Technology is both a vital-and for some people, a vexing-part of a financial advisory practice. But the former can be enhanced and latter minimized if advisors take the right approach to buying the latest software products, said consultants at the Technology Tools for Today conference.
The well-attended conference, which ended Saturday at the Hilton La Jolla Torrey Pines in La Jolla, Calif., provided a venue for vendors to show off the latest operations, customer relationship management and financial planning software tools to financial advisors. Financial Advisor magazine was the conference media sponsor.
At a session devoted to tech budgeting, spending and needs assessment, one of the themes discussed was that advisors often set expectations for new technology purchases that are too high and timelines that are too short to realize the hoped-for benefits.
"People are always excited about a new technology purchase, but they don't fully incorporate the risk factors," said Stephanie Bogan, president of Quantuvis Consulting in Redlands, Calif. "The more you can plan for the potential downside, the better you'll feel about the technology and the more successful the technology implementation will be."
In that vein, Bogan added, it helps to keep in mind the 80-20 rule. "Everybody is looking for the perfect technology, but it doesn't exist," she said. "Realize that when you buy new technology you'll have to trade off 10% to 20% of your perfect world, and you have to ask yourself whether the 10% to 20% that you're giving up will be offset by the 80% to 90% that you'll be gaining."
The key to making new tech purchases work is to fully evaluate ahead of time how a particular piece of technology can enhance an advisory practice's business, and to try to figure out the potential return on investment ahead of time, Bogan said. But, she added, not many advisors do that.
"Advisors by nature are entrepreneurs," she said, "so it might be against their nature to take the time to be systematic about their tech purchases. But sometimes you have to slow down to speed up. If they can take the same systematic approach to tech purchases as they do with evaluating investments, imagine how much better the tech outcomes would be."
Spenser Segal, CEO of ActiFi, a consultant in Plymouth, Minn., said never let a vendor take control of a product demonstration. The reason: They'll show you only the best attributes of that product, and that may not apply to your needs. "Ask the vendor to demonstrate the software benefits based on your needs," he said.
One advisor in the audience asked for the best way to budget for technology purchases. Dan Skiles, executive vice president of technology for Shareholder Services Group, said advisors need to incorporate both the cost for the new software and additional training costs.
Skiles added it's important to try to anticipate business needs over the next five or so years. Advisors should buy software they can grow into, he said, but they shouldn't overbuy and purchase something they'll never utilize because they realistically won't need it.
Said Bogan, "Sometimes advisors get overwhelmed by the technology and might use only 15% of its capabilities. All the while they complain about the stuff it won't do for them."