Advisors and Technology

First, the good news. Most advisors are working in a technologically sound environment. They have fairly new equipment — most are using desktop and laptop computers that are less than three years old — and all have Internet access, use e-mail regularly to contact clients and many have at least a nominal presence on the Web.

And the dealers appear to be onside when it comes to technology. Many dealers assist advisors in acquiring technology, about half supplying all technology for a flat fee. Many dealers supply applications for functions such as portfolio reporting, electronic forms, account aggregation, financial planning and insurance quotations.

But most are falling short when it comes to using the technology, and many are using inadequate, consumer-grade software applications. One telling finding: 53% of respondents spend less than $2,000 a year on technology. That’s probably not enough, says Edey. And, considering the proliferation of low-cost or free software among individuals, it would be surprising if they were spending anywhere near the $2,000 mark.

For example, financial planning software. The two most popular programs are AIM Funds Management Inc.’s In Sync, which is used by 25.6% of respondents, and Mackenzie Financial Corp.’s InfoMack, used by 21.3%. These programs are offered free of charge and, although they may be appropriate for some advisors, their popularity suggests individuals are choosing them as a matter of price, not function.

“There are other tools that they should be using,” Edey says. “People aren’t taking the time to find the applications that suit their needs and their particular clientele,” he says. There is no single financial planning program that’s right for everyone, he adds, so you should take the time to shop around and invest in software that meets their specific requirements.

Edey says factors to be considered include how data are collected and whether the program outputs information that is clear and understandable from the client’s point of view.

Another area of concern is contact-management software. Forty-one per cent of respondents surveyed list Microsoft Outlook as their contact- management software — the most popular response. This is troubling, Edey says. “There’s nothing wrong with Outlook, but it is not contact -management software for advisors,” he says. “It’s more like a glorified Rolodex.”

You should be using contact-management software such as Macimizer Software Inc.’s Maximizer (the second most popular product, used by 16.4% of respondents), Act or Goldmine, which are specifically designed for use by financial advisors.

A good contact-management application can be customized to the individual advisor’s needs, and can be used to perform functions such as segmenting clients. Although 29% of professionals say they use contact-management software to contact clients in a systematic manner, 19.8% use it for client segmentation.

The study shows that individuals use a wide variety of software applications to design client portfolios. The most popular of these programs are Morningstar, which is used by slightly less than 30% of respondents, and Fidelity Portfolio Pro, named by 18%.

They also use a variety of technologies for mutual fund research: www.globefund.ca scored the highest here, with 23.3%, and www.morningstar.ca, with 18.5%, was a close second. A considerable portion, more than 17%, rely on mutual fund company Web sites for fund research.

No surprises here, says Edey, until the survey respondents tell us what they use the technology for. The answers say as much about advisors’ approach to financial planning as they do about their approach to technology.

More than 63% of respondents say their portfolio reports include individual rates of return, and 17.9% of respondents use their mutual fund research tools to check rates of return. Only 7.6% refer to fund manager biographies.

“It looks as if they base it all on performance and many are still looking for the best rate of return,” Edey says. “And it is interesting that they don’t much care who is managing the fund — the number of advisors who read the portfolio manager bios is quite low.”

This goes against the credo of long-term planning and building a portfolio that best suits the client’s time horizon and risk profile, rather than tracking short-term performance.

The study also provides some striking revelations about the way advisors operate their businesses, exposing some practical inefficiencies. When asked who performs the mundane task of inputting information in the contact-management software and other applications, the vast majority of respondents say they enter the information themselves.

Slightly less than 73% of advisors enter client information into financial planning software themselves, while another 20.7% say they share the task with their assistants. Fewer than 7% delegate the task completely to their assistants.

Client-management software presents a similar scenario: 67.6% of advisors use those programs themselves; 25.1% share the task with assistants; only 7.2% delegate the job exclusively to an assistant.

“That’s not good use of your time,” Edey says. For financial planning programs, advisors should be passing information on to assistants to input into the software. And assistants, not the advisors, should be operating the contact-management programs.

“Even considering some advisors don’t have assistants, the numbers [of assistants inputting data] should be a lot higher. The advisors are inputting data on their own and not letting the staff handle contact management. [Advisors] should be delegating more.”

And the results to the questions on training suggest advisors’ assistants are qualified to take on more responsibility. The majority of advisors — 75% — report that their head office provides technology training.

Slightly less than 60% of advisors attend the training themselves. But more than 40% say their assistants attend the training, either on their own or along with the advisor. So assistants should be able to handle these programs, freeing the advisor to do what he or she does best: meet with clients and prospects.

Today’s professionals are “wired.” All respondents — 100% — report that they have Internet access, and 93.2% have high-speed service. Yet other questions reveal some apprehension about the Web. Despite the many advantages of Web-based software (for example, it can be accessed from anywhere), most advisors — 71.7% — still prefer PC-based software.

And while a majority — 76% — say a Web site is important for marketing and communication, only 40% actually have one. And of those who don’t have a Web presence, 63.2% have no plans to get on the Web in the next year.

Advisors have a wide range reasons for not establishing a presence on the Web. About one-fifth of respondents simply don’t think they need a Web site, while another 20% are held back by concerns about compliance issues. Other answers, such as “Don’t know how to maintain it” and “Don’t know how to market it” reaffirm a need for education.

Some advisors’ Web presence is simply a name and a face on the dealer’s corporate Web site, but that is not enough, Edey says. Today’s advisors should be exploiting the technology, with Web-based software and interactive sites on which clients can access data.

“Your Web site is your calling card of the 21st century,” Edey says. “But people come looking for information, and advisors have to learn about getting information onto their Web sites.”

When it comes to communication technology, it seems individuals know what they should be doing, but aren’t doing it. Slightly less than 88% of respondents agree that it’s important to be mobile and able to connect to the office, but less that 36% own a personal digital assistant. “Maybe they don’t have one because they don’t fully understand how it could make them more mobile,” Edey says.

They may be on the right track, but they have a way to go, Edey says: “They don’t have to become technological experts, but they have to realize that their businesses could be running a lot more smoothly and profitably if they took advantage of technology. ” IE

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