Every Advisory Firm Should Know What Technology They Need, Not What They Want

Understanding your “technology personality” will help streamline the decision process when it’s time to make changes to your office systems.

From time to time people ask me which technology vendors they should consider when upgrading their portfolio accounting capabilities: Advent, Black Diamond, Asset Book, Morningstar, someone else?

I often wonder what process was used to develop this short list because often times it appears to me that they are comparing apples and oranges. In trying to answer this question, I like to take a step back and look at the advisor’s real preferences.

Think of buying a car. You probably don’t put together a list of vendors first. Instead, you spend some time up front determining your general requirements -- your “car personality” if you like.

How many passengers does the vehicle need to transport? Will you be using it to drive the kids to school or trash to the dump? What gas mileage do you need? How much are you are willing to pay?

Understanding your needs and preferences upfront helps you streamline your search and selection process. The same holds true for purchasing technology.

There are many quality vendors that serve the RIA marketplace, but in reality only a few are best suited to meet your needs.

So what does a personality test look like for portfolio accounting technology? A few key personality attributes should include your:

  • Need for operational control

  • Desire for efficiency (a high-quality solution) versus simplicity (an all-in-one solution)

  • Position on the technology adoption lifecycle curve

1.) Operational Control – One of the biggest decisions a firm needs to make in regards to portfolio accounting is whether or not to outsource back office operations, and if so, then to what extent.

If your firm has a command-and-control-type personality and feels that keeping this function in house allows you to maintain a high level of service, than on-premise (client-hosted) software such as Advent Axys or Schwab’s PortfolioCenter may be worth consideration.

But if you feel that outsourcing your back office functions would allow your firm to better focus on your clients, your search should of course then focus on outsourced solution providers such as Orion Advisors or Tamarac.

Fortunately, outsourcing is not an all-or-nothing proportion. Solutions exist across a continuum of functions and services. Providers range from software as a service (SaaS), to reconciliation as a service (i.e. Accusource and B-Ready) to complete outsourcing.

Identifying your operational pain points and preferences will help you determine how much or how little you want to outsource your back office operations. This understanding will help you narrow down the list of potential vendors you should consider.

2.) Best of Breed vs. All-in-One – Do you need to have the best tool for a specific job or are you happy to use a multi-tool like a Leatherman because it can do most of what you need and is easy to carry around?

It is important to understand how a provider will integrate in your current environment as well as your future state environment. Advisors need to map out what specific functions they need (CRM, document management, accounting, rebalancing, etc.) and what functions need to be integrated with one another.

Once you have the functional map drawn out, it is much easier to determine whether you want to purchase these functions from a single vendor or integrate products from multiple vendors. Both approaches have their benefits and drawbacks

Selecting different vendors for rebalancing, accounting and CRM will allow you to customize your technology capabilities to meet your specific needs. It will also mean you are managing multiple relationships, implementations and integration efforts.

A single integrated platform on the other hand, will reduce the number of relationships you need to manage, and all functions (in theory) should be integrated. Integrated vendors will have strengths and weaknesses across their platform. Not every module will be best in class, or best to meet your particular needs. You need to match your priorities against the strengths and weaknesses of the vendor.

3.) Technology Adoption – Is your firm an early adopter, early majority or a “laggard” when it comes to technology?

Early adopters can have a great deal of influence, but this influence also comes with growing pains. Do you like to help shape a product’s feature set? Are you willing to help a new vendor work out the kinks?

Younger vendors may offer innovative technology but may not be as mature and consistent in terms of delivery. More established vendors will have legacy demands that slow down their ability to innovate, but their existing functionality is proven.

Some buyers are willing to be on the “bleeding edge” and others have no tolerance for it. Know where you fall in the technology adoption lifecycle and select potential vendors based on their experience as well as their functionality.

You Might Also Be Interested In:

comments powered by Disqus