Until recently, financial advisors were severely limited in the value they could extract from their software, but new, more flexible technology has the potential to simultaneously catalyze growth, lower operating costs and improve the client experience.
As long as firms can use that technology effectively, said Tom Westhoff, vice president of global sales at Practifi, a business management platform for registered investment advisors.
“An investment in technology is supposed to be a growth investment,” said Westhoff. “But the process is falling down because advisors don’t understand the technology, and technology providers aren’t doing a good enough job of understanding the industry they’re serving.”
Failing to effectively implement technology can prevent firms from growing and make it impossible to offer a good client experience, Westhoff said.
Advisors can’t be totally to blame, he said – they don’t have a lot of time to learn new technologies, so it’s incumbent on technology providers like Practifi to make the process of adopting new software an intuitive one.
“If there are no processes or training at the firm-management level on how technology can be applied to practice management, everything they have going on in terms of growing their business and servicing their clients is going to be impacted, and it’s going to become a challenge to understand how to utilize technology more effectively,” said Westhoff.
An aging advisor workforce complicates matters—many advisors are interacting with technology the same way they were 5, 10, even 15 years ago. This technology was designed to be static, did not incorporate deep data and was inflexible—advisors’ workflows and day-to-day processes became distorted by the technology their firms used because it was not reflective of the way they preferred to work.
So, a CRM became more of a Rolodex to store phone numbers, addresses and birthdays, and didn’t drive any workflows, notifications, or proactive client engagement, said Westhoff. Data on interactions and work for clients, if it was kept at all, was separate from the client’s record, so advisors had no insight into their processes, or any idea if the technology they had in place was offering any benefit. In other words, they were only deriving a fraction of the potential value of their technology.
“Advisors also need to see a benefit from their technology,” he said. “That benefit should come in the form of more AUM and less time servicing clients with unnecessarily manual tasks. Until recently, that was hard for them to register, and that’s also where things have fallen down.”
There have also been some issues on the enterprise procurement side of the technology picture, said Westhoff. Some technologies with a lot of potential to help the financial services space have faced slow rates of adoption because they are complex and costly to implement.
“It becomes a double-edge sword of complexity—advisors need more complex technology to help them solve the complex problems encountered as they scale and manage their firms, but that technology can be difficult to implement,” he added.
Firms need to think about building a platform that starts inside the advisor’s world, said Westhoff, versus making advisors, or branches, fit into a world created at the enterprise or home-office level. People making enterprise technology decisions need to understand which high-value activities are helping advisors grow their practices more efficiently and effectively and what can help them engage with clients at a deeper and more meaningful level with as little time cost as possible.
“The answers to these questions are not infinite; there are probably five to 10 things that most firms need to do that will get their advisors into the technology and excited about it,” said Westhoff. “After identifying and serving those high-value activities, firms can layer in more things, more functionality over time. But they need to start with that design phase and understand what their new platform is going to look like.”
Practifi strives to balance complexity and simplicity, said Westhoff, offering a framework that allows advisors to become very granular, customized and personalized to their clients, but in a way that doesn’t limit a business from a cost or time perspective.
The result is a platform that uses a data-rich CRM to help advisors find opportunities for high-value activities through notifications.
“When high-value activities need to happen, notifications trigger workflows that move seamlessly when advisors need support from customer service departments, compliance, or marketing. This allows for much more efficient, high-value practices, without the technology becoming a hindrance,” said Westhoff.
Technology Providers Must Step Up
Technology providers have to understand the pain points of advisory firms, said Westhoff, and constantly ask if their technology drives outcomes that actually matter to the firm.
They should also provide support when, where and how advisors want it, said Westhoff. For example, when a firm is onboarding new technology or transitioning to a new platform. At those times, it’s also important to ensure adoption across the firm to maximize the technology’s effectiveness.
“The really important thing over time is incorporating an ecosystem of high-value technology providers,” he said. “If we’re all working together, we should increase the value of our clients’ technology investment across all the tech they are using. That interoperability will drive a ton of enterprise value.”
Westhoff believes that technology providers, too, should understand that advisors will use a range of other technologies. So if a company like Practifi wants to become an operating system for RIAs, it needs to incorporate other technologies seamlessly into its workflows.
“Let’s make execution easy to do within our platform, so advisors don’t have to go anywhere else to trigger workflows that aren’t manual,” said Westhoff. “Let’s make it intuitive for an advisor to collaborate with other people or teams in their office; let’s make that process almost invisible to the advisor, so that they don’t have to go through four or five different systems.”
If an extremely high-value workflow, like rebalancing, needs to happen within a client’s portfolio, an advisor shouldn’t have to sift through their e-mail or even open up a portfolio management system to be notified of that need, said Westhoff. Technology providers should make it easy to do, easy to use and apparent within their systems.