At wealth management firm LarsonAllen Financial, technology has been a key budget item during the past four years as the firm has transitioned to a fully independent practice. Going into 2009, the plan was to roll out account aggregation software and a document imaging system for its paperless office initiative.
Then the market meltdown happened. “We had to put a hold on any planned projects that we hadn’t started implementing or paid for yet,” says Chris Johnson, the Minneapolis-based firm’s director of operations and chief compliance officer.
LarsonAllen is hardly alone. A growing number of firms are facing tough decisions about spending money on new technology these days. That’s why many advisors are now focused on leveraging their existing technology systems to the fullest extent possible–in effect, wringing every benefit they can get from what they already have in place, and spending little to no money in the process. With that in mind, here are eight steps that you can take right now to size up how effectively you’re using your current technology and make smart, low-cost moves that can help you to get the maximum value from your existing systems:
Step No. 1: Rethink Your Workflow
Start by identifying and documenting each step involved in your procedures. Once you clearly see how you and your team get things done, you can eliminate unnecessary actions, and look for ways to use technology to do a better job on the remaining steps. To succeed, however, you’ve got to be willing to challenge your legacy processes. You might do something because “that’s the way you were taught to do it” five years ago–but it might not be the best approach anymore.
One area where it makes especially good sense to consider workflow and technology improvements is the quarter-end reporting process. The first step is to determine how the amount of time needed to complete the reporting process has changed during the past year. If it’s taking longer now there are opportunities to improve. Break down the process into a flowchart of individual steps (see “Sample Flowchart of Quarterly Report Production,” below) and look for ways to use your portfolio management system to speed up the process and reduce errors. For example, automatically downloading data from your custodian into your portfolio management system instead of entering it manually or manually performing the download of files will save time and prevent mistakes, as will reconciling your data daily instead of monthly.
Don’t overlook seemingly small tasks in your workflow analysis. For every daily five-minute process that’s automated, you could save $800 annually in operational resources (see “How Much Can You Save?” sidebar). So instead of manually collating your various reports, have your portfolio management system set them up as batches in the order you want them. Also, calculate your management fees and generate your billing invoices using your portfolio management system. Foster Group in West Des Moines, Iowa, recently used a combination of technology and workflow reengineering that the firm says has made its billing process 40% faster. “That enables us to cut costs, save time and collect revenue quicker,” says Travis Rychnovsky, who heads up the firm’s operations and IT departments.
Step No. 2: Consolidate and Integrate
Many advisors are reexamining their processes to eliminate redundant efforts and be more streamlined. One way to accomplish this is to centralize clients’ information and correspondence (including client e-mails, scanned documents, and portfolio values from the portfolio management system) into the CRM system–enabling staff to view and manage multiple facets of each client relationship from a single application. At Foster Group, the team has stopped scheduling meetings and calls through Outlook and instead is addressing all scheduling needs through its centralized CRM system. The results: “No more duplicate entries, omitted entries, or mistakes about who’s doing what,” says Foster Group’s Rychnovsky. “With such high demands on the staff these days, it’s really important to save time and get things right.”
Step No. 3: Streamline Trading and Rebalancing
Many advisors are trading and rebalancing more frequently to protect capital and take advantage of opportunities such as tax loss harvesting in the wake of increased market volatility. One way to reduce costs and rebalance faster and more consistently is by using inexpensive (and sometimes free) rebalancing software to automatically rebalance client portfolios based around model portfolios. This type of “mass customization” approach essentially allows you to group very similar clients together in your trading system–20 clients of the same age with the same goals and risk tolerance levels, for example–and rebalance all of their portfolios simultaneously instead of on a one-by-one basis. That obviously helps scale your operations, while also reducing or eliminating manual rebalancing tasks (and error potential) for entire segments of your client base, in addition to continuing to provide customized solutions for clients.
You also may also be able to achieve the same types of benefits using automation tools with clients in unique situations who aren’t good candidates for a mass customization approach. For example, setting up an individual portfolio to be automatically rebalanced around highly specific parameters can save time and money versus using manual processes. What’s more, many of these tools can examine multiple investment accounts in the same household or family unit to ensure that any rebalancing that occurs reflects the entire family’s broader financial situation and goals.
At LarsonAllen Financial, director of operations Johnson estimates that the advisors using the firm’s rebalancing system are seeing a three- to five-fold increase in time saved during the rebalancing process. What’s more, the potential for mistakes due to manual entry has been greatly reduced. “Reducing trade errors is very important for any firm,” says Johnson, “especially so right now, when everyone is moving quickly from one task to another,” he says.
Step No. 4: Gain Staff Buy-In