If the Internet has turned information into a commodity, should planners spend their time processing information? There are plenty who argue, especially in this volatile investment environment, that hours spent on routine record keeping and report generation could best be spent meeting with and reassuring clients.

"Clients pay advisors for their time and knowledge, not for downloading data and generating reports," says Stephen J. DeAngelis, president of ADVISORport, a Web-based platform based in Plymoth Meeting, Pennsylvania, that provides financial advisors with a range of advisory capabilities, including integrated money manager and mutual fund solutions, client profiling tools, asset allocation analysis, performance monitoring, rebalancing models, and customized proposal and report generation. "There used to be value in providing data and information. In fact, many practitioners based their service and value on that—collecting data and providing information to clients. Now that the Internet and other technologies have made that a pure commodity, advisors need to move from providing data and information to offering knowledge and solutions."

Application Service Providers

As the Internet moves you along the value-added chain of turning information into solutions for your clients, it also provides you access to a range of new services that can give you more time to spend with your clients. In the last several years, for example, a host of new offerings from application service providers (ASPs) have emerged to take the administrative headaches of installing and maintaining software and reconciling data away from advisors. (Think of an ASP as a Web-based service bureau. You log on and run software from the software provider’s server rather than running programs on your computer or network.)

ASP technology has a fan in Charles J. (Pete) McCarn, CFP, who operates PinOak Advisors, L.L.C. in the remote town of Gorham’s Bluff, Alabama. Says McCarn, "I’m tired of buying software. I’m tired of going through the learning curves with limited-function demo software. You can read about a new program or listen to a presentation, but that doesn’t tell you much. You have to work with any program for a while to feel comfortable with it. I was finding myself buying software, only to use it and find that I didn’t like it. It got so I didn’t like to get any software at all."

Software upgrades also caused headaches for McCarn, particularly because he has a business partner six hours away in Mobile who shares licenses on some programs. "If you own your software, there’s always something coming in the mail that you have to deal with," he says. "In my case, that often meant putting that package in the mail to my administrative partner, Connie. Everything takes some extra work."

While ASPs certainly save you time, another appeal is cost because you don’t have to make that big initial investment as you do when you buy software.

By managing your database on their sites, ASPs provide two major services from which planners benefit. They download and reconcile all holdings with the client’s custodian banks and they print out reports. "A number of smaller investment advisors feel it’s a great way to get their technology squared away without a lot of investment or training," says John Haliday, marketing director of the Denver, Colorado-based TechFi.

A provider of portfolio management systems, TechFi recently released a Web-only portfolio management solution, AdvisorMart.com. AdvisorMart provides online account access, multiple report configurations, online reconciliation and real-time news and pricing. And while Haliday acknowledges that there will always be advisors who simply prefer to run everything in-house, he estimates the ASP model already accounts for 50 percent of his firm’s business.

Matt Abar, TechFi’s co-founder and CEO, notes that the ASP model addresses not only the issue of time, but of expertise. "We’ve found many investment advisors did not have the technical expertise or staff to maintain their in-house system," Abar says. "The Internet has provided a common delivery mechanism for information, so over the last year we’ve conceptualized the service bureau model as an option for these clients. By storing the information online, there’s no need to back it up, and you can stay current with all accounts from any computer with Internet access. By outsourcing the management of client data, advisors can focus on client assets and customer service—not their software packages."

Says DeAngelis, "We’re not a product offering, we are a platform to make advisors more efficient; they can outsource to us all that daily and ongoing back-office, overhead and infrastructure stuff that their clients just don’t perceive as adding value to the relationship. If they can outsource that to us and deliver to clients, they can leverage their own strengths and not only survive, but thrive in a growing and competitive market."

While TechFi and ADVISORport clients are freed from the headaches of managing their own software, the firms provide additional tools and capabilities that are changing the way planners do business by enabling them to offer more to clients.

Notes DeAngelis, "We help clients manage by exception. Our system can monitor parameters and alert you when things are out of whack in a client’s portfolio. So, you don’t have to review 100 accounts each quarter. Because that saves time, instead of servicing 100 accounts, maybe you can work with 150 clients, or take on smaller clients and serve them properly."

DeAngelis also notes that his firm’s technology is enabling advisors to deliver services less expensively than ever before and still retain good, solid profit margins. For example, ADVISORport provides access to separate account managers and wrap-fee programs. "Advances in technology means that our ability to deliver separate accounts to individuals in a very cost-effective fashion has grown tremendously over the past five years," he says.

An innovation Abar points to is that planners can choose to allow their clients online access to their account information. "When advisors sign up with us, there is a Web link they can use to hook back into their own site. With that, they open up a logon for their clients. If advisors want them to, clients can see the same performance, positions and transaction information that the advisor sees. This allows for a high level of collaboration potential," he explains.

Adds Haliday, "Some advisors prefer the same kinds of client meetings they have always had. Others find that their clients like to have real-time information and performance available to them online."

If your practice is not highly automated, your greatest fear in exploring some of these technologies may be that the firm’s desire to automate your practice comes without any human interaction. Not true, says Donald J. Potter, Jr., CPC, of Sigma Financial Advisors in Roanoke, Virginia, an ADVISORport client. "ADVISORport is incredibly service minded. They are very eager to work with us and that is a breath of fresh air."

Collaborative Tools

It’s the collaboration between planner and client mentioned by Abar that is one of the greatest changes that the Internet will facilitate. Financeware.com, based in Richmond, Virginia—which provides everything from Monte Carlo analysis to a tool that publishes from any software application directly to the Web for client viewing—is designed for collaborative use between planners and their clients.

Financeware’s president and CEO David Loeper believes planners best serve their clients by reviewing a range of investment scenarios. His firm delivers the tools to do just that. "The planning profession is operating under a flawed premise that it’s possible to identify a client’s risk level," says Loeper. "It is impossible to isolate a risk tolerance as a lone point. If risk tolerance cannot be identified, why do we take the next step and assume that our job is to get the highest return for a level of risk?"

Financeware tools are designed to factor clients’ "it depends" responses to questions asked to assess risk tolerance along with some "what ifs" into the equation: "What if I stopped saving for three years and took some great vacations? How would that affect my retirement date?"

"That’s the kind of work that is most beneficial to do with the client," says Loeper. "We need to let go of simple formulas and consider ranges in the equation. Financeware enables planners and their clients to look at 50 different scenarios online. We present a range of portfolios and work with the client to identify a range of comfort levels."

The ability to change some assumptions and review implications instantaneously is a tremendous help to McCarn. And while technology facilitates communication with many of his clients, McCarn notes that it’s important for planners to realize that there are limits. "Some client behavior won’t change," he says. "The same clients who throw away the paper report will not look at a report online. Personal client visits are at least as important as ever."

Account Aggregation and Consolidation

It’s impossible to talk to a planner about sharing information with clients without having two words come up—account aggregation. Account aggregation lets an investor create a consolidated account statement combining assets from different brokerages. For example, assuming you have online account access at Fidelity and TD Waterhouse, an account aggregator collects your account data from Fidelity and TD Waterhouse and puts them into a single online statement. Aggregated statements also can incorporate data on credit card debts and other loans, even frequent flyer miles and mortgage balances.

Because account aggregators are targeting institutions so they can sell the technology in bulk, this is technology that likely will trickle down to planners by way of their broker/dealer. While you wait, however, you’ll hear your clients talking about it—and they may even have an account somewhere else.

What’s likely to pique your interest is that aggregation lets you view assets held away from your firm. With a client’s aggregated statement, you can see if a portfolio managed by someone else is underperforming or overperforming the one you manage for that client.

The fact is, however, that if you want to provide professional-level advice to clients, aggregation is not enough. And, yes, there are other tools that can make the aggregated information more valuable. For example, Advent Software Inc., the first ASP to hit the industry and a leading purveyor of portfolio-management software to independent advisors, is targeting the independent advisor with an account-aggregation/consolidation tool. Launched in March 2000, the TrustedNetwork service accepts transactional information from bank and brokerage accounting systems that provide data to Advent, aggregates those transactions by individual investor, and delivers the information to participating institutions—and their clients—online.

Explains Advent’s Charles Record, "Account aggregation is not enough. That just brings accounts from different institutions together. That’s why we add consolidation—that means combining those accounts in an accounting engine so you can see the three taxable accounts versus the two taxable accounts. Or you could take a look at how small-cap is performing versus large-cap. If you want to provide investment advice, you need to take this extra step beyond aggregation to consolidation."

Record notes that, in studies his firm has done with firms like Gomez (an Internet quality measurement firm for both consumers and e-businesses based in Waltham, Massachusetts), investors responded to the difference between aggregation and consolidation. "This is all the talk in the industry, but investors expect advisors to consider the tax impact of reallocating portfolio," he says.

L. Patrick Gardner, CFP, president and chief executive officer of ByAllAccounts in Woburn, Massachusetts, agrees that aggregation not enough. He says the extra that distinguishes his firm from other aggregators is that, from the start, they focused on building applications to help people manage their money. "By starting with analytics, we then determined what information we had to go get," explains Gardner. "For example, if you are calculating the dollar-weighted rate of return, you need every transaction that went through that account. You can’t just have the beginning and ending value, you need to measure all the cash flow in between. So when we go to a Web site, we get all the deep data. And because data doesn’t come in standard format, we had to build an artificial intelligence engine to interpret the data."

Of course, whether or not your clients grant you access to all their accounts depends on their level of trust. Gardner explains the benefits this way. "If an advisor can see a client’s assets that he’s not managing, he can do a better job managing the assets for which he is responsible. Maybe he’s buying Intel, but the client has a bunch of Intel he doesn’t know about. Maybe he sees the client has some muni bonds maturing and can suggest a solution. Maybe the client’s buying muni bonds because that’s all he knows how to do and would be open to another solution."

Regardless of whether planners embrace this new technology, Gardner says, "the cat is out of the bag." He continues, "To some extent, it’s a race to see who can serve the client the best.

Planners can put their head in the sand and say they don’t want new technology, but that doesn’t mean it won’t be available to clients from somewhere else. The key is to take advantage of what the technology offers. My belief is it gives the smaller firms a lot of power over the big guys. This new technology offers planners new ways to enrich the client relationship and build better, stronger, more efficient and more profitable relationships. For example, with the alert functionality, a planner could be doing an estate plan somewhere and get a message that another retirement portfolio is out of line by 20 percent. He could then shoot that client a message to say, ‘Let’s have lunch and talk about it.’"

Business-Building Tools

While much of this new technology started as back-office processing solutions, planners are finding other ways to use it to service clients, even to build new business. Says McCarn, "When we needed to come up with a privacy statement, I e-mailed a copy to existing clients, but also put it on Financeware.com along with a characterization of my firm and résumé. Having all that pulled together on the site keeps me from having to stop and fire something off to someone who calls me for information. Just the other day, someone from California called and wanted me to do some work for them. Rather than send my firm characterization via e-mail, I suggested they go to the site."

Taking marketing a bit further, PortfolioCorner.com is a Web site designed to increase a planner’s top line by broadening his or her exposure on the Web. Here, technology is empowering consumers by turning data on planners into information they can use to evaluate whether a particular planner would be a good match for them. "We’re making it easier for investors to find the financial advice and financial professionals they are seeking," says PortfolioCorner.com founder George Tan. "Investors can search by services and specialization as well as licenses and designations and compare and contrast up to three advisors side by side."

The site’s current content is focused on education; articles written by the financial advisors in the referral service address topics ranging form estate planning to investment strategies and charitable giving. Within two years, however, Tan expects PortfolioCorner.com to be a one-stop shop for planners—complete Monte Carlo simulations, back-office accounting and account aggregation tools. "PortfolioCorner.com will have front-office, middle-office and back-office tools," he says. "We started with the front-office, online marketing piece of it and our database is increasing 10 percent a month. The next area we’ll address is advice and planning—risk management, asset allocation and optimization."

Is Now a Good Time to Make a Move?

In the 2000 FPA Financial Performance and Compensation Study conducted by Seattle-based Moss Adams, planners were asked to identify the top business challenges they face. The major issues planners zeroed in on included time management, capacity to serve clients, improving efficiency and keeping up with technology. Many interviewed for this article would argue that taking advantage of technology could, in fact, help many planners deal with their other top business worries.

For planners who have had technology on the back burner, the down market may present an ideal time to question business as usual and explore automation. After all, increasing operational efficiencies could give you more time to spend counseling clients.

And when you’re thinking about how technology could change that all-important client relationship, these technology folks stress that "enhance" is the key word when it comes to evaluating potential tools and solutions. "Nobody is saying that the planner is in danger of being replaced," says Loeper. "Home design warehouses didn’t put carpenters out of business."

Loeper continues, "Now is a time to be more extreme about questioning how you’ve done business. It’s helpful in this environment to take several steps backwards and open your mind to a change in philosophy. The industry doesn’t do this often enough. There are many ways that the Internet and other technology can enhance the client relationship."

Finally, these closing words from DeAngelis: "Sometimes we feel like we have more confidence in the role and the value of the financial advisor than a lot of them seem to have in themselves. So many planners will say, ‘I need this particular chart in my report to clients.’ Our view is, your clients want you. They want time with you. They really don’t care so much about a particular pie chart. They want you to talk to them—to tell them that it’s okay to stay in the equity market and that they will be able to pay for college and retire. The advisory firms that recognize this and are building their infrastructure around that will be successful."

Nancy Opiela is a freelance writer and associate editor of the Journal of Financial Planning, and is based in Medfield, Massachusetts.