By Jeremy Condie
A recent Moss Adams survey1 indicates that 86 percent of advisers agree that technology is a critical factor in the success of their business. The study also reveals that advisers who use integrated technologies have attained 36 percent higher revenue per professional and 30 percent higher profits per owner. But what does "integrated technologies" actually mean?
Technology integration implies the concurrent availability of all needed data and information. In its purest sense, core systems such as portfolio accounting, Client Relationship Management (CRM), financial planning and document storage solutions should work in sync as if they were a single application. This would grant advisers instant access to all client data without the need to jump between separate applications with different log ins and passwords. Ultimately, true integration means that a client's entire financial position can be displayed on a single screen whenever the adviser needs it.
Software and technology vendors realize the importance of integration, and most claim to be experts in this space. However, the lack of a precise definition of technology integration has caused the term to be inappropriately associated with the most basic and limited data meshing procedures. Because of the erroneous interpretation of this important concept, the scope of this article is to outline some of the key factors that advisers should consider, measure and investigate while considering new technology purchases and adoptions.
The Purpose of Integration
Imagine a typical day at a typical financial advisory firm. The adviser employs several standalone applications, each serving an important task. However, this traditional manner of crafting a financial plan carries two significant drawbacks:
- The manual input of client financial data requires a substantial amount of work hours-an irretrievable loss of time.
- The adviser is exposed to the risk that manually input data is inaccurate and, once entered, locating a mistake becomes as hard as finding a needle in the proverbial haystack.
Portfolio accounting and reporting solutions remove some of these burdens as they typically ingest an investor's data directly from the custodian. However, the process is not a smooth one, because access to the needed data requires opening separate applications using separate usernames and passwords. Also, the software doesn't look anything like the CRM or financial planning software, so there are additional features and functions to learn and remember.
Updating inaccurate or out-of-date information in one system should automatically update all other relevant applications-but this doesn't always happen, does it?
One way to address this problem would be to eliminate the need for separate applications and develop a single solution that embodies every function needed by an adviser. Although the result could be tremendous with all components working off one database, the functionality and user experience would be a compromise in all departments over best-in-breed technologies.
Three Distinct Paths
In truth, there is no single way to provide an integrated solution, but there are at least three distinct methods of meshing best-in-breed applications and data. When considering technology integration, advisers need to understand the scope of each method and be prepared to ask educated questions to ensure they get the desired functionality. Also, there are no standard terms applied to these different integration capabilities, so the headings used below are the first attempt to categorize typical methods used in the industry.
Consider the creation of a financial plan. A typical example of superficial integration would be having the CRM pass over the investor's name and address only, leaving the adviser to manually key in the financial data-a time-consuming and error-prone task. True integration would instead require the CRM to pass over all relevant information including the investor's contact data, as well as all up-to-date and reconciled financial accounts and holdings.
Just-in-time integration offers instantaneous connections between critical applications and can provide very useful and valuable access to key data. This integration enables the adviser to click on a link or button in the investor's CRM record to send a coded request to another system-typically a portfolio reporting tool or a financial analysis Web site-to retrieve key data. A Web browser then pops open containing that information.
While this process saves the adviser time and reduces data errors, the retrieved information is not permanently integrated with the investor's contact data, as it is lost upon closing the pop-up browser. This prevents the CRM from creating advanced client reports and other useful measures that would be possible if the data was truly combined in one database.
Full Data Ingestion
The ideal integration scenario is when all adviser and client data is held in a central data store. Adviser data includes registration and license data, records of investor contact information, evidence of each transaction and work performed on behalf of each client. Investor data includes all contact and background information, all products and services provided to-date-updated on a daily basis-and individual holdings.
This integration truly enables the adviser to have a complete set of data in one system that is retrievable at the touch of a button. Data can now be passed effortlessly between related applications to ensure that accurate and complete information is used throughout the process. It saves the adviser precious time sparing him or her from logging onto multiple systems to get a full picture of a client's investments or outstanding tasks and requests. It allows advisers to handle inquiries more quickly, resulting in a client's appreciation for the adviser's skills and rapid response.
Full data ingestion is a rarity. Very few systems provide this level of integration. It is expensive to develop and the ingestion processes need to be managed and monitored. Many software providers lack the skills, experience and resources to implement such levels of integration, but as demand increases, firms will develop these capabilities.
The Future: Embedded Applications
Another powerful, emerging trend is the opportunity for developers to create their solutions on a common business platform such as Force.com. This underlying platform would allow different developers to create specific applications that would be able to co-reside as the business platform sets the development standards. This is similar to Windows users being able to cut and paste between applications created by different developers.
Embrace True Integration
True integration offers enormous benefits to an adviser. Time and money are saved, errors are reduced and clients are better served. And, while few technology providers offer true integration today, the value to the adviser is compelling and obvious.
Advisers can help themselves by demanding more and embracing the solutions offered by industry innovators rather than buying decade-old technology based on the rationale, "That's what I have always used."
If your business employs separate applications and suffers from data duplication, rekeying, error rates and wasted time, leaving you too little time to spend with your clients, it is time to upgrade and embrace true integration.
Here are some suggested steps to guide you through a review and analysis of integration:
- Identify the systems whose integration would provide you with the most improvement in error rates and administrative overhead.
- Calculate the potential savings. How many hours of work will true integration save you each month?
- What should the integration do-move data, seamless log on, open the second application at a key page?
- Should the integration flow both ways? If yes, can you identify the data items concerned?
- Call your preferred system provider and explain your requirements. Ask to see a real-life demonstration of their integration. If it looks promising, ask for a trial to allow you to kick the tires.
- Discuss pricing. Are any additional costs less than what you'd be saving, as you determined in Step 2? If yes, you are on your way to enhancing your efficiency and your profits.
Jeremy Condie is the president of E*Assist (www.eassistllc.com), an operational system that delivers an innovative, single application turnkey solution to financial advisers to empower them to focus on client relationships and build their practices. He can be reached at firstname.lastname@example.org.
1 "Integrating Technology Best Practices in Your Business: Opportunities for RIA Firms," 2008, conducted on Fidelity's behalf by Moss Adams LLP.
One-Way Versus Two-Way Data Flow
A typical one-way data flow would be:
- 1. The portfolio accounting solution ingests daily custodian records including each investor's financial accounts and underlying holdings.
- 2. The CRM downloads all reconciled data from the portfolio accounting solution and integrates it with the respective investor's contact history. This creates the most complete set of data comprising all of the adviser's activity history and outstanding tasks with each client, as well as a comprehensive picture on each client's investments.
- 3. When the adviser needs to create a plan, the CRM transfers this complete data into the financial planning tool including relevant investor contact information and all current assets. This upload saves hours of manual labor and dramatically reduces the risk of data error.
Two-way data flow
An improvement over one-way data flow would, for example, allow the adviser to edit an address in any of the separate solutions, and this change would be implemented in real time in all the other applications. While this is technically feasible and potential problems like inadvertently overwriting key data can be controlled through software rules, it is rarely achieved in today's solutions.
A two-way data flow would need an agreed communication language to be developed and adopted by the entire industry. While this has happened in related industries, such as the bank's adoption of the FIX protocol, there is little momentum at present to create an equivalent in the independent adviser market. A common language, while easing certain aspects of integration, could potentially limit creativity and, ultimately, undermine its final goal: to make the adviser's life easier.