If relationships are the heart of the advisory business, technology, it could be argued, is the circulatory system, ensuring the information that supports the relationship goes where it’s needed without trouble.
In that respect brokerage firms are increasingly healthy. For the third year in a row, firms’ overall average technology score increased, this year to 8.7 up from 8.5. (See chart, below.) Summit Brokerage Services and Commonwealth had the highest ratings at 9.9 and 9.5, respectively.
Commonwealth, for one, seems to be getting a return on its technology, including their Client360 platform which tracks investments and performance. “They are not a large firm, but heavily drive their own tech strategy,” says Alois Pirker, research director for Aite Group’s wealth management practice.
Scores may be improving, but technology is still the lowest-ranked category of services offered from independent broker/dealers to advisors. “What [advisors are] really saying they’d like to continue to see improvement in is effectiveness in helping them run their day-to-day business as an independent business owner,” says Tom Daley, founder and CEO of online recruiting platform The Advisor Center.
Technology and support are almost as important as compensation to advisors, says Joanna Belbey, social media and compliance specialist for Actiance.
The support is really key, she says, especially in areas where most advisors are still relative novices, including social media. (See chart, above.) “We’ve moved from this ‘you cannot use social media’ to ‘how do we use social media’ and we’re still evolving,” Belbey says.
The overall average score for firms’ support of social media has held steady over the past two years at 8.4, even as more advisors enter the space. “There’s some degree of frustration on the progress,” Belbey says.
CRM systems also seem to be a weak link. While some—Summit Brokerage Services (9.8), VSR Financial Services (9.4) and Independent Financial Group (9.3)—scored well, the average overall score was 8.4. Firms with the lowest scores, like Cetera (7.2) and Wells Fargo FiNet (7.0), offer proprietary systems rather than customizing custodian-provided platforms.
Cetera’s low score comes even as its SmartWorks Adviser system won Money Management Institute’s 2012 Advisory Solutions Technology Innovation of the Year award. But as with many brokerage firms, Cetera has essentially been patched together through acquisitions of smaller b/d firms, which is a challenge for technology integration. “Often you have to take a step back and define a new one, as this was the case with Morgan Stanley Smith Barney,” Pirker says.
Meanwhile, Wells Fargo’s FiNet advisors use the same tech platform as the wirehouse side, Smith says. “It’s probably not any worse than any other system offered by an IBD,” he added. So why are the independent advisors at FiNet (relatively) dissatisfied? Pirker points out that wirehouse platforms don’t have as many options as independent advisors want.
“If you are self-clearing you have to take technology matters in your own hands,” Pirker says. LPL is an example of a firm that has neglected technology for too long, Pirker says. It scored a 7.2 overall, though LPL is making investments in improving their platforms.
The majority of brokerages rely on technology from their clearing and custody firms, Daley says. Independent Financial Group, which scored a 9.4 for its overall technology and a 9.3 for its CRM system utilizes a suite of tools from Pershing, including the online trading platform NetEx 360. Advisors also have access to Pershing’s NetExchange Client and Albridge Solutions systems.
“The institutional custody platforms, TD, Fidelity—they’re really more on the forefront on the technology, more than the IBDs are,” says consultant Ryan Shanks.
Some firms offer a mix. NFP Advisor Services Group (9.3) integrates different components from the clearing firms into their platform. “NFP is very much a National Financial shop, however, they take technology strategy very seriously and have built out the IndeSuite platform by leveraging technology components from their clearing firm,” Pirker says.
But giving advisors the freedom to pick and choose the components that work best for their business, while an attractive recruiting message, can fall down in practice. “It becomes increasingly complex,” Pirker says. “Unfortunately, many firms do not or cannot spend that extra effort and end up with a less-than-optimal infrastructure.”
Pirker predicts independent brokerages will start to narrow the options they offer brokers, relying instead on tighter, more integrated systems with fewer add-ons or choices. “In general, we have seen a consolidation in the back-office and efficiency measures,” Pirker says. “We’re going to see a lot of changes going forward,” he says.