TowerGroup documents the industry's march toward mobile technology.

The concept of "upward mobility" is taking on a new meaning, suggests a report by TowerGroup, "Mobilizing the Financial Services Enterprise: Business Mobility Gets Unwired." Factors compelling a growing number of financial services firms to "go mobile" are documented in the September 2004 report by TowerGroup Senior Analyst Ed Kountz, who notes four trends emerging in the financial services industry:

    With the improvement in, and falling costs of, mobile devices, networks and applications, the industry is renewing its attention to enterprise mobility projects;
    Always-on e-mail remains the cornerstone of enterprise mobility, but new applications are being tailored to a variety of industry "vertical markets";
    The industry is starting to pay attention to and invest in the mobility possibilities for applications such as "executive alerts," mortgage information and institutional mutual fund sales;
    When considering how to deploy mobile applications, the industry must choose the right set of partners, technologies and users if it wants a rapid and strong return on investment.

The TowerGroup report refers to enterprise mobility, but has implications for all sizes of financial services firms. "When we speak of enterprises," says Kountz, "we are referring less to the differences between, say, a Merrill Lynch and a Linsco Private Ledger (LPL), then we are a very large enterprise versus a very small shop-one with five or fewer employees."

All firms participate in the mobility movement, according to Kountz. While enterprise firms with large technology budgets are spurring initial mobility advances, these efforts are met in the "lower end of the middle" by smaller firms looking for tech advances to keep a competitive edge.

At all levels, the financial services industry is adopting mobility applications to improve client service and advisor efficiency, although motivations may be different. The goal of many larger enterprises, suggests the report, is to deploy into the hands of highly mobile employees data that is traditionally centralized in enterprise databases, allowing them to customize solutions for clients who might otherwise receive homogenized enterprise solutions.

Smaller firms taking a bottom-up approach to mobile technology may have a different goal in mind. "If the value of an independent RIA relationship is in its high-touch model, the independent RIA is clearly not going to want to replace that service model with something electronic," says Kountz. "The need for remote contact with the client will be less if you're a small business proprietor." All in all, the smaller firms tend not to be early adopters of mobile technology, since they have less of a need and less of a budget for it.

Yet, Kountz agrees that a trend among some small firms may put a new face on that need. Two trends not addressed in the report make that true: the need of smaller firms to retain key employees who leave its geographic base, and the changing lifestyle desires of small-firm owners. "We've seen the RIA space, in part, filled by people with backgrounds in other parts of the industry who are looking for more flexibility, more time for other interests. Mobility can enable that," says Kountz.

"I would stress that five years ago [these advisors] might have had a cell phone and a desktop PC; now there are a huge number of variances in that spectrum. They might be using cell phones for text messaging, PDAs with applications synced into their e-mail accounts, or wireless laptops," says Kountz. "The range of what you can do is increasing significantly. My perspective is that in a hypercompetitive industry [such as financial services], anything you do of this nature is a good thing, especially as prices come down."

Therefore key employees moving away from the RIA firm when spouses are relocated, or small-firm owners wanting to work part of the year in more remote and relaxing locations, are each aided by mobile technology.

The success of the RIM Blackberry is the foundation for the deployment of many newer enterprise applications, the report argues. A wireless PDA device developed in the mid-1990s by Research in Motion, a Canadian company, the Blackberry is the prototype for most handheld, wireless, always-on e-mail tools used today.

Other wireless systems replicate these features and accumulate new features, such as the Handspring Treo 600 "smartphone" (a phone-PDA combination) that works on the cellular networks of more than one carrier and, with third-party software, not only can maintain constant contact with the user's POP3 e-mail account but also download and display e-mail attachments and perform other tricks. In fact the report notes that the ability of handhelds, which includes smartphones, to access and open Microsoft attachments-as the Treo 600 will do when coupled with third-party software like Documents to Go-is becoming essential for the full mobile enterprise experience.

These devices, says the report, are one reason for the development of wireless networks enabling remote workers to provide improved client support. Kountz notes the proliferation of broadband and wireless network services coupled with the development of Centrino and other advanced chipsets for laptops. (The fact that laptops are shrinking in size and weight doesn't hurt this trend either.)

Public wireless Internet access is another cog in the machinery driving this trend. "The standardization of access has definitely become much more commonplace," says Kountz. "[Mobile workers connect] not just at Starbucks these days. We live near a small breakfast-and-lunch restaurant that has a wireless 'hot spot.' In fact, the Episcopalian convent near us even has wireless access. Wireless technology no longer has a fearsome technological edge to it."

TowerGroup's report charts the expected rise in mobile technology use. It shows that approximately 10% of executives at financial services firms use mobile technology, a percentage the TowerGroup expects to rise to 35% by 2009. This will be driven by the variety of applications in addition to e-mail that are being designed for mobile deployment uses such as the mobile investment banker's need for market data streams and deal updates; the mutual fund wholesaler's need for client account records and performance information; or the need of any financial services industry participant to remotely manage personal information such as calendar and datebook changes or client profiles.

With greater mobility comes greater risks, however, the primary of which may be compliance and security risks.
Today's compliance environment forces enterprise firms to more tightly control and ensure the compliance of individual reps' work products. Doesn't the decentralization effect of mobile technology run counter to this need? "Mobility isn't just a one-way channel for isolated communication," says Kountz. "It must be integrated into a larger system. You won't see a lot of reps text-messaging clients, although there are ways to do that."

Kountz believes there is less risk from compliance than from the problematic physical security of mobile devices like PDAs and laptops. "If you have ten reps using in-house desktop computers, you can control the security of the data on those desktops with a firewall. When the ten reps go out into the field with five Blackberries and ten laptops, these moneymakers become access points in airports, on trains, in Starbucks. Even if they're not logged onto the Internet, laptops holding confidential client information can be stolen. Will those data be secure when that happens?" You've got a bigger breach than if you didn't have access to mobile solutions."

Which is why the TowerGroup report stresses the need for guidelines when enterprises or small advisory firms deploy mobile technology. First, consider the goal and the user. What data, if delivered remotely, will have the greatest efficiency impact? How can users be involved at an early stage to maximize their comfort and proficiency with new devices and applications?

Second, consider the market for mobile solutions. Standards do not yet exist, so it's more important for users to choose solutions that best support their firm's needs and generate a return on investment. Third, choose mobile partners who will provide the best business results within the firm's budget or timeframe. Last, consider security issues and how to best integrate new mobile channels into the firm's "existing multi-channel infrastructure."

Suffice it to say, mobile devices and applications are the latest example of technology enhancing the financial advisory experience. Large enterprises and small advisory firms alike will use this technology to compete for client access and loyalty through enhanced communication possibilities. There is perhaps an irony, in that relationship-building has long been thought to be a face-to-face proposition. With the current direction of mobile technology, the number and variety of client contact mechanisms promote better client service , making physical access to the client relatively less important.

David J. Drucker, MBA, CFP ([email protected]), a fee-only financial advisor since 1981, is editor of the Virtual Office News monthly newsletter (www.virtualofficenews.com) and a principal in Practice Merger Consultants Ltd. (www.practicemergers.com).