Fintech Corner: Look Before You Leap – How To Drive Profitability With The Right CRM


Regardless of their altruism and love for their employees, most wealth management firms implement technology for one reason: to increase profitability.

That’s one reason that many wealth management firms are relying on antiquated, ineffective customer relationship management (CRM) software, said Tom Westhoff, vice president of sales for Practifi, a business management platform for wealth management firms.

But still, other firms are adopting new CRM platforms and failing to improve their return-on-investment, said Westhoff.

“A lot of firms have either made efforts to implement a CRM that, from the outset, wasn’t designed or implemented with efficiencies in mind, or there are limitations within their platform that didn’t allow them to drive adoption,” he explains. “Firms can’t fully leverage technology unless the people using that technology feel like they are getting value from it.”

Firms usually see a two-dimensional perspective of the potential within a CRM, explained Westhoff. A CRM can drive profitability through better communications, more interactivity and greater efficiency across various roles in the firm, but only if correctly implemented.

In the absence of a CRM, businesses fall back on doing business by e-mail, phone and paper, said Westhoff, which can cause important information to be “lost in translation, or lost in general.”

“I think firms underutilize their platform because it wasn’t really set up to drive value that each employee can see and experience,” said Westhoff. “There’s no reason for every member of an organization to log onto any type of technology if not to add value in some way to whatever their role in the firm is.”

When stakeholders begin abandoning the platform, firms fall back on previous processes, which is why in many places across the industry offline spreadsheets, email and filing cabinets remain ways of doing business, said Westhoff. It may not be efficient, but everyone knows how to do it.

“Firms can’t get out of that cycle, and it becomes hard to improve their return on investment,” he said. “It also becomes difficult to attract and retain talent, which also impacts profitability.”

Wealth management firms lose employees that use technology in more effective ways, said Westhoff. If workers don’t feel like their technology sets them up for success, they won’t come. The next wave of talent, all digital natives, expects technological excellence—it’s already how they interact and communicate.

So where do firms start if they want to use their CRM effectively?

“If a CRM is truly a productivity tool, then it is going to drive better return-on-investment and profitability within the firm,” said Westhoff. “That’s where people have to start. Once they have that mindset, that they’re getting into this technology to identify inefficiencies that exist within their firm and they want to solve that problem, that’s when they can get that ROI from implementing a CRM.”

Practifi, a CRM platform, starts by looking for a handful of inefficiencies that can be alleviated with technology.

Westhoff named five areas in which CRM can improve ROI when correctly implemented.

  • Client-to-advisor services
  • Sales
  • Employee-to-Employee and Employee-to-client collaboration
  • Marketing
  • IT and IT operations

“Across those five buckets, there are numerous ways we should be able to move the needle to drive ROI,” said Westhoff. “Let’s identify what the inefficiencies and opportunities are. Those are the things that are going to drive adoption. That’s how you get people into the system, make it clear that you are fixing a problem and make improvements that impact the employees you need in the firm leveraging technology.”

Next, Practifi works on building a business case, considering every opportunity to create efficiency and weighing those opportunities.

The results are different for every firm. For example, a firm might be driving plenty of revenue with an effective sales machine but might be losing profitability because it operates on archaic or legacy IT infrastructure.

“They have too many full-time employees dedicated to application support and administration,” said Westhoff. “They’re doing excessive amounts of training on non-intuitive technologies for people without the skillset to use them. They’re spending a lot on custom app development or upgrades. They’re probably spending a lot at the end of the year when you think about what a CRM like Practifi could be managing for them instead.”

“With a good CRM, these IT employees could be free to pursue higher-value activities,” said Westhoff. “Such as integrating data analysis across the firm to help measure the profitability of asset classes or client segments, enabling advisors, managers and executives to implement changes that can move the needle further.”

The efficiencies should also be important to leadership, said Westhoff. Practifi has found that support and promotion from leadership, management and partners in an advisory firm is a lead indicator as to whether technology implementation is going to be adopted and successful because employees look to leaders to drive awareness and adoption.

Thus, Practifi endeavors to ensure that firm leadership understands the value of its technology.

“Then there’s no excuse for executives to not be leveraging the technology themselves,” said Westhoff. Practifi practices what Westhoff preached—not only does the firm run on its own platform, but its leadership are also all active users. “It’s also appropriate to mandate, where appropriate, that employees do certain activities to make sure they are engaging with the platform in the right way.”

Firms and their technology partners then need to train and support employees using the new platform, said Westhoff. Training shouldn’t be laborious; it must be tailored to be specifically relevant to each role and employee within the firm.

Implementation also makes a difference.

“Let’s not try to do a big-tech approach where we implement 25 workflows from day one in a way that we’re doing things less efficiently than we could,” said Westhoff. “Find three to five inefficiencies we can improve upon and start from there. What is the return we can get on our investment, what is the best bang for our buck, and start there.”

That varies from client-to-client, said Westhoff, but Practifi generally takes a conservative approach: even a 1-2.5% improvement to annual revenue is worth pursuing with technology.

Westhoff said that establishing a good CRM should not only be the centerpiece of a wealth management’s technology stack, but it should also be top of mind.

“If you set up a CRM system with the right partner and in the right way, with those efficiencies and improvements in mind, then you are able to start driving better value out of your other technologies,” said Westhoff. “That’s why we want to partner with those other technology and network partners out there, if we partner together, everybody wins.”