2009 is shaping up as a year of both challenges and opportunities for the financial advisory community. Among other things, the difficult 2008 market environment has forced many firms to rethink their approach to technology, both in the upcoming year and beyond.

The bear market has mauled almost every client's portfolio, and this means that both fee-based and fee-only firms will see their top-line revenues down in the short term. Commission-based advisors will also feel the pinch as clients defer investment decisions.
At the same time, the demands on an advisor's time are likely to increase, since clients require more hand-holding when markets are volatile. This volatility creates both risks and opportunities that advisors must evaluate and act upon. Besides servicing existing clients, they'll have to handle the uptick in interest from new client prospects, especially as many do-it-yourself investors realize they need professional help (the same way they have in downturns past). And former wirehouse clients will realize that they would be better served by an advisor who represents their interests as opposed to those of the firm he works for.

Because of the financial turmoil, many financial plans have been rendered obsolete, especially those based on pre-2008 asset values and/or rosy projections. As the Obama administration and Congress get to work, tax laws will change, which will trigger additional revisions to people's financial plans. With budgets squeezed-but demand for financial advisory services strong-we think the No. 1 trend in 2009 will be a push for efficiency and productivity gains among financial advisory firms.

In Pursuit Of Efficiencies
Many consulting firms, most notably Moss Adams, have in the past counseled that advisory firms gird themselves by adding more support staff. While this strategy is valid, it is expensive. Salary represents only a fraction of the total employee cost. There are also taxes, insurance, retirement plans, and other benefits to consider. In addition, as a firm's staff grows, HR managers and compliance experts are needed to manage the workforce. In this environment, we think firms should first look at taking more advantage of their processes and technologies to work more efficiently before they consider adding people.

Many firms are beginning their 2009 technology evaluations with a "back to basics" approach. They are re-evaluating their core technologies to make sure that these workhorses continue to meet the needs of the firm and its clients. Where improvements and upgrades are required, these core systems are getting priority.

One firm following this approach is Fox, Joss & Yankee LLC, a fee-only firm located in Reston, Va. According to one of its partners, Daniel D. Joss, a MBA, CFP and AIF, the firm is planning to upgrade core technologies, including its Web site. He notes that in the past his firm has received the best bang for the buck by investing in other core technologies, specifically in Fujitsu scanners, in document management software from CEO Image Systems and in Junxure CRM software. In addition, Joss and partner Jon Yankee noted that the Technology Tools for Today Conference yields an excellent return on investment.

In a similar vein, Curtis A. Smith, a CFP with Interactive Capital Management, is tweaking his existing technology mix rather than making any huge new technology investments: "The firm has been stable with hardware and software for quite some time. The only change we envision for 2009 is to move from NaviPlan to Money Guide Pro as the primary planning software package. Many fellow NAPFA members are raving about the new MGP2, so we will be test-driving this program next week."

David E. Hultstrom, a CFP at Financial Architects LLC, says his firm is "planning to buy a good scanner and go quasi-paperless." Meanwhile, Constance Stone with Stepping Stone Financial Inc. also plans to invest in document management technologies in the coming year. "My scanner is too slow and it doesn't provide the speed I need," she says. As a result, she will be shopping for a new work group scanner, most likely either a Fujitsu fi-6130 or a Xerox DocuMate 272.

Some advisors just want to squeeze all they can out of existing resources.

"Like most advisors, we are holding back on most new technology purchases in 2009," says John H. LeBlanc, a co-founder at Back Bay Financial Group Inc. "But that doesn't mean that we are not trying to increase our productivity. We have been heavy spenders on technology for many years [among other names the firm has bought are Worldox, Portfolio Center, BOSS, NaviPlan, Junxure, etc.] so we'll use 2009 to make better use of the products we already own. As you know, most advisors probably only scratch the surface in their use of the products they own, so for Back Bay Financial Group, 2009 will be a year when we delve deeper into those products to capture additional features and to maximize their usefulness." This is a sound strategy that all readers should consider emulating.