Technology must continue to evolve

The following is an edited transcript of InvestmentNews’ technology round table, held in New York Sept. 15. Technology reporter Davis D. Janowski and deputy editor Evan Cooper were the moderators. The panelists were Rick Adkins, chief executive at The Arkansas Financial Group Inc.; Anthony L. Schembri, managing director at Clarfeld Financial Advisors Inc.; Alex Murguia, managing principal at McLean Asset Management Corp.; and Rory Collins, chief compliance officer at Gotham Asset Management LLC.
InvestmentNews: We do tech round tables annually, and we’ve taken different approaches over the years. This year, we thought it would be interesting to have each of you represent one custodian and discuss your experiences with them: what it’s like, what’s good about their tools, what’s bad, what you’d like to see done differently, what they should improve, maybe share some ideas. Alex, give us a capsule of your firm.

Mr. Murguia: I’m managing principal of McLean Asset Management [Corp.] in Greater D.C. I would describe our firm as a wealth management firm — a little beyond just investments but more serving as the general contractor, if you will, of advisers. Our assets under management right now are about $420 million.

InvestmentNews: How long have you been in business?

Mr. Murguia: It started as McLean Financial Planning in 1984. Since I joined in “01, we’ve been more of a wealth management firm. We have about 10 back-of-the-house employees and about four advisers. Dean Umemoto and I are the partners.

InvestmentNews: How many accounts or client relationships do you have?

Mr. Murguia: A little bit more than 200.

InvestmentNews: Who’s your primary custodian?

Mr. Murguia: [TD Ameritrade Institutional]. What is not at TDA is stuff that we can’t custody at TDA — a 401(k) account that’s held away, or something that is in some sort of an annuity. Then we do a 401(k) business, and I guess that’s ultimately custodied at TDA, but in their trust area, not their institutional custodial service.

InvestmentNews: Did you have a broker background?

Mr. Murguia: No. Right out of grad school. First job. Ran with it.

InvestmentNews: Anthony, tell us about your firm.

Mr. Schembri: I’m a managing director at Clarfeld Financial Advisors [Inc.]. We’ve been in business since 1981. I started with Clarfeld in 1994 right out of -Villanova University, to get my public-accounting license. Back then, Clarfeld was a public-accounting firm.

The firm evolved into a wealth management firm, or more of what they call today a family office. Our core business has always been tax services, tax and financial planning. We started our investment business in 1995, 1996. We have about $3 billion under management, depending on the markets.

Our core client base is senior high-net-worth individuals at major financial institutions, and I guess our two biggest custodians are [The] Charles Schwab [Corp.] and TD Ameritrade.

InvestmentNews: About equal?

Mr. Schembri: No. We have over a [$1 billion] with Schwab. The balance is with TD and I’d say probably 10 other custodians, because a lot of our clients are senior corporate executives. They have stock options, deferred comp, restrictive stock and all these assets that can’t necessarily be custodied at a Schwab or TD Ameritrade. So that’s managed outside of those custodians, and a lot of clients bring us a lot of private-equity deals that they might get through their businesses, and those are [under custody elsewhere].

InvestmentNews: And how many client relationships do you have?

Mr. Schembri: Because we’re a family office, it’s probably well over 1,000 clients when you include all our different services — we have an insurance practice, a financial planning practice, an investment practice and a tax practice. But if I’m looking at just the investment side of things, we have about 380 clients.

InvestmentNews: And how many employees does the firm have?

Mr. Schembri: We have about 80 employees. There’s 15 managing directors, and most managing directors, if not all, are either [certified financial planners] or [chartered financial analysts].

InvestmentNews: So do you still do most of the tax work for these people too?

Mr. Schembri: I would say 99% of our investment clients are also tax clients of the firm.

InvestmentNews: Are they Wall Street people?

Mr. Schembri: We have Wall Street people. We have corporate executives from a lot of different industries, but primarily financial services.

People come to us because we’re doing everything for them. We’re doing their tax work, so we have all that information. We’re doing their tax projections. It kind of goes hand in hand with what we’re doing on the investment side.

So it makes sense for a lot of these clients to have everything in one place. They call one person, and whether it’s their tax estimates, based on some liquidation we made in their investment portfolio, or they have questions like, “How does this affect my estate planning? How should I open up these accounts? What kind of registration should I have?” Because we’re doing everything, they’re not going to have their own private banker; they’re just going to house everything with us. The business kind of evolved that way.

InvestmentNews: Rick, let’s hear about your firm.

Mr. Adkins: I’m with The Arkansas Financial Group [Inc.] in Little Rock. We were incorporated in “82 and registered with the [Securities and Exchange Commission] in “84. We’re a traditional financial planning firm primarily serving physicians. Our tag line is, “Helping busy people make smart financial decisions,” and that’s really what we do. Whether that involves buying into the practice, refinancing their house, they basically are looking to us for someone to give them objective advice.

We also handle their investment portfolios. We manage about $230 million, about 210 clients. Some are older physicians, some are young physicians who probably have negative net worths. So the investments aren’t the basis of the relationship; they’re an important piece that allows them to achieve their goals.

We’re allocators. We bought our first optimization software back in “90 or “91. I used to do a lot of expert-witness work, and I basically made the decision I didn’t ever want — when asked why didn’t we do something — to answer that attorney by saying, “Well, it seemed like a good idea at the time.”

So we really have followed a very disciplined, rational process over that period of time. When we started out, our server was a speedy 286 processor, and optimization software is so calculation-intensive, I would start the run before I left at night and just hope the system didn’t crash over-night. That same calculation’s done in about 20 seconds now. And back then, we were doing it mainly to protect our clients who were serving as trustees for their clinic’s retirement plan, but over time, we could just see a massive difference in consistency and performance. So we follow that same process with each client.

There are four planners. We used to do all the taxes in-house. For a smaller firm, that really was disruptive. About five years ago, we made that shift where we’re not doing the tax work. And for us, that’s worked out better. It was so disruptive from January through October, when the file extensions were done. And [doing tax work] also reduced the likelihood we were going to get referrals from CPAs in the area, and [the shift] made an immediate difference. Our primary custodial relationship is at Fidelity [Investments]. Initially, all of our assets were at Schwab back in the early “90s, and then about “94, we started using Fidelity, and that relationship has grown.We’re kind of in the same position [as Mr. Schembri’s firm]. We have clients that have the self-directed options for their 401(k) either at Ameritrade or Schwab, so those assets are held there.

InvestmentNews: What are your assets under management?

Mr. Adkins: About $230 million.

InvestmentNews: And your number of employees?

Mr. Adkins: Six employees and four CFP professionals that serve clients. And really, technology is what allows us to do that. Over the years, we actually have had less support staff rather than more. Things that human beings used to have to do, now you can really either outsource it less expensively or you can use technology to do it more effectively.

InvestmentNews: Rory, tell us a little about your firm.

Mr. Collins: I’m the chief compliance officer of Gotham Asset Management LLC. We changed our name on Sept. 1 from Formula Investing LLC.

We are a relatively new adviser. Our registration became effective in February 2009, and we started managing assets in April 2009. Formula Investing continues as a brand for our retail business, of which the majority is under custody at Pershing [LLC].

Our assets under management is approximately $365 million, and [we have] 30 employees, as we’ve staffed up and built out our infrastructure to focus on our institutional business.

I think the proper term for us would be “equity manager.”

One of our co-chief investment officers, Joel Greenblatt, is the author of “The Little Book That Beats The Market” [John Wiley & Sons Inc., 2006] and “The Little Book That Still Beats The Market” [John Wiley & Sons Inc., 2010]. Formula Investing was initially formed as a result of Joel’s being introduced to our chief executive, Blake Darcy, the founder and CEO of the online brokerage firm DLJdirect.

As a result of the book’s selling approximately 350,000 copies, and many people were sending letters and e-mails to Joel saying, “This is great, but can you do it for me?” So we started as a result of Blake’s creating a scalable solution for followers of Joel’s strategy, which is a value-based strategy that focuses on two primary factors: earnings yield and return on capital. In essence, we screen and purchase securities we believe are both good and cheap.

InvestmentNews: This week, we published results of the Moss Adams LLP study we just did. One of its points is that technology is a definer of top performers among advisers. Technology helps them succeed. And it wasn’t so much that these firms spend a fortune on technology; they just use it wisely. So let’s go around again.

Mr. Murguia: We spent fortunes on it.

Mr. Schembri: So did we.

Mr. Adkins: We all have.

Mr. Schembri: It’s very difficult to be in this business without doing so. Unless people are giving away their software and hardware, it’s very difficult.

InvestmentNews: What works? What doesn’t work? Tell us what you use and how you use it. What technology do you consider the center of your practice?

Mr. Murguia: We live in indexing, and so to a large extent, you set up the portfolios, and it takes care of itself. My role within the firm has evolved to the point where I’m not seeing clients. I’m actually running the firm and strategically overseeing things. So I’m a little different from an adviser that’s seeing clients and is hacking out on MoneyGuidePro or whatever. I don’t do that.

How is our firm set up from a technology standpoint? We have Junxure. We use MoneyGuidePro and Financeware. We don’t do this huge cash-flow-based planning or anything like that. We’re more focused on goals-based planning.

In addition, we’ve tried to institutionalize the firm, so to a large extent, the investment philosophy’s a deal breaker. If you want to join our firm, I’m not going to convince you this is the best way to invest. It’s one of those situations where you bring in like-minded folks.

We’re not big into hard-core financial planning. We’re more into the general-contractor wealth management mode: “Let’s knock out the to-do list with the client.”

We use PortfolioCenter, and we have [TD Ameritrade’s] Veo, so we have our bases covered.

There’s a lot of functionality that I still think is missing, and for the last two years, we’ve been creating an internal solution.

InvestmentNews: To do what, exactly?

Mr. Murguia: To actually address some of the shortcomings that are in the industry. I would say right off the bat, there’s not enough proactive planning. Right now, planning is reactive. It’s day-to-day. I don’t think that should be the case.

I think if you include a proactive planning solution that can help coordinate wealth, now you’re really talking.

The last piece is I think is missing is a knowledge basis. It’s a nascent industry. I don’t think any of us here today really started off as a CFP.

We’re going to give very different advice to similar types of clients, and no one’s right or wrong — it’s just how it is.

So why don’t we develop a best practice? The way to develop a best practice? Crowd-source it. Enterprise 2.0. You go from there. That’s sort of what we’re working on.

InvestmentNews: You’re developing software for these things?

Mr. Murguia: Yes. We’re actually beta-testing internally right now. Anthony’s seen it. But this is a different thing.

InvestmentNews: Is that an expensive thing to do?

Mr. Murguia: Yes. I started it up as a separate company. We’re actually finishing a friends-and-family round this month.

InvestmentNews: So it’s a really serious, expensive deal.

Mr. Murguia: Oh yes. I’ve got three teams in India coding. We’ve hired outside developers to build it.

InvestmentNews: And eventually, you’ll sell this to other planners and other firms?

Mr. Murguia: I don’t want to say more right now, but that’s not the model.

InvestmentNews: Anthony, tell us how you work.

Mr. Schembri: When we first got into the business in “95, “96, and we had 15 or 20 investment clients, it would take us almost two months to get our investment reports together, and it was a manually intensive process. And you’ve got a lot of binding and a lot of page numbering. There were no third-party reporting systems. All you had was a portfolio management system. You had maybe one or two choices.

Back then, we chose PortfolioCenter. We’re still with PortfolioCenter, although back then, it was the DOS version of Centerpiece. We downloaded with a modem, and we got the information. And I still remember trying to figure out how to wire funds through Schwab, and going back and forth with their service team.

One of the first things you do when you’re a CPA and you’re taking on a new engagement is to do a test of internal controls. And how do you do that? You either do a questionnaire or use flow charts.

So we started standardizing processes. What happens when the mail comes in? What happens when a client places a trade? That really helped us eliminate different people doing things different ways. And then you bring technology in.

We weren’t really happy with the canned reporting modules of PortfolioCenter. They weren’t very robust. They weren’t user-friendly. They weren’t really pretty to the eye. At least at that point, they were kind of plain-vanilla reports.

We hired some outside consultants and created our own report-generator program, which pulled data from various systems. It was pulling information from our portfolio management system as far as pricing and transactions. It was pulling information from Ibbotson [Associates Inc.] regarding indexes and flows. We also pulled information from Morningstar [Inc.] regarding performance on specific returns for client-specific holdings.

So that was something that we spent considerable resources on — money, time and personnel. But we knew that if we spent the time upfront by investing in that kind of technology, it would reap benefits later and make us more scalable and more efficient, and allow us to bring more clients onto our platform in a standardized way.

So technology was the only way we were able to leverage our business and do that.

Mr. Murguia: No client has ever come to us and said, “I love your servers; here’s $3 million to manage; that freakin’ Hewlett-Packard is out of this world.” It doesn’t happen. So it’s not our core competency to a large extent. Hence, our servers are at Savvis [Inc.], a remote data center. That does a couple things. It allows us to be on a cloud: You can access the system by remote desktop or you can use Citrix — whatever you want. So from here, I can actually go on to my desktop at the office through the solutions very nicely.

InvestmentNews: How much more on a percentage basis does that cost than do-it-yourself?

Mr. Murguia: It costs upfront, but doing it yourself doesn’t really cost that much less, because I would have to hire somebody.

But relative to leaving it at a data center, it’s a huge savings. I don’t have to take care of those servers. From a compliance standpoint, in the middle of the summer, it’s 100 degrees outside, guess what? The buildings shut off their air conditioning on the weekends, so where are you?

The other point that’s a shortcoming, and this is where [customer relationship management systems] come in, is the idea of Enterprise 2.0. I don’t know if you’re familiar with that, but every adviser should read [“Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges” by Andrew McAfee (Harvard Business School Press, 2009)] as opposed to [“The Myth of the Paperless Office” by Abigail J. Sellen (The MIT Press, 2003)]. Focus on where things are going to some extent.

When Anthony came [to our office], we got into a real deep discussion with regard to work flows and Junxure. We’ve used it for the last few years. In fact, two years ago, we mapped out everything. If a client dies, what are the steps from soup to nuts? Discovery meeting. This, that. Everything is process-oriented.

And when Anthony was coming over, I’m showing off, “Hey, look at all we’re doing,” and then I realized the biggest problem that we have is that we’re too mapped out. It’s too top-to-bottom. CRMs have work flows, and then you daisy-chain 10 actions. But if you daisy-chain 10 actions, it’s lost. Nothing ever happens in sequence like that, so it’s not realistic. And the whole idea of this Enterprise 2.0 model is that it doesn’t allow for feedback to go back up. It’s a paragon of morality. I don’t think that works properly.

InvestmentNews: Give us a little capsule of what Enterprise 2.0 is.

Mr. Murguia: Taking advantage of the stuff that’s out there. Let’s say the work flows — you have your user manual, your employee manual. This is how we do this, and that comes from the top, saying, “This is how we do that.”

The easiest one is to let the company develop their own “wiki” manual, where the employees can contribute to the knowledge, and let them determine it.

It’s all about how you can break out of this hierarchy and make it more flat so folks are more participatory in nature, and that’s a philosophical problem I think that’s happening right now with CRMs, to some extent.

It’s this, “If I can control these work flows, this is how you do it, and I’m more efficient,” and I think you’re fooling yourself. After a yearlong project of trying to do this, it’s very hard. We have work flows, and it’s hard to really measure the effectiveness of these things, because there’s no feedback loop. How do I know you need 10 steps to do this? Maybe it can be done in six. And frankly, what if the advisers say, “I don’t want to do this”? It goes like that, and then it becomes an antagonistic relationship.

InvestmentNews: Rick, let’s hear how you work.

Mr. Adkins: When we started, there was no networking. Our first attempt at networking was in the late “80s, sharing printers. We had a printer-sharing gismo.

We thought we had died and gone to heaven. Then peer networks came out, and I was the technical expert for our peer networks. And then we migrated to Novell. And it’s like my dad working on our cars; today, you couldn’t even touch it. Well, it’s getting to be that way with networks. So we outsource that, and have for several years.

InvestmentNews: Are you the technical go-to person in the firm?

Mr. Adkins: Not now. Back 20-something years ago, I was. In the late “90s, we went down the rabbit hole these guys were just talking about. We started using Goldmine and Worldox — Goldmine to try to capture those processes, those work flows. I look back and think of the untold hours we spent doing all that, and what it did was create 8,000 tasks for each one of us that none of us could keep up with, and after 10 years of information in Goldmine, it had become totally useless. You couldn’t find anything. It ate up space on the server.

It was a great idea. It sounded nice. Everyone had tasks feeding to them. We way overprocessed everything.

Worldox was a different story. That got us away from having subdirectories on the computer. Somehow you had this directory structure back then that was the only way we could figure out to track stuff, and [Worldox] was a big help. We started with dbCAMS — we still use Principia CAMS — mainly because it was the only game in town then, and we never did switch over to Centerpiece.

The challenge with all of this stuff is the way software comes and goes, and being able to map data is more complex than anyone will tell you. And they’ll tell you, “Oh, yeah, we can map, we can export your data over,” but whenever you try their variables, they don’t map, and you’ve got to come up with other solutions.

When we found out that Fidelity was going to take a different approach — to build their hub to use best-of-breed in all these different areas so that they finally talked to each other — that immediately was music to my ears. As a small firm, we never would have been able to afford an Oracle Siebel system. It’s just out of the price range.

So we made the decision to go ahead and beta-test the software and start migrating over from Goldmine to the Oracle Siebel system.

It gets to this issue of getting a notification to the person and letting them do all the tasks that they know they’re going to have to do anyway, as opposed to telling them you have these six tasks to do. And so what it’s done is make the process more manageable, and it allows talented people to use their brains and do what they do best.

And so it has eliminated a lot of that clutter. There still are challenges. For one thing, custodians and technology vendors, in our world, are all geared around accounts. That’s not the world I deal in. I deal in client relationships. And I was amused because another publication called about Wealth Central, and I said, “You know, we’re not using the Advent [Software Inc.] piece, because of the pricing structure.” A, there are critical pieces it will not do, and B, it was going to cost between $50,000 and $80,000 a year to have an inferior product from the standpoint of process.

And the guy who’s head of that project said, “Oh, no. I disagree with his numbers.” Well, the reason he disagreed was that he didn’t know that a financial planning firm has a much higher account-to-client ratio than an investment management firm. They may only have one or two accounts per client. We have about 1,200 or 1,300 accounts for 220 clients. And they bill on a per-account basis.

Our practice is built around not only allocation but active re-balancing on a conditional basis. The one reason we haven’t switched to Morningstar Office is that their re-balancing system is still account-based. They just don’t get it that there are firms whose relationships are with a bundle of accounts that are bound by this one address.

Mr. Schembri: I think that’s the point of this conversation: For the very first time, the custodians are acknowledging this.

InvestmentNews: And investing in it.

Mr. Schembri: Yes. We need to come up with a solution that’s agnostic so that it doesn’t matter which client you’re dealing with, but it’s looking at it from a global perspective.

That’s why I think the Schwabs and the TDs are taking a step back and saying, “Look, I’m not going to put out the Schwab re-balancing program anymore, because if one of our [registered investment advisers] has assets held outside of Schwab, they can’t use it — it doesn’t work.” If you’re not taking into account all of the other assets, it’s worthless.

That’s why when TD purchased iRebal, which is an agnostic re-balancing program, it kind of opened up the floodgates, because now you’ve got a custodian investing in something that’s custodian-agnostic, providing service and offering that to their clients at a reduced rate. So you get this great re-balancing program.

And you can have assets anywhere. As long as they’re in your portfolio management system, the re-balancing program, iRebal, can work with it. That was a game changer. But that’s just the tip of the iceberg because now Schwab and TD Ameritrade and Fidelity are focusing on: “Let’s come up with these integration systems in which it doesn’t matter where the assets are held, it doesn’t matter what system you’re using, which third-party CRM you’re using or which third-party portfolio management system you’re using, or which third-party scanning system you’re using. Let’s bring to the advisers’ desktops a way in which they can pull data in a standardized format.”

Mr. Murguia: I would say, though, that in Fidelity’s case, it did strike me that it’s more of a closed system — best-of-breed.

InvestmentNews: Rick, you’re not able to use the Northfield Information Services Inc. re-balancing engine in the current setup, right?

Mr. Adkins: That was one of the issues. I helped do the re-balancing — the re-balancing in Principia CAMS is probably better for us than any of those others. Prior to 9/11, if you went to a financial planning conference and asked, “What’s the best way to re-balance?” everyone told you quarterly re-balancing.

First of all, it’s not. Secondly, if it were, you couldn’t do it. You could do that when you only had 40 clients, but if you have 1,000 clients, even if you have 200 clients, you can’t do it. We couldn’t do it back when we had 100, simply because it’s spread over six accounts, on average, per client. And they’re not all under custody at one place.

Mr. Schembri: That’s why this agnostic notion is so critical to the industry. We had TD in our offices, [TD Ameritrade Institutional president Tom] Bradley came for a visit, and there was a re-balancing process that we would go through that would take us upwards of three weeks.

Now, fully implemented on a program like iRebal, we can do that same implementation, that same re-balancing, in hours. So considering the volatility in the markets today, you really can’t afford not to be that flexible, and for the first time, you have these systems that look across multiple accounts, multiple custodians, multiple systems, and let’s face it — there are very few advisers out there that are committed to these canned one-stop-shop programs that do everything.

InvestmentNews: Rory, did that fit in or did you have a clean slate when you went to Pershing? You had ties, familial corporate ties, but it’s brand-new.

Mr. Collins: You’re right. In the beginning, you’re faced with a lot of decisions, and so when we started, did I envision where we would be today? No. A lot has changed since then.

One of the things that we wanted in vendors is that they be flexible and help us with change. And so in looking at that and looking at our portfolio management accounting systems, we chose Advent’s APX, because they were connected to the major broker-dealers that we wanted to work with. So we wanted to be flexible there.

The order management system that we use, Eze Castle, has a lot of great features that we didn’t need in the beginning. But as our business evolved and we started offering international [separately managed accounts], those decisions wound up being good decisions.

I am very familiar with Pershing’s NetX360, but even in preparing for this meeting, I had to read through the NetX360 PDF document on Pershing’s website just to make myself more familiar with what has changed, because I was such an early adopter.

Mr. Murguia: I tend to disagree to some extent with Fidelity and with Pershing, because how is that an open system? They’re creating a closed ecosystem.

Mr. Adkins: First of all, where they start and where they end up are two different things. What I think Fidelity had to do first was get away from the idea that everything had to have the Fidelity brand on it. They started with best-of-breed in certain areas, but one of the things that they announced earlier this year is, they’re about to open those systems so that you’re going to be able to use Morningstar Office or you’re going to be able to use some of these other systems.

I think the custodians are recognizing that in the real world, we have no choice when a clinic selects Diversified [Investment Advisors Inc.] for their 401(k) option and the self-directed option at Schwab — we have to have a relationship there to be able to serve the client.

This whole real-world thing is tough for everyone, and at the same time, [custodians are] going to have to do things that are in their self-interest, too. If they don’t attract firms because of that platform, they’re not a 501(c)(3) organization.

So what they’ve done is, they’ve started a place where they can migrate to a better place, and that’s what I’m seeing, because we were already using NaviPlan, but now we don’t have to enter all that stuff.

There are so many pieces where integration is way more important than openness. At some point, you’ve got to balance those two. That’s part of the problem with this profession. Everyone wants to do it their own little unique way, and that’s why you have all these different answers coming from each firm.

InvestmentNews: To whom do you think you’re going to transfer your portfolio management?

Mr. Adkins: At this point, I don’t know. If the pricing were different and if they can generate that report, we would end up probably with Advent in the Fidelity structure.

I have a sneaking feeling when they open up to other entities, there are going to be other options there — to me, it makes sense that Morningstar just takes what’s happening here and puts it over in the other product.

But they have an account mindset. Now the other issue: Two years ago, our old server was running to the end of its life, and our tech consultants basically wanted us to move to a cloud. We made the decision to move to a cloud, but we had to go ahead and buy another server and get everything we could cleaned up, and at the same time, we were starting beta testing of Wealth Central.

What’s going to eventually happen is that we’ll have three clouds, but they won’t be on a physical server sitting in our office. So our agenda is to put the cloud in as all the other clouds — right now, the investment stuff is basically on a cloud, the financial planning’s on a cloud, CRM’s on a cloud.

Our e-mail piece and some other things are still in-house. But we will not have a server two years from now. We just knew that was a short-term solution.

InvestmentNews: How well does your Oracle Siebel CRM talk to Principia CAMS? Does it do so at all?

Mr. Adkins: It doesn’t. We download just like we always have. So the data feeds in. Now we have to manually enter the initial information on the client, but it’s essentially downloading instead of being just seamlessly integrated. But we’ve worked that way for 25 years, except we used to use a modem. It’s a whole lot nicer now.

Mr. Schembri: I don’t know if we were ahead of the curve or it was just the way we always did business, but CRM has always been the central point of how we conduct business, and we always have documented client actions, client transactions, client conversations.

And you had to, because if you’re a wealth management firm and your tax partner is having a conversation with a client, but the investment partner working with that client doesn’t know what’s happening on the tax side because it’s not documented and not recorded, then the client has no benefit.

So from early on, we had to make sure that when you go to the CRM, that conversation is there. It’s documented. If that person’s out sick or on vacation, or if you need to have reference to that information about a piece of property that was sold, it’s seamless to the client, and it’s seamless to the people in the firm, because all that information’s being documented.

How great would it be if all of the personal information that’s sitting in my CRM — basic stuff, client name, address, telephone number, Social Security numbers, of course, with levels of security — is mirroring what’s at Schwab or TD, and they’re talking to one another?

And how great would it be if when I want to prepare the next account application, all the information is coming right out of CRM automatically with maybe the press of a button. I don’t know how it’s going to be when it’s finalized, but it populates that application automatically.

The CRM doesn’t have to be a Schwab product. It could be a Junxure, a Salesforce. We don’t really know who the partners are going to be. But let’s assume it’s going to be one of the bigger partners. TD’s working on that same kind of integration.

How awesome would it be if when a client moves money over or when a check clears, you see it live on your CRM?

Again, the reason why it’s exciting is, this never existed before — having the CRM be the central point of where you’re launching everything from.I think it’s just going to make everyone’s way of doing business a little more standardized.

The various custodians are really picking this up and running with it. We’ve participated in Schwab’s technology back-office consultations. TD Ameritrade has Roadmap, where as an adviser, you might have different systems of processes set up: How you do your morning download, how you execute trades.

You’ll get a technology consultant from one of these custodians. They’ll come down, they’ll sit with you for the day. They’ll look and see how you’re doing your process from soup to nuts. They’ll review your reporting processes and make recommendations, based on what’s happening around the industry, what vendors they’ve researched and studied, and what other advisers are doing different than you, and maybe add some real-life suggestions that could improve your processes.

Mr. Murguia: It’s a good point. I mean, 40,000 feet in the air, what I think you’re getting at — and you’re very astute to point it out — is, custodians are getting away from the blocking and tackling. “What do I need to do to get clients and advisers?” And that’s trading, reconciliation, reporting. And they’re going into that in a hierarchy of needs, the next phase, which is: How can we improve the practice management? Because they’re not charitable organizations. They want to bring in more assets, as well, so that they can facilitate our business all the better.

Mr. Adkins: I can tell you, the cost savings have been huge. Our point of entry is when you fill out the application and it’s populated — it’s actually a favorable cycle in that if they’re already in CRM, it is populated.

These things make for more efficiency because now you can have staff members who are highly trained in this area to make the cycle work, and you’re not having to sit there and learn how to enter data in eight different databases, which is what we used to have to do.

InvestmentNews: Are you using something like the one from Laser App Software Inc.?

Mr. Adkins: No. It’s part of the Wealth Central platform, where it’s feeding from Oracle Siebel into the software that does exactly what was just described. It isn’t a “one of these days.” That’s what’s happening [now]. And so what it’s done is to allow better training of staff to learn how to make all that work, and then it is populating. Now the problem is, certain behaviors had to be changed. That’s the hard part in any firm. Technology is not the problem; it’s our behavior in how we use it.

For example, I don’t schedule my own appointments. My administrative assistant is doing it so that there’s a central piece and we’re not running into each other. If data needs to be corrected, we’re having her correct it so that that’s where it feeds into that cycle.

You have to have a place that’s consistent so that the cycle gets fed in a consistent manner and you don’t have chaos again, because that’s what we had in Goldmine.

Doctors have weird hours, and so if they’re at the hospital at 3 a.m. waiting for something, they’ll send e-mails, they’ll do stuff. One of the options on the Fidelity.com website is a Yodlee [Inc.] screen scraper that they literally have their financial life on. We show them how to set it up. We help them set it up. The administrative assistant basically sits down with them and does that. So if they need to move money, they can either do it themselves or they can call us.

InvestmentNews: Yodlee being an account aggregator?

Mr. Adkins: Yes. So where we’re headed, it’s really critical not just how their money is invested but whether the money invested is going to be sufficient for them to retire, and how are they going to manage all these various things?

So one of the things that we’re really focused on today — 20 years ago, I would never have thought about it — is really understanding the spending patterns of clients in a much more accurate manner.

InvestmentNews: Are you suggesting they use Mint at all?

Mr. Adkins: Yeah. In fact, I still use Mint, I still use Quicken, and I use Full View — for three different purposes. Twenty years ago, all our clients were my age and young doctors. Today they’re my age, and they’re trying to figure out how to retire.

The problem is, they don’t have a clue what cash flow is needed. That’s the other big challenge that the financial services world is clueless on, and that is how to go from an accumulation mindset to a distribution mindset.

I’ve got clients who every month want $17,000 hitting their checking account. That doesn’t happen theoretically.

You’ve structured the portfolio to do it, and you have some process that, by the way, checks to make sure there’s $17,000 in cash.

So one of the challenges we’re facing with technology is, technology’s going to have to deliver solutions in the future that we don’t even contemplate today.

InvestmentNews: Anthony, what CRM system are you using now?

Mr. Schembri: E-Z Data. We’re actually reviewing that system and looking at some other systems, such as Junxure and Salesforce. We’re looking for something that’s really robust and web-based, and that can also integrate with a lot of our other systems.

InvestmentNews: Did your firm participate in the write-in campaign that Schwab conducted — basically a popularity contest among advisers to find what their most requested applications are for the new system?

Mr. Schembri: That’s correct.

InvestmentNews: What did your firm suggest?

Mr. Schembri: We definitely want to see Salesforce and Junxure on their short list, and I think they are. Schwab had an interest in Junxure awhile back. And it’s also one of the leading systems out there.

But here’s where it gets a little scary: These custodians really want to bring that technology to your desktop, and I think it’s fantastic, and it’s very exciting, but where does this start, and where does it end?

So I think that’s going to be a critical question for these custodians: “Who am I going to call if you give me this application and it’s on my desktop and it’s integrating a Schwab Institutional, Schwab Advisor Services, and it’s linking my CRM from whoever? Who am I going to call for service on that? Is it going to be Schwab customer service or is it going to be the CRM that’s being provided through Schwab?” And I don’t know what the answers are to those questions.

Mr. Adkins: I can tell you what it is at Fidelity. Now we call one number, and there’s a specialist if we have an issue with NaviPlan. In the past, we would have called NaviPlan. Now we have one number, and they understand how the systems all work. That was a smart decision on their part because now [our] staff only has to know one number, whether it’s this piece or that piece.

So they have people who are trained in those areas, and that’s a better model than what we had to deal with for years where whoever you called, it was going to be the other person’s fault. No one ever wants to take responsibility when you call tech support. “Oh, you do this? Well, it’s their problem because it’s not integrating correctly.”

And I think having one phone number to call where they understand how the pieces integrate has been a huge help, because I don’t have to make all those phone calls.

Mr. Schembri: I agree 100%. What I’ve suggested to Schwab is, if you’re going to provide XYZ CRM and you’re going to give me a tailored product that works effortlessly with your website, I don’t know if I want Schwab to be the primary contact on that, but what I suggested was, you should have a group of specialists who work with investment advisers who purchase that product through Schwab.

Mr. Collins: Taking what Alex and Anthony are saying, in summary, I believe the message is, we want to choose our CRM, such as a Salesforce.

Mr. Schembri: Right. And I’d like you to provide a reduced pricing for me. If Schwab’s going to partner with Salesforce, well, that’s great. I’d like to benefit from the bulk contract you might have. And to be quite frank, that’s why I haven’t made a decision yet, because how silly would it be to sign on with a new CRM partner and two months down the road, you find out they’re on Schwab’s platform, and Schwab has preferable pricing?

Mr. Schembri: It should remain with the third party. It really should.

Let them train people on their staff to handle the Schwab clients, to handle the TD Ameritrade clients. I think that’s really the way to go. And I don’t think the custodians want to be in the software business. I really don’t.

InvestmentNews: How many of you are using account aggregator services? And who are you using?

Mr. Schembri: ByAllAccounts.

Mr. Murguia: ByAllAccounts. We started with CashEdge, and we ended that experiment two months into it.

Mr. Adkins: ByAllAccounts.

Mr. Schembri: So that brings up another issue — now that you’ve got user names and logins that you need to track and have a database, you need to make sure that’s locked down and secure. So it’s just another phase of information where you really need to use technology to control that client information.

InvestmentNews: Rory, are you using account-aggregating services?

Mr. Collins: Yes. We’ve recently signed up — we’ve been doing the reconciliation with Advent. Just getting everything in there.

InvestmentNews: Whatever their aggregation services are?

Mr. Collins: Correct.

Mr. Murguia: And what’s cool is, portfolio management companies are sort of being amenable to that.

Mr. Adkins: If you use mint.com, you’ll run into the same issues you run into with those aggregators, and that is, it’s like some days, the [JPMorgan] Chase [& Co.] site doesn’t work right, and you’re going to have the same thing with those aggregators.

Mr. Murguia: So going back to technologies and custodians and who they use, some software company is going to take advantage of that and say, “Hey, there’s a service offering potential here.” That’s the innovation you can potentially stifle if there are closed systems.

Mr. Adkins: I’m just talking about ByAllAccounts. They’re already doing that, and they’re probably ahead of most of the folks, but even they have challenges with that. Has it been a business-based decision to take on account aggregation? In other words, is it to build out more assets or is it driven by your clients who want you to take over managing it for them?

We’ve never agreed to an en-gagement where we do partial stuff. It doesn’t add more assets. What it does do is make it more accurate. In the old days, if we had to wait for someone to manually enter that information, we were dependent on what day that would occur. And particularly if it was on their retirement account, you could be so far off, and particularly using a process like we use, we need accuracy of that day’s data on everything they’ve got.

And so what the aggregator did was really improve the efficiency of our process so that we serve our clients better.

Mr. Schembri: I would echo that. We have the same exact business practice.

We are reporting on everything for our clients. We may not be billing on everything, which is a whole other scenario, but let’s say a brother-in-law’s managing a Fidelity account: Make sure you get it on my report.

For something like that, we’re not going to get a direct feed into Fidelity. We’re going to go ahead and use ByAllAccounts to get the information. We do get duplicate statements, and before ByAllAccounts, we had a team of people that would input that information on a monthly basis.

By using an aggregator, you save a ton of time.

Yes, there are going to be those days where you come in, and the reconciliation doesn’t look right, because something’s wrong or the site’s down that day. It’s a minor inconvenience, [considering] the amount of time savings that implementing that kind of process really gives the firm.

InvestmentNews: Thank you, gentlemen, for taking part in this discussion.