People are key to making technology work

Respondents to the recent InvestmentNews RIA Technology Study overwhelmingly (95%) rated technology as either “critical” or “absolutely critical” to the success of their business. This is an impressive statistic, given the diversity in terms of size and type of firms that participated in the study. Why the tech emphasis? The answer is that technology helps improve productivity, which can lead to success across the board in efficiency, client retention, revenue growth and profitability. Technology can play a decisive role in improved performance when one looks at the profitability metrics that matter most: greater assets per employee and greater revenue per employee, both of which support larger operating margins and higher professional compensation. Technology also can help address a key priority for all firms, which is freeing up more partner time for business development. Then there are the qualitative client experience benefits to consider. Reducing time spent on routine administrative tasks can improve responsiveness and help allocate more time to clients and prospects at all levels of the organization, potentially helping increase retention and referrals. When implementing technology, however, the piece that financial advisers often miss is the link between technology and the people who will use it. Advisers should be looking for ways to integrate the tech strategy with their firm's human-capital strategy. As one adviser said: “Advisers believe technology will help free up people to develop new clients. And that is one of the potential benefits of technology. But problems can arise if the firm does not have the right people in place — that is, people with adequate business development skills and the desire to develop business.” The same can be said of any of the firm's deliverables, from portfolio management to financial planning to client service. If your staff doesn't have the right skill set, using technology to free up more of their time won't necessarily help. Linking the firm's tech and human-capital strategy is key to making the most of the tech investment. Our study and my discussions with leading firms have identified five steps to strengthen that link: • Align staff resources efficiently. Use well-defined roles and responsibilities that are communicated to employees and connected to meaningful outcomes for the firm. It is important to link tasks and deliverables with technology to ensure that the technology is being fully adopted and deployed. • Make sure that employees have sufficient skills to make the most of the time savings that technology can generate. Invest in training and see that there are adequate career paths to retain and develop talent. Also, ensure that your compensation philosophy and plan is competitive and rewards employees for the behavior that drives the right client experience. • Involve your employees in the tech decision-making process. Because employees use the systems on a regular basis and likely know them better than you, their opinions matter. Soliciting input can help you make better choices. If they buy in early, the implementation phase will go more smoothly. • Invest in tech training. A tech purchase needs to be followed up with extensive training over a year or more to get it fully implemented and realize its full benefits. Top- performing firms invest more in training and appear to get better results from the technology that they deploy, with higher satisfaction. • Consider outsourcing non-core business functions. There has been a shift in the registered investment adviser business toward outsourcing of non-core business functions, which advisers think can be managed more cost-effectively by hiring external providers. A majority of firms now outsource key non-investment functions, and most of that has occurred within the past two years. Consider where you can outsource and how that will free up staff time that can be reallocated to core investment management and client service functions. Ultimately, the message from both the study and the advisers with whom I have consulted is clear: Tech investment can't be made independently from an investment in people. Firms need to hire the right people with the right skills and put them in the right jobs. As a firm's tech environment evolves, employees must be trained and developed to make the most of the new tech resources being put in place. Kelli Cruz is director of research and consulting at InvestmentNews. For more information about the 2011 InvestmentNews RIA Technology Study, go to investmentnews .com/adviserstudy or contact IN Adviser Solutions at research@investmentnews.com