Is it safe to assume that most of you have retired your old Nokia cell phones and Samsung flip phones? How about your JVC or RCA heavy black box TVs? I’m guessing you’ve traded them in for newer, quicker, easier-to-use, slicker models.
So why are so many advisors still using portfolio management systems from the 1990s? Why is over 50% of the industry still using spreadsheets, software that’s hard to upgrade, and in some cases, no system at all?¹ Scary thought. Since the growth spurt of independent advisors in the 1990s, firms have adopted and continued to operate on outdated software. Over time, as growth skyrockets, sails, and plummets, back office operations struggle to keep up with managing data, reconciliation, billing, and reporting for an increasing number of investors, particularly as they demand more transparency and set expectations on how and when they want the information. Instead of investing in new technologies, firms increase their headcount, use workarounds, manual processes, and hard coded integrations to fill any operational gaps.
Advisors and firm management know that they risk operational turnover and an increased potential for errors if the workload gets too onerous. At the same time, they also feel pressure to differentiate themselves from other advisors and to diversify their client base of investors to reach a broader base of clients, making it more imperative than ever to ditch their legacy systems.
As I think back to earlier in my career when I helped clients migrate their portfolio accounting and reporting data to new systems, I remember the faces of stressed out operations folks at project kickoff, but I also remember celebrating faces on go-live dates and relief that they had made the change. It may seem daunting to migrate to new platform; however, the potential downfalls of relying on outdated technology are becoming more and more jarring. Legacy systems pose difficulties with data management – trying to manage hefty amounts of data across disparate systems – lack of integration to accomplish various business processes, inability to accommodate complex portfolios, inefficiencies in meeting compliance requirements, and more.
And as we’ve shared time and time again, expectations of investors have surpassed the capabilities of older systems and for good reason – outdated technology does not typically offer secure and customized online client portals with real-time access and an easy-to-use interface for clients. In fact, it often requires advisors and their back offices to spend more time on manual processes for monthly billing and reporting cycles, and meeting prep, than building client relationships and helping clients reach their goals. Studies have shown that investors do not merely desire the latest technology in their interactions with their advisors, but expect it, and would even leave an advisor who does not incorporate it in their services. Worse, you could be totally missing new opportunities to build your client base by sticking with older systems. 95% of high net worth clients who had a highly tailored advisory experience recommended their advisor in the last 12 months.² Wouldn’t you like to be that advisor? That advisor probably doesn’t even have to work quite as hard to find more clients.
95% of high net worth clients who had a highly tailored advisory experience recommended their advisor in the last 12 months.² Wouldn’t you like to be that advisor?
Advisory firms that strategically invest in the latest technologies have realized enhanced productivity and profitability (read a 25% increase in assets per professional and a 45% increase in profit per professional).³ Advanced wealth management platforms offer advisors portfolio management, reporting, and rebalancing all in one solution, a comprehensive experience for investors – a client portal, vault and communication tools to collaborate more effectively with clients, aggregated and reconciled data, extensive integrations for CRM and financial planning, and much more.
If you’re looking for more information on tackling the challenges presented by outdated technology and migrating to a new system, take a look at our new white paper, Hitting the Technology Roadblock.
¹2013 Financial Planning Magazine Technology Survey
²Top Technology Initiatives for 2015 in Wealth Management, CEB TowerGroup
³2013 InvestmentNews Adviser Technology Study
Anne Acosta is Senior Manager of Solutions Marketing and leads Advent’s marketing efforts in the advisory space. Joining Advent in 2004, Anne’s financial technology experience spans product marketing, competitive intelligence, product management, and consulting in wealth management and capital markets segments.