Taking Charge

“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.”