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Dan Skiles has been working with advisors since 1994, when he joined what was then a privately held Jack White & Co. in San Diego. The pattern of his career soon asserted itself: while he had his broker’s license and knew trading, what he was really good at was helping advisors grow their businesses through the smart application of technology. Making advisors more efficient through technology, Skiles realized, not only allowed them to serve their clients better, to get a better picture of how to structure and monitor client portfolios, to see how their trades processed, but it allowed them also to charge for those services, to expand a solo RIA’s footprint to allow her to emulate her larger competitors, and to report on those better-monitored portfolios. In other words, it allowed them to build their businesses, which had the effect of allowing the custodians and now a unique broker/dealer where Skiles plied his tech trade–Jack White (which through merger and acquisition morphed into TD Waterhouse, then TD Ameritrade), Schwab Institutional, and now as executive VP at Shareholders Services Group–to grow their businesses as well.

“I always had a passion around technology, I was always the guy that, in school and growing up, people would turn to and say ‘I have this problem with my Commodore computer…,’” Skiles recalls. His passion, however was never “about coding,” he says. Instead, he was–and is–”much more passionate about the business application of the technology.” So at Jack White in the early 1990s, he started projects “which today sound so simple,” to allow advisors “to exchange data with some of the key programs which back then were Advent and Centerpiece…so the advisors could look at their accounts and run reports.” Next up were projects that tried to answer the question, “How do we process their management fees? Is there another way we can help them upload some information to do that?” So Skiles and his team at Jack White eventually built desktop software allowing advisors “to access their accounts, to trade and do research on mutual funds, (to) run queries and reports on the data and hopefully to do it in a way that they can become experts on the actual technology, to really embrace the program.”

In a continuing column that begins in May 2010, Skiles will do just that for Investment Advisor readers: provide insight into the major technology products, concepts, and trends that affect advisors now, and will affect them in the future. More than just being informational, however, the Technology Coach column will explain how and why these technologies should, or should not, be embraced by advisors, but always with an eye on the business applications of those technologies.

In a late February telephone conversation, we spoke to Skiles about the past, present, and future of advisor technology, focusing on how technology can help advisors grow their business.

In speaking of how you got started, the institutional side (that is, the part of the business that served advisors) at Jack White was small in the beginning, right?

Yes, it was for everybody. I mean, look at Schwab, they were obviously a lot bigger [on the institutional side than Jack White] but small when compared to the retail side. As I look at the retail side of Jack White, and the institutional side, the retail side was six, seven times bigger [than the institutional side]. I bet if you looked at Schwab’s numbers, that ratio was even higher for Schwab and the same with Fidelity.

For the custodians, was there a connection between the improved technology and the growth in the institutional businesses in places like Jack White and Schwab?

In the early days, yes, the retail side certainly commanded more dollars because of the client base, but it wasn’t hard for us to see the opportunity with advisors early on. It was just such a fast growing area of the business, even though it was still much smaller than the retail side. And the scalability of the business! I mean, here you are speaking to one individual that represents 100 accounts or 200 accounts and the difference in the way that business scales versus the retail side, where you had to have a lot more people to support 200 retail accounts than one advisor with 200 accounts! So even though the advisor business was just so much smaller at that time, our management could see very clearly, “Oh, gosh, if this continues to happen, this is not a bad business to be in.” It also complemented each other: you had a lot of infrastructure that both businesses benefited from; it’s more the front end that needed to change for advisors.

After Y2K–and I’m stating the obvious here–everyone felt the slowdown. There was all this focus on Y2K–everyone buying new PCs–then you had the tech bust occur, and then the dollars were just not available that you had before, but up until that point it was pretty much: ‘You got a project that was worthy of dollars? You’ll get it’–you just had to have a good strong business case and backing for it. After Y2K, in 2002, 2003 it was more about, ‘Okay, we have very limited dollars, choose wisely.’

It was such a different game from a technology perspective, and for advisors, too. They had already bought all their new PCs, they had already prepared for Y2K in their own way as well, and then their economics changed a bit, too, during that time frame, though not as dramatic as we’ve seen in the last 18 months. During those years, in ’02 and ’03, everyone’s awareness was raised to the point that “We’ve got to make some really smart buying decisions this year because we’re not able to do everything we want to do, and we don’t have the dollars that we had maybe two or three years earlier.”

That’s kind of a good development actually, in a way, right? It’s one thing to say, “Come on, if we’re going to be up to date we need new computers, and we need big pipes to get to those online databases!” But you had to think of what you were going to do with that equipment and those services. “Is there a business case to made for those things?”

Absolutely, it made you focus on the details of every project and the worthiness of that venture. So 2002 and 2003 [were] difficult because of the missed dollars and tech busts, [but] it was better because the projects that we did select, we felt much more confident in their sustainability and their application to the industry.

But then things started moving faster over the last five or six years, you had more and more advisors embracing broadband, you had more and more advisors embracing Web-type applications. Though as you and I sit here, there’s still plenty of desktop programs offered by the custodians that are critical to what advisors do. But there are other applications that are not Web-based…but it’s more the processing-intensive systems that are the ones that are still on the desktop.

In considering [what's next on] the Web, you see some early companies doing this whole cloud thing that everyone keeps talking about.

I like the term “being in a cloud,” I agree with it, but I also chuckle, too, when I hear it because I think about some of my friends that are pilots and they never want to be in a cloud unless they have great instruments.

So it’s one of these things that being in a cloud can be a great thing for a business, but you’ve got to know why you’re there, you’ve got to know where you’re going, and you’re going to have those instruments helping you navigate it. Without those you can’t see, you get confused, you’re not sure what is up and what is down, what is left and what is right.

So I think it’s critical that as folks think about this concept of being in a cloud, being more Web-based, they need to understand why they’re doing it and look at the instruments of how they’re guiding them. [The first Technology Coach column in May 2010 will focus on cloud computing and its applicability to advisors' businesses.-Ed.]

Talk about your time at Schwab

I decided to join Charles Schwab in 2001. They were the market leader and so it was an exciting opportunity to help drive their technology strategy. A big part of my role there, especially in the beginning, was all about technology consulting, consulting with advisors to help them make technology assists. Often the technology component of their business, the small aspect that it was, was just a portfolio management system and maybe a program they were using from the custodian. But they started having Microsoft exchange servers and Microsoft Office, and maybe a CRM application, and maybe a trading product. Oh, and by the way, they still have their portfolio management system, and now it had twelve years worth of data on it, so they better back it up.

All of a sudden there’s all this for advisors, financial-minded individuals who also had this huge technology [component to their business] that certainly interested them, but part of their DNA was never “Hey, I can’t wait to have all this technology in my office,” their goal was to better serve their clients.

They delivered this wonderful financial planning for clients, but technology was such a huge component of them being successful. So we built this whole consulting arm with Charles Schwab to help them through all these decisions because, as custodians, you don’t want your advisor spending half their day or more on these technology issues, because then they can’t grow; then they can’t take care of their clients.

So the consulting arm assisted them in making faster, better decisions with much less resources on their side. Then I had Schwab’s Performance Technologies [unit] as well, so I had the whole PortfolioCenter business and the performance reporting; I had primary responsibility to help drive the strategy of Charles Schwab Institutional from a technology perspective. There were a number of us at that table, but my job at the table was to represent the clients, similar to what I used to do back at Jack White and Co., of making sure that anything that was released by Charles Schwab was valuable to advisors from day one.

I was with Schwab for just about eight years. My friend and colleague Peter Mangan, who, since the day he started Shareholders Service Group in 2003, has always asked me be a part of his team. He’s one of the smartest people I know but I was really never that interested cause I just really loved what I was doing at Schwab. Peter’s firm kept growing and it just came to a head essentially, about a year ago, where his firm needed some more help at the executive level, and he provided me an opportunity that I just couldn’t refuse at this stage in my life, which was as a part owner, a seat at the table in running the firm so now I’m enjoying touching areas of business I’ve never touched before; its much more than technology now.

It was the toughest decision of my career by far, but I’m thrilled with it, it’s been great to be here, of course I miss my friends at Schwab and the advisors I got to talk to on a regular basis, but I’ve gained so much; it’s been very challenging and very exciting at the same time.

What are the common frustrations advisors have with technology? There are many who like to tinker with off-the-shelf software, but what’s the process they need to go through to determine what technology they need?

There are so many instances where advisors spend money on technology, and they’re just not satisfied with the results.

Some advisors do love to tinker–because the technology can be fun and exciting. Every type of solution that advisors key in on have great promise. But firms forget to apply their own strategy and story to the decision to purchase new technology.

They talk about how they provide personalized service to clients, but then, just because their colleague down the street or at a conference praises some product–”It’s great for me!”–that’s great information, but not a buying-information decision; it’s just a reason to look into it. Advisors have to take the time, invest the effort, to find out if this is really right for their specific firm, just like they supply specific guidance to each of their clients. Firms forget to apply their own strategies when they buy technology, and they get influenced too much by vendors and other advisors.


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