Better Business: Time to embrace the latest technology

Industry surveys suggest 30% of adviser firms still use ‘home-grown’ technology to run their businesses. In a time of heavy regulation and stiff competition, Nick Eatock, chief executive of IntelliFlo, says IFAs should be embracing up-to-date and business efficient technology...

As well as being a particularly complex business area, financial services is one of the most heavily regulated industries in the UK. It is also an industry where the end client (be they an individual, a firm or a trust) is highly reliant on the advice given for some of the most important decisions they will ever make.

From an advisory firm perspective, this makes it even more important the client is well managed and is provided with frequent, high-quality service.

Given this backdrop and the extensive range of services, it is surprising so many advisory firms still use their own ‘home-grown’ technology to run their businesses. Industry surveys suggest 30% of firms still use their own technology. Indeed, 36% of the new firms joining IntelliFlo have moved from their own bespoke software solution.

Advisory firms give a number of explanations for this reluctance to embrace up-to-date, business-efficient technology. By taking a closer look at these reasons, it is relatively easy to understand the thought process behind this reluctance for change, which normally boils down to three main areas:

1. Historically, adviser front- and back-office solutions have not necessarily helped reduce the overall business process burden placed on an IFA firm. They instead focused predominantly on storing data records, perhaps with the view it is all about having the ability to record multiple sets of data. The truth is almost all businesses face a far larger challenge in dealing effectively with wide sets of data. This, in turn, means the real efforts should be focused on improving the business processes. For example, advisory firms all face significant challenges in both the management and reconciliation of fees and commissions. This is compounded by additional burdens such as managing risk in an effective and compliant manner. Both these areas can be substantially eased by sophisticated yet easy-to-use technology. The trouble is most adviser front- and back-office solutions have not focused on these areas, so why should an advisory firm use them?

2. We now increasingly operate in a world where there are a myriad of partner companies and manufacturers (portals, wraps and providers) that are also keen to remove the old-style labour-intensive manner of servicing adviser firms. They now offer a range of largely web-service based integrations with the leading front- and back-office solutions in the market. These are designed to significantly improve areas such as commissions, new business processing and valuations. Historically, these services were not available, so this is another reason why the off-the-shelf solutions appeared to offer no real added value.

3. We are seeing increased consolidation among advisory firms and these large businesses need to find effective ways to work together, often from different geographical locations. Sophisticated, and often web-based, solutions are helping integrate these businesses.
It is therefore easy to gather why, in the past, firms used their own technology to run their businesses. But now it is no longer the most effective option, and large numbers of advisory firms are realising a bespoke, proprietary solution will simply not evolve quickly enough, integrate well enough, or provide the functional depth of an off-the-shelf solution.

When advisers do look to purchase their first off-the-shelf front- and back-office technology solution, it is imperative they select the right team. This is not just about the software supplier they choose but also – and arguably more significantly – about ensuring the adviser has each technology requirement satisfied by the available solution. This equates to a strong back, middle and front office. Often, it is exactly these technology areas that are blurred by software vendors, perhaps trying to cover up areas of weakness. But each area is as important as the other if the adviser is looking to run a more efficient and better business with the aid of technology.

Here is an explanation of each of these main areas:

Back office

This is about enabling the business itself to run for the good of the business. Mainly, it encompasses commissions, finance, compliance, risk-based monitoring, regulatory reporting and management information.

Middle office

The concentration here is on functions that provide ongoing customer servicing in relation to existing business/advice. Middle office is there to serve the needs of clients and advisers alike. Examples of functionality in this section include: electronic valuations; client access to information; document management, including scanning, holistic portfolio reporting, workflow and centralised task management for client servicing; and TCF.

Front office

This is about the advice/sales process for a particular client. It should concentrate on new business. Functionality includes integration quotations and new business, suitability letters, opportunity management, lead management, needs analysis, financial planning and fact find.

A number of functions sit across all positions, such as diary and task management, and some elements occasionally also sit across a number of areas such as fact finds and quotations.

Front, middle and back office must all interact together. This is fundamental to a seamless and effective technology solution. While interacting together, they should also interact with multiple third parties such as providers and platforms. It is hard to imagine how any advisory business could operate successfully without all the main three elements covered.

A number of technology vendors also supply point-of-sale (POS) technology, but advisers should ensure this is both necessary and appropriate for their business before buying. Traditionally, POS systems have been reserved for the likes of tied salesforces and banks in the main. POS solutions are certainly similar to the front-office systems but are typically targeted where the adviser is using the technology at POS and in front of the client. Not many IFAs work in this way but some do, so it can become an additional weapon in the armoury. It is important that advisers’ POS interacts with the other core elements. Of course, an effective front office will allow you to do most of this too.

Choosing the right solution

So, in light of the increasing regulatory and compliance burden placed on advisers, retaining a bespoke ‘home-grown’ solution is becoming more and more unfeasible and impractical.

Not only does it place the adviser at an administrative disadvantage – both in terms of time and quality – but it could also pose a serious business risk as usually the code underneath the solution is understood by just one person.

Perhaps most important of all in challenging economic circumstances, using a commercially well-recognised solution will boost the value of an adviser’s business should they decide to exit. When advisers are reviewing technology choices they should ensure they consider of all these main elements to ensure a successful implementation. They must ensure they do not get distracted by what a technology does over what it needs to do.