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Mastering Advisor Technology

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Now is the time for all good financial advisors to come to the aid of their practices. One of the smartest, easiest ways? Go high tech. But go swiftly before you find yourself seriously lagging the competition.

Savvy choices and thoughtful use of technology have been shown to indeed help expand advisors’ business. Certainly, tech can prepare you for an influx of the many new clients expected to change advisors or hire their first once the financial crisis subsides.

“Research shows that four out of five affluent investors are considering switching advisors. That’s a very large business opportunity for those who have a compelling value proposition,” says John J. Bowen Jr., founder-CEO of CEG Worldwide, a coaching and consulting firm for financial advisors.

To help grow your business — or at the very least to just stay competitive — it is essential to optimize the use of technology. “We’re at a place where it’s not a matter of ‘if’ — it’s a matter of ‘when,’” says David J. Drucker, editor of Virtual Office News, whose spin-off 2009 Technology Tools for Today conference will be held February 25-28 in Addison, Texas, at the InterContinental Hotel.

One of the most intriguing new studies delving into how technology can boost financial advisory business was performed last year by Harvard Business School researchers partnering with broker-dealer Commonwealth Financial Network.

The study showed that Commonwealth independent advisors who used more computer-assisted work processes — mainly in the areas of client service and operations — grew assets under management at a faster clip than did other FA respondents.

On average, advisors in the top information technology (IT) use quartile increased AUM about 10 percent quicker than those in the bottom quartile. “The results suggest that investments in IT can enable financial advisory practices to grow more rapidly,” says David James Brunner, a Harvard Business School doctoral candidate who designed the study and conducted it with input from HBS professors. Results will be published in a forthcoming academic journal.

The study of 203 respondents, out of 310 surveyed, found “a very strong relationship between rate of growth and the amount of IT the advisors used,” Brunner says. Further, advisors who were providing a broader range of wealth management services and also offered more client customization had “a significantly stronger relationship” between IT and asset growth.

“The effectiveness of [FAs'] IT systems may play a crucial part in determining the rate at which [their] practices can grow in the future,” Brunner notes.

“But IT is not somehow magically causing [asset] growth. One reason it is associated with faster growth,” Brunner says, “is that it helps the advisor offer a better [client] experience,” such as higher quality client service.

And to be sure, today’s competitive marketplace requires broker-dealers themselves to make ever-increasing investments in tech, notes LPL Financial, citing a 2008 study of the independent arena conducted by Tiburon Strategic Advisors.

For FAs, a superb time to invest in more technology is right now, says Drucker, who is based in Albuquerque, N.M. ( “When the market tanks, people put their heads in the sand. But eventually they’ll come up for air. When they do, a lot of advisors are going to experience a strong inflow of new clients; and they’ll need technology to help them build their capacity and handle all that new business. This is an excellent time to gear up.”

Hi Tech No Substitute for ?High Touch

Still, using cutting-edge technology can be a doubled-edged sword. Get carried away with the near-bottomless cornucopia of innovations, and you could wind up with results 180 degrees from what you’re seeking.

“The more technology-competent the advisors are, oftentimes the less money they make,” says Bowen, formerly an FA for 26 years with, at one time, a $2 billion-plus RIA at Charles Schwab. Bowen bases the above statement on anecdotal evidence he’s observed as a coach of wirehouse and independent producers, many of them “superstars.” “They get so caught up in the technology that they forget how important the client relationship is, and they stop being client-centered.

“We found that advisors who spent 60 percent or more of their time on client-facing activities made six times as much money,” continues Bowen, located in San Martin, Calif. “Technology is a great, cost-effective facilitator that can make you more efficient; but,” he warns, “sometimes it can get in the way.

“When you interview a client and put everything up on a plasma screen to impress them, the technology may be cool — but it can make you seem aloof. What the affluent investor is looking for,” Bowen says, “is someone they can trust, have chemistry with and can connect with immediately.”

Drucker seconds that. “Technology isn’t a marketing ploy,” he says. To wit: Starting out as a fee-only planner in 1981, “I was so proud of the financial planning software I’d developed that I told prospects we had the best in the business — a unique, customized system. But they really didn’t care. Investors just want to know what the results are, that you’re going to meet their needs. They don’t care how you do it.”

According to Drucker, technology targeted at increasing AUM needs to be specifically marketing-related: for instance, developing a website to bring in new clients.

Bowen calls that “leveraging technology for credibility marketing — identifying the niche you have and [presenting yourself] so that you’re perceived as an expert. You need a compelling value proposition on your website that’s aligned with the conversation you’re having with prospects.”

However, in order to take on more and more assets, advisors also need to invest in spectacular tech time-savers, such as a client-relationship management (CRM) system and a portfolio reporting system.

And nowadays, FAs must make a major decision when acquiring the new technology: to go either desktop or Web-based. Along with in-office use, the latter affords remote access and the ability to pull up records and the like when visiting clients.

If you’re a wirehouse advisor, your firm will of course make this and other tech decisions for you. Merrill Lynch, for example, is emphasizing remote-access mobile computing. Right now, it has a pilot version of its wealth management workstation available on FAs’ BlackBerrys.

“Technology is absolutely a top priority for Merrill Lynch,” says Chris Randazzo, managing director and head of Global Wealth Management technology, based in New York City. “Studies show that our top-tier advisors use more technology tools, such as CRM [systems] or customized management reporting. We have statistics showing that advisors who [make greater use] of our Client Review Center wealth outlook tool are typically in the top tier. They hold those client relationships, and the assets have grown over several years.”

Paperless Productivity

So, are we finally, truly headed for the paperless, all-electronic, office? Not long ago, folks scoffed even at the concept. Now paperless seems to be on track to become a reality — at least among forward-thinking financial advisors.

In Harvard’s Commonwealth study, Brunner observed that “almost everyone was moving in the direction of the paperless office, and some had completed the transition.”

At one branch, the FA showed Brunner a gaggle of empty file cabinets in the hallway, announcing proudly, “Look, no paper!”

Paper filing systems typically mushroom 22 percent a year, according to an LPL advisor study. “In general,” the BD points out, “the paperless office runs at a higher profit margin than a comparable paper-based office because of efficiencies that drive cost savings.”

Drucker, who went paperless a decade ago, considers the paperless office an absolute necessity. But “the savings aren’t really what a lot of people, at first blush, think they are,” he says. “It’s not just savings on file cabinets and so on. The savings are in client service and the time it takes to find information. Digitized information can be searched and found virtually instantly.

“For a lot of firms,” he says, “everything is still on paper. So when a client calls with a question, they need to tell them they’ll call back after they get out their file, look for the file, search for the paper in the file — then play phone tag with the client indefinitely.

“Compare that with the paperless office: When a client calls with a question,” says Drucker, “you can bring up the information on your screen within seconds, answer the question and move on to the next task. It’s a huge difference in productivity.”

Notes Merrill’s Randazzo: “We’re looking to improve a lot of what we do — and certainly [going] paperless is one [area].” The firm already delivers client confirmations, statements and other documents online. Paperless “is one aspect we are trying to push more and more.”

Early this year, Merrill will launch a secure online channel where clients can view their accounts, perform research, trade and interact live with FAs. “We want to take servicing [e.g., ordering checks] out of the branch and give time back to the advisor…The FA, the client, the Call Center are being integrated so we can represent ourselves as one wealth management organization.”

CEG’s Bowen, who sits at an all-glass desk with no drawers to discourage the collection of paper, suggests that one way advisors can win the paper chase is to send clients brochures and white papers they’ve written via computer — in PDF form — instead of snail-mailing them.

It’s all part of relationship marketing, he says. “You can send it to a client while having a conversation with them. If they don’t have e-mail, send it to Kinko’s, and let them mail it out.”

A pivotal issue concerning technology is integration of the wide variety of different types of systems advisors use. Addressing technology in the Tiburon study, FAs’ biggest beef was, not surprisingly, lack of integration.

Randazzo says that “without question,” FAs “should demand integration. Applications and infrastructure should not work independently of one another. Information should flow seamlessly between applications.”

At the moment, the industry is proceeding along two quite different integration paths. One focuses on a model tantamount to a multi-function office machine: It puts together many types of systems in a single product. On the other path, a number of vendors are forming consortiums to build products that compatibly talk to one another.

The second approach, notes Drucker, “preserves the advisor’s ability to pick and choose what they think is the best product for each function and know they’ll get integration between them even though they’ve come from different companies.”

To what degree do FAs use all this technology hands-on? “I think there are a lot of practices where the staff pretty much runs the show,” says Drucker. “But the person at the top needs to have the vision to [acquire] the technology even if they don’t know how to work it.”

On the flip side, he insists, “through outsourcing and smart technology use, an advisor can manage hundreds of millions of dollars without having a single employee. It’s just that simple.”

At Merrill Lynch, it’s mostly the support staff who use tech for client service. The FAs themselves “utilize these tools to enrich the client conversation,” says Randazzo. “On the phone or in the office with a client, they try to enhance or improve the quality of that conversation, whether through their desktop or online by, for instance, showing charts or doing asset allocation or trading.”

Just what’s stopping many FAs from using or purchasing more technology? “Ignorance, computer illiteracy or other kinds of psychological inhibitions,” says Drucker. “I sense that only about 10 percent to 20 percent of [independent] firm owners are really tech-savvy. The rest are more-or-less savvy, and at the extreme are those who are completely phobic about technology.

“But if the advisors are visionary enough to know that technology is essential to their company’s growth,” he says, they’ll invest in it. “If their avoidance of technology filters down through the entire staff, though, they’re going to get further and further behind.”

Essential Technology

Technology tools are “huge time savers and great facilitators,” says John J. Bowen Jr., founder-CEO of CEG Worldwide, a coaching and consulting firm for financial advisors. He should know: CEG is a tech-centric “virtual company” with all services delivered by about 60 independent contractors based in a host of different cities across the country. Virtually amazing!

Bowen, whose office is in California’s Silicon Valley, notes that with the exception of major systems, such as those for client-relationship management or portfolio management, “there is no reason that you have to spend a lot of money on technology.”

He divides tech into four different categories: 1) client-related tools, like e-mail and websites — the latter useful for “credibility marketing;’ 2) productivity-related tools for greater efficiency, such as phone systems, CRMs, digitized recorders — voice recognition/transcription systems for non-typist FAs; 3) technical-support related: research tools, back-office platform, client profiling, financial planning software, online compliance; and 4) time-management tools, like those for scheduling phone appointments.

“The voice mail you left me came across my system as an e-mail with a sound attachment,” notes Bowen, based in San Martin, Calif. “I sent it to my virtual assistant in Santa Fe, N.M. I found her on I’ve never met her. She’s just phenomenal!”

Freelance writer Jane Wollman Rusoff is a Los Angeles-based contributing editor of Research and is the founder of Family Star Productions.


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