Buttonwood Financial Advisors is a registered investment adviser with three employees, $61 million in assets under management, 105 clients and little interest in hiring an information technology staff dedicated to supporting the firm's increasingly tech-driven and mobile practice.
The RIA is seeking to streamline its technology while remaining secure, so when the firm's custodian, Fidelity Investments, offered up a cloud-based virtual desktop for advisers called External IT, Buttonwood jumped on it, according to principal Damian Gallina.
“Our time isn't consumed by non-financial products. We outsource all of our IT support to External IT,” Mr. Gallina said, noting that a three-person team from External IT paid a visit in June to Buttonwood's Baltimore offices in order to study the firm's workflow practices.
Since Fidelity
introduced its agreement with External IT a little over a year ago, 23 of approximately 3,000 Fidelity Institutional Wealth Services firms are using it, said Fidelity Institutional spokeswoman Jessica Macdonald.
“About 250 [individual] users are on the Fidelity/External IT offering,” Ms. Macdonald wrote in an e-mail, noting that Fidelity's 2013 “Insights on Advice” study found that 32% of advisers are using cloud-based applications and another 35% are interested in using them.
External IT gives advisers access with a single sign-on via a web browser to all of their documents and e-mail as well as a product-agnostic platform to support software designed for e-mail archiving, customer relationship management, portfolio management, financial planning, rebalancing, document management, disaster recovery and network security.
Pricing for External IT starts at $143 per user per month, or $1,716 per user per year, for access from mobile devices to cloud-based apps and data.
The concept of a secure and compliant virtual desktop such as External IT or competitors True North Networks and ĪTEGRIA (formerly Mimic Technologies) is simple. It's a software product that takes business applications traditionally residing on a PC and moves them to the cloud. For advisers who want mobility — and the ability to view their Microsoft Windows desktop on an Apple iPad — a virtual desktop can solve the problem of staying connected to clients while working anytime and anywhere across devices, including a laptop, tablet or smartphone.
Joel Bruckenstein, co-founder of the T3 Technology Tools for Today conferences, said most advisers have never heard of virtual desktops. Still, he said, advisers do know that they want mobility and access to a wide range of integrated products such as Microsoft Word, Intuit QuickBooks, Junxure CRM, Advent Software Inc.'s offerings and more.
External IT lets advisers gain access to any software that doesn't reside on Fidelity's WealthCentral platform, Mr. Bruckenstein said.
“For Fidelity, it isn't about getting thousands of users. It's more about offering another option to advisory firms,” Mr. Bruckenstein said. “If other offerings don't suit you, External IT is going to work because you can host anything. It's about Fidelity making an effort to provide another vetted technology option for advisers.”
Custodial platform providers Pershing Advisor Solutions, Schwab Advisor Services and TD Ameritrade Institutional also work with advisers who have contracted with External IT or other third-party virtual desktops.
“From a virtualization perspective, that is where the future is headed,” said Patrick Yip, Pershing’s director of advisory technology strategy. “People are moving away from managing their own desktops, servers and storage in their offices and leveraging services in the cloud. Amazon and Google have shown the benefits of it from a company perspective. It’s highly scalable.”
Sam Attias, vice president of External IT's financial services practice, said the firm hosts more than 2,000 applications in a variety of industries.
“We integrate the integrators,” Mr. Attias said. “We're not competing with them.”
Mr. Bruckenstein said virtual desktops can be used either by a solo practitioner or by a larger firm that wants to replicate the same desktop for a number of employees.
But Darren Tedesco, managing principal of technology at Commonwealth Financial Network, a large independent broker-dealer, said solo advisers may chafe against the constraints of a virtual desktop's operating environment. They also may worry about losing their Internet connection during a storm or other disaster, Mr. Tedesco said.
“That's a much more difficult sell,” he said. “I struggle to tell an independent adviser, 'Here's the system you will use.' The average adviser doesn't join an independent broker-dealer to be told what to do, and I would extend that to the RIA.”
Nevertheless, Commonwealth has created its own virtual environment by buying VMware Inc. virtual desktop infrastructure (VDI) boxes for 100 out of its 700 home office employees because the boxes are more secure for both the company and its employees, he said. VDI boxes offer a scalable way for a firm to create a personalized virtual desktop on a screen for multiple users.
“For us, it offers the ability to make sure employees have the exact same operating environment from a support standpoint,” Mr. Tedesco said.
Any independent advisory practice should look very closely at the potential return on investment before buying a VDI system, even if it does protect the firm against viruses and spyware with routine upgrades, Mr. Tedesco said.
“The answer is how much it costs to sign up for a VDI per user per month,” Mr. Tedesco said. “Over three years, it's a total-cost-of-ownership ROI analysis. If a VDI costs a nickel a month, then I would take it. But unfortunately, virtual desktop companies are not out there charging a nickel a user.”
