Without a doubt, 2010 is a far better time to start an advisory business than at any point in the last 30 years, according to the participants in
InvestmentNews' technology round table.
The four participants began their careers at different times, ranging from the early 1980s to the late 1990s.
All agreed that today's technology landscape, while still far from perfect, has come a long way from what was available when they were starting out.
(View the transcript from the Technology Roundtable here.)
For example, Anthony Schembri, managing director of Clarfeld Financial Advisors Inc., noted that when he joined the firm in 1994, it would take almost two months and hours upon hours of manpower just to get the quarterly reports out. And even then, they were generally unhappy with the aesthetics of the reports — and that was with just 15 or 20 clients.
“We were using the DOS version of Centerpiece that later became PortfolioCenter,” Mr. Schembri said, reminding the group that this was before the time of modern customer relationship management applications and their built-in work flows or ways to help advisers standardize their processes.
And that, in fact, is one of the key conclusions from this year's round table: Custodians and third-party providers of technology have made significant progress in the last few years at integrating technology.
InvestmentNews asked the participants,
each of whom represents a registered investment adviser that works closely with one of the largest custodians, including
Fidelity Investments, Pershing LLC, Schwab Institutional and TD Ameritrade Institutional, to gauge this progress.
It seemed an opportune time to conduct this exercise. During the next few years, the custodians plan to invest hundreds of millions of dollars in a full menu of attractive technology choices, all in the hope of attracting advisers through platforms that offer them most or all the tools they will need.
Today, advisers can choose from any number of portfolio management systems or turn to third-party turnkey performance-reporting providers on an outsourced basis.
That was not the case in 1994.
“We hired some outside consultants and created our own report generator program, which pulled data from various other systems,” Mr. Schembri said.
He said his firm's program pulled index and flow data from Ibbotson Associates Inc. Performance information on specific client holdings came from Morningstar Inc.
“We knew it would reap benefits later and make us more scalable and more efficient,” he said.
GROWTH THROUGH TECHNOLOGY
It seems to have worked. Clarfeld, which started business in 1981, predominantly as an accounting firm, now has 80 employees, 380 clients on the investment management side (more than 1,000 if you count all the firm's services) and manages more than $3 billion in assets.
Similar sentiments and anecdotes about the not-so-good-old days were expressed by the other participants as well, all of whom applauded the menu of choices they now have.
The outsourcing of all sorts of necessary technology-related services is another positive trend observed by the participants.
Alex Murguia, managing principal at McLean Asset Management Corp., said his firm outsources because technology is not a core competency.
“No client has ever come to us and said, "Here's $3 million to manage. I love your servers,'” he said.
All the advisers have let third parties take over at least some of their technology management, whether it was outsourcing of their previously in-house servers (McLean's are now hosted by Savvis Inc.) or turning to hosted applications rather than keeping them running inside their firms.
The advisers agreed that it is easier for breakaway brokers opening their own RIA shops because they can start with a clean slate, and pick and choose applications, instead of having to build on old systems.
Rick Adkins, chief executive of The Arkansas Financial Group Inc., said that his firm's investment in the nascent CRM technology space seemed like a sound forward-thinking decision in the early "90s.
“It was a great idea, but we way overprocessed everything. After 10 years of use, Goldmine was totally useless,” Mr. Adkins said of the CRM system.
So deciding what not to bring over from their old system became a project unto itself when it came to embracing the Siebel CRM system from Oracle developed for advisers by Fidelity and its WealthCentral platform, he said.
“Because of some of the issues with Goldmine and the constant managing of multiple databases that don't talk to each other, when we found out that Fidelity was going to take a different approach whereby CRM would be the hub and it would be best-of-breed [Oracle Siebel] and that everything would talk to one another, that immediately was music to my ears,” he said.
On the other hand, things are not perfect. His firm has been reluctant to convert to the Advent portfolio management system available on the platform, for several reasons.
“We still use dbCAMS [portfolio management and accounting system, now Principia CAMS] because mapping data — I don't care what anyone will tell you — sometimes the variables just will not map,” Mr. Adkins said.
“Custodians and their technologies are centralized around accounts,” he said. “With Advent, there are critical pieces it does not do. Advent bills on a per-account basis, but financial planning firms like ours function on a client basis, and clients tend to have multiple accounts,” he said.
[Advent responded that APX, through WealthCentral with its multi-portfolio and relationship reporting features, which extend to billing, can provide an adviser with household views of client holdings.]
Other providers, especially some third-party independent portfolio management software companies, are also taking an approach that meets this need. That's the sort of thinking that the panelists said gives them hope that their range of choices are only going to improve.
E-mail Davis D. Janowski at [email protected].
To read the full technology round table transcript, visit
InvestmentNews.com/techroundtable.
