By Amy E. Buttell
If you're tired of endless software upgrades, server glitches and IT bills, it may be time to consider cloud computing. While it sounds mysterious and complicated, cloud computing involves, at its most basic, moving your computer applications and programs to the Internet rather than your desktop. At the extreme, cloud computing involves outsourcing all your IT functions, from back-up to support and applications, to the Internet, or cloud.
"For Generation X and Y, this is something they can easily tap into that greatly reduces their out-of-pocket costs in terms of setting up an office," says Dusty Huxford, a national FPA board member and president of Huxford & Associates in Cumberland, Md. "It allows them to go virtual and be more mobile than traditional planners have been."
While cloud computing has been in the news for a while, it is now gaining the critical mass and acceptance it needs to win over many traditional small and mid-size business owners. Younger planners may lead the way, but the advantages of cloud computing are likely to attract more established planners as well.
If you're intrigued by the concept, here are the six reasons you might want to consider a switch to cloud computing:
As Huxford notes, the costs of cloud computing are hard to beat, especially for a new graduate or a newly independent planner. When you're starting fresh, you can get set up quickly and cheaply with the applications and programs you need to run, including financial planning and investment software and client relationship management applications as well as back-ups and software updates.
"I've been in the business since 1993 as a financial adviser, first with Merrill Lynch, and then on my own since 2006, and I've dealt with local installations-everything from single computers to networks-and stuff just goes wrong," says Russ Thornton, AIF®, CEO of Thornton Wealth in Atlanta. "I find that keeping the network or the computers running smoothly and the software updated and secure can be quite costly, not just in terms of money, but in terms of time, too. There's a cost savings, in terms of money and time, in cloud computing."
Julien Mordecai, principal and consultant with AllBackoffice Consulting in Edenton, N.C., says while the costs to enter a cloud environment vary depending on how big your office is and how much outsourcing you want to do, it is much less than the tens of thousands of dollars you might have to spend on a server, office back-up systems, desktop software and IT help.
"You could be talking about thousands of dollars a year rather than tens of thousands of dollars a year," he says.
Low Barriers to Entry
A major benefit to cloud computing is the speed at which you can have an office up and running. Mordecai notes that he could have a server functional for a new client within a few hours, although doing the research work to assess a particular planner's needs and get them fully operating could take a week or two.
As the technology gains acceptance, more companies with more applications and services are moving into the space, making it easier to get quotes and construct a system that works for you. You can either take on this task yourself or hire an outsourcing firm to do it for you.
However you handle it, think carefully about how far you want to go into the cloud. Virtually any type of application or program you need or want to run-from investment management and financial planning applications to broker-dealer applications to office apps and client relationship management programs-are available in the cloud. You can also buy back-up space to store all your scanned documents, and your application vendors will provide redundant back-ups to all your information that is stored on their applications. In addition, you can outsource your office support and IT support functions via the cloud, says Huxford.
As a newly formed RIA, Eric Lybarger, principal and owner of Evergreen Global Investment Group LLC in Golden, Colo., needed an efficient solution for portfolio management as well as back-office recordkeeping and CRM.
"The barriers to accessing these products can be somewhat high, especially with respect to the cost of stand-alone software or high asset minimums for online portfolio management," says Lybarger. "However, I found two companies whose platforms are reasonably priced and have no asset minimums that made it easy to switch to the cloud."
Obviously, the security of cloud computing is a major issue for anyone considering a switch.
"The data is secure because it is being accessed through encryption set up by people smarter than us," says Dave Williams, CFP®, of Wealth Strategies Group in Cordova, Tenn. "Clients like accessing their data through a cloud environment because they know it's secure, they know they can get access to it, and they know we are able to bring together a lot of their records."
Williams believes that cloud computing is more secure than an environment with paper, in-office servers and desktop applications. In addition, going to a cloud environment meets the Security and Exchange Commission regulations covering disaster recovery and business continuity.
"We live in an earthquake epicenter and tornado alley, plus tributaries of the Mississippi have been known to flood," says Williams. "The cloud environment gives us the functionality for disaster recovery because everything is offsite."
While cloud computing can offer very robust security solutions, it's important to assess each potential cloud computing provider in terms of security, asking questions about back-up servers, encryption and other issues. Any reputable provider will also allow you to set up systems allowing differing access levels for your staff, depending on their level of responsibility.
"Once I set you up as a user, we can let you decide who, within your organization, has access to particular projects or electronic filing cabinets," says Sean Morris of Digitech Systems, an IT management and storage company in Greenwood Village, Colo. "You decide who can read only information that's out there, who can mark up documents or make changes to documents. We can take this down to specific, document-level security, too."
One of the major benefits in cloud computing for Lybarger is the instant mobility.
"I used to work with a large broker-dealer and when I was traveling, I sometimes would have difficulty getting my computer connected to the Internet with all of the proprietary software on my laptop," he says. "There were times when I was traveling when I wanted to be able to take care of a client's business on the spot, but I wasn't able to. Now, I can do it in an instant."
Mike Logan, president of Axis Technology LLC, a technology-consulting firm in Boston agrees.
"You can be anywhere," he says. "It gives you reliability and flexibility no matter where you are."
The instant mobility feature works for clients too, because if you work with a broker-dealer or custodian who is set up to work in the cloud-which most are-your clients can access their financial information from anywhere.
If you're looking to grow, the scalability of cloud computing could be a big selling point. With applications software, you can buy only the licenses you need right now, and add more as needed. The same goes for storage space, according to Lybarger.
"I've replaced my filing cabinet with a scanner," he says. "Scanning paper documents is a tedious and time-consuming process and scanned files can take up many megabites, so I can see how this can quickly chew into my allocated cloud 'memory' space, which is currency 10 gigabytes."
Planners who are already in the cloud believe that their compliance program is stronger than it was before. For Thornton, who is registered with the state of Georgia (not large enough to require registration with the SEC), his business continuity plan includes an appendix that lists all the Web sites and his user names and passwords so that, in his words, "If I get run over by a truck tomorrow, whoever comes in to take over can access my business continuity plan and pretty much pick up where I left off."
He adds, "In the event of an audit, I think most regulators are pretty comfortable with the concept of using Web-based solutions and having stuff stored offsite. As long as you can access it when you need it and you follow through what you say in your documentation, you're in good shape. I think these cloud-based solutions help me comply better than I could otherwise do."
Lybarger notes that his client relationship management application in the cloud allows him to comply with regulations that communications and notes to and about clients can't be altered in the future. In addition, every transaction, note, e-mail or communication about a client is attached to that client's name, so everything is easy for him, or an auditor, to find and trace.
Amy E. Buttell is a freelance writer and regular contributor to Practice Management Solutions.