Few financial advisors go into business because they love spending time thinking about their back-office and technology. Advisors generally get the greatest reward from working with clients or managing portfolios, but find themselves dealing with too many back-office distractions. Having an efficient back-office requires tightly integrated technology. According to a recent Moss Adams survey, advisors who successfully integrate their core applications enjoy 30% higher profits.
To illustrate this point, consider the following scenario, which might sound familiar:
Let's say your operations manager has been pleading for months to upgrade to an enterprise-level CRM. It will make everyone's jobs and lives better, from prospecting new accounts all the way to reporting to your clients. Finally, one morning you give in to the request. By noon that day, the tech guy is coming around loading the latest and greatest CRM onto each workstation around the office. But just as your team is asking how they ever lived without it, the first problem comes in, and it's a big one. Turns out, your portfolio accounting software doesn't share data with the new CRM. Just like that, two of your most important IT systems will now require double-data entry and might never be in synch.
In addition to the integration issues that have popped up, some of the laptops in your office are not compatible with the CRM software that your tech guy is trying to install. Come to find out, a server upgrade is going to be required to fix the fact that the software is not performing like it was during the demo, nor up to our expectations.
At this point, you are asking yourself, was there an outsourced, hosted solution that I should have considered? Recognizing that you need to upgrade a few laptops, purchase a new server, and pay your tech consultant makes you realize that the total cost of this project is now beyond what you had budgeted. Did we mention opportunity cost? How many referrals haven't been called back to while all of this is going on?
While all of this is going on, it is quarter-end, and your firm needs to be focused on getting statements and invoices out. Really? No...not really, what you need to be focused on is added value activities to your clients, not back-office tasks.
How can advisors ensure this doesn't happen?
Develop your needs and wants lists before going shopping. Identify your firm's areas of pain that need to be resolved. Your needs matter the most, not the latest bells and whistles offered by vendors. Your list will keep your firm focused on finding solutions to meet your goals.
Avoid one-size fits all systems. Find the solutions that fit your business model and capitalize on the things that make your firm unique. Don't abandon the identity of your firm to fit the software provider's model.
Ask how the different core technologies you need will integrate with each other, specific to the way your firm does business. Expect your software providers to understand enough about each other and integrate their services real-time using web services. Try and avoid batch file integrations, although these are clearly better than redundant data entry. Systems should offer some kind of single sign on for mutual subscribers.
Make sure the new technology is scalable for where your firm plans to be in the future, not where you are today. Ask for references of existing users that are of a similar profile to where your firm plans to be in the future, and find out what their experiences are so that you can learn from them.
Take the new technology for a test drive. Just like you wouldn't purchase a car without first taking it for a spin, get your actual data into the system and test drive the technology. It will become real with your firm's data in the system.
Run your existing and new systems parallel for a period of time during the implementation process. This will ensure that your business continues to operate while not being tied to a new system that may not work for your business.
Budget one-third of the cost of the technology for training and customizations. You need to make sure that your staff can overcome the initial resistance to change, and training alongside customizations will help make sure that they are using the new technology in the most efficient manner.
Learn best practices during the journey. Finding new technology and outsourcing components of your business will allow you to learn how other advisors and industry experts are solving similar problems. Above all else, look for opportunities to outsource as much as possible, so that you can put your time, energy, and focus back into value-added activities for your clients. Now you can get back to what got you into this business in the first place - not what is nearly driving you out of it!
Eric Clarke is President of Orion Advisor Services, an integrated portfolio accounting service bureau for advisors.