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Technology > Marketing Technology

The Technology Coach: It's Mid-Summer Technology Review Time

By Dan Skiles

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Ah, summer! For all of us, now is the time to take a step back and enjoy a well-deserved break. For advisors, however, the slightly-less frantic summer months provide a great opportunity to review your technology solutions and processes, and confirm that they are operating they way you intended.

Even though this volatile market environment may demand more of your time and attention right now, every firm should have an annual process for testing two essential business functions: your backup strategy and your business resumption plan. I know that these are not the most exciting technology areas on which to focus your time and energy, but think of it as risk management for your business: if these two areas are not properly maintained, what might be a small problem could have a devastating impact on your business. All too often, I hear from advisors dealing with difficult situations that involve failed backup processes, and each time these events occur, the advisors describe simple things that they wish that they had done previously in order to be better prepared for the event itself. But that does not have to be you. With a little attention and focus, and a simple plan, you can be confident that your firm is prepared for the unlikely but potentially damaging business disruption.

Get to Know Your Backup Procedures

Take a close look at your data backup strategy. All advisors know the importance of backing up their systems and critical data, but it’s also a legal requirement. In the Investment Advisers Act, rule 204-2 covers the requirement for RIAs to make and keep true, current, and accurate records of their businesses. Many advisors have developed a backup process that is executed on a daily basis. E-mail, client documents, and other business-related data should be stored on a tape drive, a portable hard drive, or at an offsite location using a Web-based service. In order to be fully compliant, many advisors will have two processes: one to create an immediately accessible backup; and another to create a permanent and indelible record. For now, I will focus only on the immediately accessible backup needed to protect against a business disruption.

Most likely there is some type of cyclical schedule or rotation in this process, meaning that a full backup is completed and then incremental changes are captured for a certain time period. For example, a firm may do a complete backup of all its critical data each Friday night, but then only capture the incremental changes with their daily backup conducted Monday through Thursday. Perhaps the firm also stores the complete backup executed on Friday for an extended period. This is a very common practice, because it captures all the critical data and it is easy to maintain. The main question for advisors to ask from time to time is this: How is your firm meeting its need for a backup process, and what type of rotation are you following?

Sounds simple, but overlooking this area can really create problems if your backed-up data is ever needed and the schedule was not being followed correctly. I encountered a case, for example, where the rotation schedule in an advisory firm’s backup process called for replacing the backup tape each day, but the firm was replacing the tape only once per week. The firm was overwriting the complete weekly backup set with the few daily changes that were made, so that at the end of the week, the firm had backed up only the few additional documents and changes that had been made.

Applications and PC Backup

An important consideration with your backup plan is the programs and services your business actually uses and the potential implications they have on how you store your data. So start by reviewing the backup requirements for the software programs that you use, confirming with each software provider the data they require to be backed up to ensure the program will operate. The simple solution might be to back up everything that has to do with the software program. However, the program might have processes already built in that streamline the backup task and ultimately allow you to restore the data much easier. Unfortunately, there are too many stories out there where a firm thought it was backing up everything it needed to restore the software program, but then finds out that it missed a required file when it is time to use the backup copy.

In addition to software programs, make sure you understand what might be stored locally on an individual PC in your firm. Is there anything that should be located on a central server instead? Rarely do firms that operate with a server back up each PC in their office, but do your associates understand this critical point? Too often it is assumed that everything on the PC is also part of the backup process. This faulty assumption is generally not identified until the hard drive crashes on the individual PC and the associate is surprised to learn that his or her computer is not part of the backup process. Critical spreadsheets and Word documents are some of the more common items that are perhaps inadvertently stored locally on the PC versus the server. Bottom line: Every associate at your firm needs to understand what is, and perhaps more important, what is not, part of the backup process.

Certainly the most important part of your backup process is testing that it is actually working. This is by far the area where I hear the most horror stories (and frustration) from advisors. Unfortunately, backup software can fail, too. The application may indicate that it has completed the backup each night, but I have known cases where the files were not actually created or were not stored properly. Ultimately, a true test of using your backed-up data is the best way to be sure that the process is really working. A true test must include using the backed-up data in a production environment (see A True Backup Test sidebar).

Get to Know Your Business Resumption Plan

Most advisors understand the importance of having a detailed business resumption plan (also known as a disaster recovery plan). Often these plans include details regarding where and how the business should operate if the main office is not available. Furthermore, a business resumption plan should clearly define roles and responsibilities of each staff member if such an event occurs. It is also very important that the business resumption plan is reviewed with the staff to ensure they understand all aspects of the plan. Finally, your business resumption plan should be an active document that is regularly updated to reflect any changes at the firm, especially as your firm grows and adds new staff members.

Developing and reviewing your business resumption plan is fairly straightforward. But it is only when you run a test drill and involve all your staff that you will discover if you have an effective plan in place. In order to verify that you have the best plan, make sure that you incorporate different variables when you run the test.

For example, in addition to operating your office from a remote location, only include some of your staff in the drill. When a natural event occurs (hurricane, snow storm, etc.), it is rare that you would have all your staff available to support the business. Therefore, your business resumption plan should include details about how and who will handle even the apparently less-important tasks and responsibilities when you have reduced staff during the event (see Snap Quiz on Disaster Recovery sidebar).

Much of having the right backup strategy and business resumption plan involves following common sense practices and procedures. Unfortunately, the “common sense” approach can sometimes lead to overconfidence that the strategy and process is working without putting in much effort to confirm that everything is in good order. The most important thing you can do is to take the time, once in a while, like this summer, to test that your plans work in both these areas. The time investment for achieving success with your backup strategy and business resumption plan is not significant, especially when you compare it to the costs if it doesn’t work when an event occurs. Simply make it a regular priority to review and test these two areas, and you can rest easier–both in the summer and throughout the year–knowing that your firm is better prepared for the unexpected event.

Dan Skiles is the executive VP of Shareholders Service Group in San Diego. He can be reached at [email protected].

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