Financial Planning in Plano, Texas. “I have looked at programs like ProTracker and GoldMine, and from what I saw they were great, but I find few people take the time to sit down and learn them. Planners often end up buying a program and not using it to its capabilities. As a sole practitioner, I found I wanted to lean more toward the simple and straightforward, and go with something I already knew, which was ACT!”

To manage his 50 clients, he uses Cyberbroker, an ACT! overlay that offers a strong level of customization. Lee points out, for example, that off-the-shelf ACT! only has four or five tabs at the bottom of its main input screen for client information, while Cyberbroker has an additional nine or ten. “Rather than taking the time to set all those tabs up, [the program] set up all that I needed,” Lee says. “Those setups saved me many hours I would have spent customizing.”

Lee’s biggest complaint with contact management software is the contact managers’ lack of integration with financial planning and portfolio management software. “I want the information I enter into my contact management system to flow into my financial planning software. That is what I think everybody is looking for. You can get that if you go with an organization where everything is tied together. But I was not comfortable having all my eggs in that basket. Who’s to say that company will be around two or three years down the road? Whereas I was quite confident that ACT! was going to be around and would continue to upgrade on a regular basis.”

Like Buff, Lee also says his favorite tool for mutual fund research is Morningstar, although he would like to see more comparisons of historical correlations between funds. “So many funds have style-drifted quite a bit during this underperformance of the last few years,” he says. And since “the point of diversification is to have non-correlating asset classes in the portfolio, knowing of a drift would be helpful.”

Regarding his choice of portfolio management software, however, the situation is still a bit shaky for Lee. “There are lot of political issues that are going on right now, and where you custody assets determines what portfolio management software you are going to use,” he says. For example, he has a problem with Schwab’s decision to no longer sell Centerpiece to non-Schwab advisors. Lee is also unhappy with Schwab’s recent decision, effective July 1, to impose a $1,200 charge each quarter to advisory firms that have less than $10 million in assets custodied with the firm, up from the current $600 per quarter charge. “While the importance and the power of the technology is prominent, I think that just as important is determining who you are going to custody your assets with, who you are going to partner with.” For Lee, Centerpiece and Advent Axys are the two options in portfolio management, so he has hired a recent college graduate who is familiar with the current industry technology to help him make the best long-term decision.

As a sole practitioner himself, Lee says that many such planners “will work themselves to death with 12- to 15-hour days before they will justify bringing someone in to help them. I find that a lot of the planners I meet are great planners and allocators and investors, but are not always good business people.” That’s why he hired his “paraplanner,” as he calls his new assistant. “Planners don’t spend much time on technology because they don’t have the time. So hiring a young person coming out of school” with a strong technology background is a good idea, Lee argues.

At some point, Lee says he will shift to a paperless office. “Probably within the next 18 months we will use a program like LaserFiche [a document scanning and filing system], but being a sole practitioner, I couldn’t justify the cost yet.”

Lee is a big proponent of Monte Carlo analysis. “Those advisors who are not currently using Monte Carlo in their plans” should be concerned, he says. “I think not using it sets up you up to be a much more likely candidate for a lawsuit,” since Monte Carlo allows you to present to the client “all the different possibilities” of the future value of that client’s portfolio.

His software suggestions for planners starting their own practice: “Although it may be exciting to be one of the first advisors to implement a new software tool, it may not be wise. I’ve found it best to let other advisors test out a product first,” he says.

Also, consider outsourcing where you can, for example with portfolio management. “I am not so eager to run my portfolio management in-house because that can take a full-time person,” Lee says. On the other hand, Lee points out that if you outsource your portfolio management “then you’re at the mercy of the Internet and someone else has your data.” It’s a decision “each planner will have to make on [his] own.”

Help in Managing the Managers

Carl J. Kunhardt, Quest Capital Management

Carl J. Kunhardt of Quest Capital Management in Dallas says the firm is run like a traditional business where everyone, including the planners, is paid a salary. “We are an independent RIA firm but are still part of Raymond James,” he says. “We own the business and have seven shareholders.” With that model, Kunhardt found it more economical to hire a salaried networking person rather than deal with technology himself in addition to his planning work. “I do a lot of due diligence, and I rely a lot on Raymond James’s due diligence, but we learned long ago not to rely 100% on a broker/dealer’s research, so we used that as a starting point and built our own research.” Comparing that model to technology, Kunhardt says there were “too many dollars flowing into technology to not pay any attention to it.” He believes that technology is both art and science, and “probably more art than science. In trying to make the science portion as accurate and streamlined as possible, you have to rely on technology, so we merged the two closely. Now the network guy is in charge of researching” technology tools, and Kunhardt can spend his time on client needs.

For portfolio management, he, too, relies on Advent. “Probably the most useful feature is being able to do a history” of a portfolio’s value over time. “Raymond James has been really good at giving us daily valuations on our portfolios, but if I needed to get a history for a client, all I need to do is go to Axys. Also, during tax season Advent has a report–a 1099 reconciliation–which has been helpful” for clients and their accountants. The only problem he has with Axys “is that it is so comprehensive; we probably only use 50% to 60% of its capabilities.”

Quest uses GoldMine for contact management. With 27 employees, including 12 planners, Kunhardt thinks other contact managers would not be able to accommodate all the cross-scheduling the firm needs to handle. “ACT! is a comparable program if you have only one or two people,” he says. Using GoldMine, all of Quest’s employees are able to share information on clients. “We found we don’t have as many dropped balls,” Kunhardt says. “This is what works for us, and with the size of our office we had to go with something that was commercially available. ACT! would be limiting, Outlook was just personal information and calendars, and we needed something a bit more robust,” he says.

Although he likes GoldMine, Kunhardt says he’s looking forward to the day his contact manager can share data with other programs. “We often have to rekey data two or three times, and it would be nice if, once we entered the information, we could dump it into the other programs.”

For mutual fund research, he uses Morningstar and Raymond James’s proprietary tools. He says he found Morningstar Principia to be the most comprehensive and affordable research product on the market. “You tend to get sticker shock with anything from Ibbotson, and as far as Value Line and Standard & Poor’s, there was less flexibility.”

To make a practice run more smoothly, Kunhardt suggests increasing overall automation, and instituting electronic document filing when possible. But first there’s an overarching issue to address: “If you don’t think through how each of your different pieces of technology relate to each other, you will find that you will increase the time you spend on technology as opposed to letting technology manage your time,” he says.

Kunhardt says his firm is well on its way to implementing a paperless office. “We have about 60% of our files scanned, so we have no hard copies of anything the client has given us. We are currently using LaserFiche, but we are not really happy with it.” For one thing, LaserFiche’s search capabilities leave a little to be desired, Kunhardt says. Nevertheless, “it has really helped,” he says and is “very affordable.”

Pick Carefully, Then Get Trained

Harry K. Foote, Foote Financial

“I would love to see the paperless office but I doubt I could ever do it,” sighs Harry Foote of Foote Financial in Cherry Hill, New Jersey. “A lot of files now are being sent to me on CD, and that’s great because it cuts down on what I have to store. But in terms of client correspondence, if they send me an e-mail, I have to print it out and put it in a file.” After realizing he was buying more and more file cabinets, Foote is now moving to a bigger office. “Paperless would be a nice goal, but I don’t think we will ever see it in my tenure.”

With more than 100 clients, Foote believes that in order for a practice to run smoothly “everything has to be integrated and everyone has to understand how it works. I have a satellite branch that I would like to further integrate so we get a synergy of being a team instead of a group of individuals. The more uniform we are, the more efficient we will be.”

Not having a tech person in the office is a source of great frustration to him since he says he has neither the time nor the expertise to explore new applications. He suggests getting well trained on the applications you do settle on.

That advice was suggested by nearly all the planners interviewed: since shifting from one program to another is costly and time-consuming, take your time and get professional help in picking any portfolio management, contact management, or fund research program, then reserve serious training time for yourself and the members of your staff who will be using that software. Investing the time will pay big dividends later on. It’s one way to tame the beast.


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