Skip navigation
Dropping Out of the Tech Arms Race

Dropping Out of the Tech Arms Race

When looking to outfit their new offices in Alexandria, Va., Timothy Lee and his three other managing directors sized up phone systems space for the then-nascent firm, Monument Wealth Management. Vendors tossed around features that sounded fun to the small crew of reps — but were clocking in at upwards of $19,000 to purchase the hardware and then install.

“We were literally ink over paper when we decided to meet with a tech consultant,” says Lee. “He said all those features are nice for an office of 500 people, but with eight you can stick your head out your door and say, ‘Hey, come over here.’ That's a conference call for us now.”

I Want ‘IT’ All

The push to buy every technology bell and whistle that hits the financial service market can break the budget of any financial advisory. And certainly most spent the past few years belt-tightening, purchasing tools and software only when absolutely necessary. But even while confidence has slowly crept back among advisors, as the market has cooperated as well, many are still holding tight to the lessons of the past few years — spending, but with a new kind of financial savvy and discretion.

“Just like every one of our clients, I am a small business owner,” says Lee. “And it's a constant decision of weighing, ‘Should I do A or B?’”

That's not to say advisors aren't spending. Globally, financial services firms are expected to increase IT spending in 2011 by 3.7 percent from 2010, according to research house Celent. Yet those who work with reps on how to integrate tech effectively into their businesses say that increase is more akin to a homeowner looking at a remodel — and deciding to focus on the kitchen now, putting the bathroom aside for next year.

“Reps have put things off for three years to protect their business and to serve their clients,” says Bill Winterberg, principal of FP Pad (, a technology consultancy for independent financial advisors and broker/dealers. “Now that the crisis has subsided, there are so many thing on their lists, they can be overwhelmed about what to do. But they're not going to spend widely. They want to be targeted and judicious in their spending because the feeling of the crisis is still close. They're going to leverage more with what they have.”

No one understands that better than Lee. While Monument did invest in iPads this year, that purchase made sense to Lee and his partners as a way to serve clients better. Lee also believes it's a smarter decision than the $15,000 spent over the past few years on it's website, which could have been built for far less.

“You should absolutely not pay up when someone says they can build your website for $6,000,” says Lee. “I'm a reasonably advanced tech guy, but I didn't know about WordPress even a year ago. But at the end of the day it's a powerful tool and it's possible to use it for the backbone of the site, if you have someone helping you.”

In some cases, that help can come from home too, says Greg Friedman, founder of Junxure, a customer relationship management software firm, and also co-founder and president of Private Ocean, a financial advisory in San Rafael, Calif. Friedman believes many firms are not investing enough in training and educating their own people on the technology they already have in-house. The education can give them an upper hand in knowing what works and what doesn't, and also potentially save them from investing in extra programs they may not actually need.

Instead, he'll hear reps voice concerns about sending an employee out for a $250 training session with a vendor, and losing the person for the day. “But if they learn two things that can save them time, then that's a great investment,” he says. “I don't know why people don't get more excited about it.”

Education Bonus

Certainly, Friedman's firm embraces a mission to educate staff on its technology in-house, or at least encourages them to try. Every quarter his employees take online training or a seminar on a tech-related product such as Excel or even Microsoft Word, as part of their bonus plan. To Friedman, if the staff is always learning, then he's sure he is maximizing the investment in the technology he's already purchased.

While Friedman himself is certainly not required to hold to the quarterly bonus plan, he still takes classes and seminars as well, cherry-picking his way through different programs used throughout the office because he then knows to the letter what technology is needed to run the business and what may be missing or needing an update.

“I think it helps me run the firm because I really understand what it takes,” he says.

Yet bringing on board an outside consultant can also be a worthwhile solution — particularly for FAs who may not feel learning the details of every software program or app is worth spending time away from clients. FP Pad's Winterberg says that while some reps may have a natural interest in technology, sometimes the most prudent move is to look for help on specific projects to make sense of what tech you do need — and what you don't.

“Reps are in the business of serving their clients and not being software experts,” he says. “Instead of trying to self-educate, they can find a freelance contractor and get a few tips and tricks at not a whole lot of expense.”

Doug Lockwood took that tactic recently in hiring a consultant to upgrade the firm's most current version of its website at his firm, Harbor Lights Financial Group in Manasquan, N.J. As principal, Lockwood wanted a completely new revamp for the site, and he decided to invest new capital to make the site more interactive and flexible with the social media tools he's adopted, including LinkedIn, Facebook, and Twitter.

Yet while Lockwood decided to push on the web front, he simultaneously took a hard look at other technology used at Harbor Lights, from servers to computers. He even called each of his vendors, making sure they were getting the firm their best price.

Lockwood says he has no problem investing the dollars he believes he needs to spend to keep his practice streamlined and technologically up to speed. As his firm continues to grow, he knows he can't afford not to. But what he feels he needs to spend on has clearly changed in this new era.

“I'm a little frugal today and I'm not blowing it any more,” says Lockwood, who even called his home cable provider and got them to cut his rate. “It's a good lesson for advisors; you don't have to spend every nickel to make money in this business. But you have to put the money where it makes the most difference.”

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.