Financial planning firms can give themselves a pat on the back. This year’s Planners’ Report Card shows a dramatic improvement in marks for front-office technology. The category average in this year’s Report Card for the 16 firms surveyed was 7.5, a half-point increase over last year’s 7.1, while the marks for back-office technology were also up slightly.
The good showing is in contrast to the recent Brokerage Report Card, which reported fairly neutral technology performance among Investment Dealers Association of Canada firms. But what do these good marks mean?
One reading is that financial planning firms are following recent trends in U.S. productivity, which has been skyrocketing over the past few years as North American firms finally seem to have figured out how to implement all the technology sold in the late 1990s.
According to Kevin Regan, executive vice president, financial services, at Winnipeg-based Investors Group Inc., new technology has been rolled out at more than 100 financial planning centres, involving some 4,000 people.
“That went very well. But it’s really a question of learning curve. When it comes to the new technology, people are beginning to pick it up, learn it and apply it to their clients’ situations,” he says. “And that’s lowering the cost to advisors.”
The new technology at Investors Group includes a strategic investment planning tool on the company’s network, as well as a major conversion of its core back-office systems from the CLASS system to SAS, an industry standard.
But another reading of the good technology marks may be that the promises of consolidation are coming to fruition.
Consolidation has promised a new and permanent higher level of productivity from technology by spreading the costs of fixed capital expenditures on technology over a wider advisor base.
This will help firms’ profit, and that always gets good marks from advisors. As well, some planners have seen an immediate boost in resources as smaller dealers are swallowed by larger ones.
That’s partly the case at Assante Corp., which has been busy merging several back offices. “Many of the technology challenges facing planners are those around consolidation. There has been a big commitment to improving technology,” says president Joe Canavan, adding the company is moving from multiple back-office systems to a single system. “I’d say in 12 months we’ll look dramatically different.”
Technology improvements have also been the case at Burlington, Ont.-based Berkshire Investment Group Inc., at which investment in technology has been instrumental in its ongoing consolidation efforts. Berkshire recently rolled out a fully integrated Web-based desktop suite for advisors that includes contact management software,
financial planning software, clients’ files and market data.
The system also includes training, company policies and product information. It can show an advisor how to process any piece of business, not to mention being “pre-populated with all client data,” says Craig Henshaw, vice president of information technology and operations. The system is so fancy, in fact, that it was the subject of an article in IT Focus’s April 2004 report on technology in the financial services industry. “We believe we have the most advanced technology in the industry,” Henshaw says.
That may be true, considering the advanced state of its technology was credited by TWC Financial Corp.as one of the reasons it chose to integrate with Berkshire. As well as making the firm an attractive partner, its advanced technology made the merger a snap. “It’s paying off by making the transition easier,” says Henshaw.
He notes that although advisors used to be able to transfer their books in bulk, new regulations have made that more difficult. But Berkshire’s technology has made it easier to move clients one at a time, which made the transfer of TWC’s advisors “a weekend non-event.
“Advisors don’t ever have to re-paper client accounts. We’re the only firm in the industry doing that,” he says, noting this feature leaves advisors well positioned for future regulatory changes because they will be able to migrate to new regulatory regimes without a hassle. As well, Berkshire’s technology will make it easier for TWC advisors who are considering becoming IDA-registered advisors to do so.
Investments in technology are clearly paying off for companies, which may encourage those that have put off such a move. Firms that invest in technology will almost certainly have a strategic advantage whatever way the industry moves. And that will make it tough for the small independents, which will be continually squeezed by the large players that can afford to invest in bigger and better
technology. IE