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Advisers Need a Plan Before Rolling Out Tech Tools

In the race to compete with low-cost, online algorithm-based investing services, financial advisers are constantly bombarded by sales pitches about the latest and greatest in financial technology.

And they're buying. In North America, adviser spending on digital tools for managing wealth will reach $2 billion this year and swell to $5 billion by 2017, according to Boston-based research from Aite Group. The products, typically software, help advisers with everything from financial planning to compiling information from a client's multiple accounts.

Despite the urgency to use cutting edge technology, the pitfalls in picking the wrong tool or rolling it out poorly are real. The watch phrase for advisers that many experts suggest: spend wisely and implement well.

The first step in a well-thought-out and smooth implementation of a new financial technology product is making sure the software fits the firm, said Neal Quon, chief executive and co-founder of financial technology consultancy QuonWarrene in Orange, California.

Quon said he has seen many advisers install new software only to be underwhelmed by its capabilities. The on-screen images may look prettier than an Excel spreadsheet, for example, but the program does not actually save time.

Advisers should think about choosing financial technology as they would a client’s portfolio, Quon said.

"When a client comes to you and asks, 'Should I buy Google?' the answer is, 'It depends.' 'Does it line up with your long-term investment objectives?'"

Another consideration for firms is how the new product works with other software already in use, or planned.  For example, will it be able to upload and use existing client data? Will the firm's custodian be able to analyze information it generates?

"Integration is key," said Joel Bruckenstein, president of Technology Tools for Today, a Weston, Florida-based consultancy for advisers. Grill the software companies about the issue before buying, Bruckenstein said. "Not every vendor works equally well with every custodian and every broker-dealer."

It's also imperative to make sure everyone, from advisers to back-office personnel, understands the rationale behind using a new product. Software specifically for managing customer relationships, for example, is intended to make it easier for staff to keep track of their clients and work on their behalf.

“If you get even one employee who says 'It's easier for me to do it the old way,' the whole process is going to fail,” Quon said.

Some advisers also are adding software for clients to use, which has its own set of concerns and imperatives, said Josh Brown, chief executive of Ritholtz Wealth Management in New York.

When Ritholtz Wealth rolled out a new mobile app last spring, based on Orion Advisory Services software, the firm appointed one "go-to person" to answer all questions related to installation and roll-out, and to answer client questions and problems.

"You have to assume that you are going to be the troubleshooting desk," Brown said. "Clients did not hire you to give them an 800 number."

Communicating the purpose and value of the new tool to clients was critical, he added.


(Reporting by Suzanne Barlyn; Editing by Paul Simao)

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