The importance of software in the financial services industry is rising. Although financial advisors use software on a regular basis, there is no single source or individual that possesses all of the information needed to select the very best products. As a result, when advisors make a decision to purchase a particular piece of software, they do so based on the information they have obtained, which is always limited to some extent.

In reality, advisors may not choose the very best software. Instead, they select one that seems to meet their needs. In this post, we will take an inside view of a software company and discuss questions designed to improve the software selection process.

Customer Technology Lifecycle

Newly released software always contains a few bugs. This is an inevitable part of the technology industry. From the customer’s standpoint, in the early stage of a purchase, you may be excited about the prospective benefits. Then, as the advisor ascends the learning curve, your enthusiasm may wane as you discover a bug or a perceived deficiency. Finally, when the customer becomes increasingly familiar with the software, you become more valuable to the software company. 

The Product Enhancement Dilemma

After the initial launch, product enhancements become a key focus as the software company strives to remain competitive. Deciding which enhancements to include and which to exclude can be challenging. How do companies manage this process? Some ideas are internal and some are external (i.e., customer experience itself). Here are three primary factors in the product enhancement process:

  1. the number of customer requests for a specific enhancement
  2. the efficacy of the enhancement
  3. the number of employees available to do the development work

Some of the best ideas will come from customers. However, when seeking feedback from customers, the company must be careful. This is because some ideas will clearly be good; some ideas may be good, but this may not be immediately apparent; and some ideas will be worthless, perhaps even ridiculous. Therefore, the company must be diplomatic and not offend those with ideas in the last category.

Most companies track the number of requests for a particular feature enhancement, but there can be a problem when basing the product enhancement decision solely on the number of customer requests. Henry Ford wanted to build a V-8 engine. This was not a customer request. Hence, it wouldn’t have made the list if the decision was based only on the number of customer requests. Fortunately (for the Ford Motor Co.), Henry was the owner. In short, some of the most valuable ideas stem from a single source. When a good idea is presented, if the company lacks sufficient insight, it will fail to recognize it.

Purchasing Software: A Systematic Approach

Advisors must decide how best to allocate capital on software. To minimize poor decisions, here are some issues to consider.

  1. Make a list of every important requirement of the new software. You could use Microsoft Excel, listing requirements in the columns and a different piece software in each row.
  2. How many years has the company been in business? Be careful when subscribing to a new company’s product. Many new businesses fail. If a large company owns the new firm, the risk may be reduced.
  3. How many employees work in the company?
  4. Where is it headquartered?
  5. How many individuals work in the customer support department?
  6. How many customers does the company have? It probably won’t say, but knowing the ratio of customers to support staff is important.
  7. What is the target market (RIAs, large B-Ds, banks, etc.) for the software?
  8. How does the company feel about receiving customer feedback? I’m certain they will say they welcome it.
  9. How does the company determine which features or enhancements it incorporates?
  10. If applicable, does the software integrate with your custodian or broker/dealer?
  11. If applicable, does the software integrate with other software (especially, software you currently use or expect to use)?

Questions 2-11 can be included as columns in the Excel spreadsheet mentioned in item one above. In considering a large number of questions/issues, you will move your decision from the emotional to the logical realm.

Until next time, have a great week and thanks for reading! 

For a more detailed look at the best process to take for choosing a customer relationship management system, see Spenser Segal on CRM Success.