How advisors should evaluate their firm's tech

How advisors should evaluate their firm's tech

How advisors should evaluate their firm

As the pressure to decrease operational costs, increase productivity, and comply with industry regulations continue to mount, advisors are relying more on technological tools in both the front and back office — and getting frustrated when they fall short. While it’s easy to blame issues on vendors and service providers, they may actually stem from something more fundamental and basic.

“As firms age, they often add tech without a real plan for how it fits in with their existing solutions,” wrote Jarrod Upton, chief operating officer at consultancy firm Herbers and Company, in a piece for ThinkAdvisor. “The result is a firm can be left with a tangled mess of technology instead of a tightly integrated and cohesive system.”

To ensure a system of technology that works to benefit growth, Upton suggested that advisors ask seven questions in reviewing their tech stack. First, they should ask why they have a given piece of software. One way to answer the question simply is to determine the amount of revenue each software application creates; the underlying reasons behind both positive and negative revenue evaluations must be clear.

Advisors should also determine whether their technology helps with growth. That could be through adding scale or efficiency, or it could be through the acquisition of new business. “Good tech is not always about adding more clients. Operational efficiency is the backbone of your end-client support — both need to be addressed in growth plans,” he stressed.

Another key consideration is the support that comes with the technology. Even the most cutting-edge products can work negatively — impacting both the firm and the clients — if there’s no support behind it. So understanding the resources for training and support offered by the vendor over time is critically important.

Along the same lines, advisors should ask the vendors about the development road map for any software. That means knowing about any future enhancements that should come the longer the firm uses it. “Knowing what’s coming can save you from purchasing tech that duplicates functionality with another solution you already own,” Upton said, adding that firms should train their teams to stay current as new enhancements come. “Know what each offers before you can take advantage of all its features.”

He also noted the need for advisors to consider and ask about growing pains that may come with new technology rollouts. In case unforeseen circumstances delay the implementation of a software launch within the firm, there should be a backup plan to keep operations moving smoothly in the meantime.

In the investment industry, changes are driven largely by clients’ expectations. That means technology must continually be evaluated based on its ability to satisfy their needs. New technology must be added based on demands or pain points that aren’t addressed.

Finally, advisors and firms must consider how acquisitions affect their tech. If their vendor gets acquired by another firm, they have a right to ask questions about how support will be handled moving forward.

“Review your tech annually by going through these seven questions. If you can’t answer why you need a piece of technology anymore, or it doesn’t make sense from a profitability standpoint, it may be time to trim back,” Upton said.


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