In architecture, as in life, balance and symmetry lend themselves to aesthetic beauty and efficiency of design. The great advantage of open architecture is that anyone can design add-on products/services for it. Making an architecture public, however, allows others to duplicate, add to or copy it. An open architecture 401(k), for instance, permits outside investments to be offered inside the 401(k) structure, affording the participants choices and/or greater levels of customization and flexibility. But the design could be easily replicated by other providers.
In the software world, for example, Linux is considered open architecture because its source code is available to the public for free. In contrast, DOS, Windows and the Macintosh operating systems have been predominantly closed. The choice of software manufacturers to open an architecture is clouded by proprietary concerns. Yet consumer demand has persuaded some to move in that direction.
The "Your Silver Bullet" (www.yoursilverbullet.net) project has produced some significant liaisons among key providers of software to the financial services profession. Yet even that effort has been less than universally accepted. However, all this may be changing with the recent separate announcements by TD Ameritrade Institutional and Laserfiche (www.laserfiche.com) of open-architecture initiatives. With TD Ameritrade, this announcement signals an effort to ramp up competition with its main rival, Schwab Institutional, by making their platform for advisors more flexible, with more choices.
Laserfiche, for its part, announced an open architecture move at its Laserfiche Institute Conference 2011 in Los Angeles in early January. The company's efforts began with its recent integration with a financial-advisor-optimized version of Salesforce.com.
All of this is interesting, but the question is: What does it mean to financial advisory practices? The answer lies in a fuller understanding of open architecture and how it can be applied to an individual firm. In an open architecture, diverse elements, potentially from outside sources, can be brought in to integrate with the proprietary offerings, or elements of a financial advisory firm.
Software has long been a source of frustration for advisors where certain key software products may or may not talk to each other. In cases where they do not, staff may find themselves typing the same information into different programs over and over again. This is inherently inefficient and an obvious time waster, particularly if there is a way in which that firm could integrate the data in an open architecture environment. Software providers have recognized this need and are responding by permitting more integrations, albeit on a selective basis.
The fact is, this concept can be extended beyond technology to other areas of a financial practice. Outsourced services is a prime example. Some firms have chosen to outsource things they don't want to offer in house or don't have expertise with. There are dozens of ways to use outsource services; from virtual receptionist to back office operations or financial plan preparation, chances are there is an outsource provider ready to assist the financial practitioner at a competitive price.
Outsourcing services can be tricky though, in that often the firm may have to choose an outsource provider that does not necessarily work the same way as that firm. An example of this might be where a financial plan back-office solution uses software that is not the same as what the firm is using. There may have to be some trade-offs or other accommodations to make in order for this particular outsource arrangement to work. Accepting this may mean adapting to a different way of producing a financial plan. So, in studying whether this is right, the advisor needs to develop a cost-versus-benefits analysis to determine if it is going to be worth the effort to work with such a provider. In other cases, where multiple providers are available, it may simply be doing the due diligence on each to determine which one best fits with the way the firm works.
Another example of open architecture that could be applied to the financial advisory practice is the concept of collaboration. Working with other trusted professionals in a common goal of serving the needs of clients is a time-honored tradition. In 2011 and beyond, competitive pressures may cause some practices to consider this concept more closely. Given the cost factors of running a firm, with the real possibility of added costs for compliance-related duties, it may make sense to find efficient ways to make working with other professionals a reality. By sharing combined staff, for instance, in an open office environment, attorneys, accountants and other potential collaborators could find cost savings in administrative support while coordinating the work associated with common clients (though it's given that there may be regulatory issues to confront with this concept).
Even in cases where the collaborators are just a group of financial advisors who choose to work together (what has been called the silo-type firm), there are ways to coordinate staff duties and other administrative support systems to find different ways of
working with clients. As an example, if a firm has four advisors, each of whom works in different areas, a client who chooses to seek financial advice for a divorce could benefit from the combined input of the estate planner, the advisor who focuses on education needs, the divorce planner and the investment/wealth advisor. The key to make this work is the mechanics of collaboration.
For this, many firms have turned to some sort of collaboration portal (or sharing platform) to permit a better way to share information, documents, etc. with collaborators. There are now several viable choices available, from the free offerings with limited functionality to the more full-featured collaboration portals. Microsoft offers a free service called Windows SkyDrive. Offering up to 25 GB free, SkyDrive has password-protected file-sharing capabilities similar to Google Docs (www.google.com). However, neither of these offer sophisticated collaboration tools inherent in the more full-featured portals such as Family Office Network (www.familyofficenetwork.com), Junxure ClientView (www.junxure.com), Advisor Products Advisor Vault (http://www.advisorproducts.com/products/), and Microsoft SharePoint for enterprise systems (sharepoint.microsoft.com), to name just a few.
Because collaboration involves heightened communication with collaboration partners, having mobile access to a collaboration portal can be extremely helpful. More and more advisors are turning to mobile applications particularly as connection speeds become more realistic with newer generation smartphones. For this, there are literally hundreds of potential choices, including such well-known names as Adobe Connect (www.adobe.com) and IBM's Lotus Messaging and Collaboration (http://www-01.ibm.com/software/lotus/). The new Windows Phone (http://www.microsoft.com/windowsphone), using the Windows 7 mobile operating system, has direct access to Microsoft Windows SkyDrive and can access all Microsoft Office documents, including its OneNote program, with full sharing capabilities. Similar functions can be found with Google Android phones and Apple iPhones as well.
In an open-architecture environment, new ways of communicating and doing business will emerge. The traditional office environment could also change. Virtual office space, meeting rooms and outsourced staff could fundamentally alter the way some firms choose to do business. Others may stick with more traditional office arrangements, but integrate other elements of the open architecture concept. In the end, these are choices that, if used properly, could increase the efficiency and profitability of a financial advisor's firm.
David L. Lawrence, RFC, ChFE, AIF, is a practice efficiency consultant and is president of EfficientPractice.com, a practice consulting firm based in San Diego, Calif. (www.efficientpractice.com). The Efficient Practice offers an advisor network and a monthly newsletter.