NAPFA Technology Conference Report: Day Three

Day three of the NAPFA Technology Conference leads to the close of this invigorating trip.  I had the opportunity to share many stories and ideas with practitioners and back-office staff alike, and have come away with several new ideas I hope to implement over the next several months.  Here is the recap of day three:

Human Capital

Richard Lee of Lee Financial Corporation opened the final day with a session titled Human Capital and Systems.  Richard commented that financial advisers have come a long way since the days of VisiCalc, but advisers are still defining the business and profession.  He played a video featuring a staff member who discussed how spreadsheets and computer programs simplified financial product illustrations in the early 80s.

Richard also encouraged advisers to consult with external professionals who bring new perspective and different experience to their business.  Picking the right partners will allow advisers to focus on what they do best: provide excellent service to clients.

Account Aggregation

Next up was a panel of speakers who discussed the use of account aggregation software.  The panel featured the following speakers with the following firm characteristics:

• Katy Moore of Sontag Advisory; 25 employees, 3 offices, and over 500+ accounts aggregated with ByAllAccounts.
• Paul Carroll of Efficient Wealth Management; 3 employees, 1 office, and just 5-10 accounts aggregated with ByAllAccounts.
• Brian Jack of Budros, Ruhlin & Roe, Inc.; 39 employees, 1 office, and nearly 500 accounts aggregated with ByAllAccounts.

The common denominator with all three firms is pretty evident, and ByAllAccounts didn’t even send any representatives to the conference!  Even so, these firms are successfully using aggregation applications to efficiently download data about captive accounts, allow the firm to monitor and bill on captive assets, and consolidate reports for clients with assets in many locations.

One important item that came up was the issue of custody and constructive receipt.  If advisers obtain, store, and use login credentials for clients and have the ability to change the address of record on the custodian’s website (or request a withdrawal), then the adviser may be deemed by the SEC to have custody of the funds.

Here I recommend strong policies and procedures to firms that might consider storing client login information on their systems for such purposes. The ByAllAccounts interface has built-in protection, as clients can type in login information while in the advisers’ office, and the password information is masked by asterisks.  The adviser never knows what the login password might be, and thereby avoids problems related to custody of funds.

Adviser Predictions

Finally, the conference ended with a session by Andy Gluck, CEO of Advisor Products, Inc. Andy raised several important issues in his session, starting with the discussion of something he calls PMS Gridlock.

Independent financial advisers are sophisticated customers and demand high-functioning portfolio management systems, but the software market has limited competition.  The programs are expensive because of the required features, but advisers are unwilling to pay high prices.  Andy feels that limited competition in this market will continue until advisers begin to open up their technology budgets to pay appropriately for the features they desire.  His prediction: PMS development will be similar to watching paint dry.

Andy’s next prediction: advisers will be using ASP solutions nearly exclusively in less than 10 years.  Currently, many broker-dealers already offer ASP solutions for representatives, so it’s just a matter of time that this business model makes its way into the independent adviser space.

Conference Conclusion

This was an excellent conference that featured tons (almost too much!) of information on technology solutions for independent financial advisers.  I left with a notebook full of service provider names, business cards, and extensive notes on strategies other firms have successfully implemented.

If you are a back-office specialist or a techie working in financial services, I highly recommend attending conferences such as this one.  You never know what information you might pick up and who might give you the next idea that will drive up profits at your firm.

View more reports from the NAPFA Technology Conference:

NAPFA Technology Conference Report: Day Two

NAPFA Technology Conference Report: Day One