Technology is always tempting. When something isn’t working in an RIA firm it’s very easy to think, “Well, if I was only on a newer/better system I wouldn’t be having these problems.”

And it’s easy to be seduced by web demos and PowerPoint decks showing happy, productive employees knocking out tasks that have tied up your entire staff for weeks of painful manual processes and data entry.

Such traumatic and time-wasting experiences can be enough to brand your current system outdated and make a down payment on a new system whose reps recently presented a slick demo in your office.

The danger is that you may be biting off more than you can chew – or are willing to chew. It is imperative to understand what you’re buying and what such a system or solution will require from you and your staff members. Indeed, purchasing too much technology can leave you and your firm a similarly frustrating and inefficient place. Using client resource management systems (CRM) as an example, let’s take a look at some of the challenges of buying your way out of an operational bind. See: Aite Group report: CRM software industry wins RIA respect — and dollars

Beware bells and whistles

A number of industry figureheads are beginning to think about CRM as the optimal advisor workstation. It is envisioned as the hub of the infrastructure wheel, pulling in information from all the other spokes. See: Schwab chooses some giant software partners, apparently with big RIAs in mind

In theory, the advisor should be able to walk into the office first thing in the morning, open their CRM system and see a summary of the key information they need to manage their practice with each client household organized in an intuitive way: the last time you contacted them, the names of their children listed alongside their balance and performance information by account.

All this sounds wonderful in theory. The trade-off, though, is that the more sophisticated the system you buy, the more commitment and expertise it will require in order to implement and customize successfully.

In order to be a useful tool in an advisory firm, a CRM system must provide clean data mapping, good householding and consistent workflows. Holes in any of these functions can easily cause the same kind of problems advisors were attempting to solve.

It’s easy to overlook the fundamental blocking and tackling function of a product when you’re looking to buy your way out of your problem. Maybe you get excited by a “heat map” with a captivating graphical display showing how often you interact with your clients by segment. Or maybe it’s a connection to your VOIP phones so the CRM system can automatically pull up the client page when it recognizes the inbound number.

Possibly, there is even an iPad app allowing you to check up on your clients when you’re away from your computer. Set aside for a moment the question of how often you would actually use such functionality: Features like these provide more entertainment value than business value. What matters most is whether your client information has been cleanly entered into the new system and whether that information is accessible in an intuitive, user-friendly way. These things sound easy, but in practice they never are.

A tale of two RIAs

Let’s look at two real-life examples of large-scale CRM implementation to consider what can happen when firms opt for more technology. The firms described below took different paths attempting to convert to a sophisticated CRM system. Both are fee-based RIAs with over $300 million in assets. Firm A is, perhaps, a little more tech-savvy and committed to implementing its purchase. Firm B may be somewhat more set in its ways and unwilling to establish a protocol for proper implementation.

Firm A consolidates oversight and decision-making power for the implementation in the hands of the firm’s de facto COO. This individual has the final say and ability to delegate specific tasks and request staff attention where an individual has knowledge of a certain issue. All existing client data is imported and each household is carefully mapped and uploaded into the new system. Then each household is double-checked for accuracy and certain exceptions and nicknames are manually entered.

The firm also begins developing a new workflow process for client service, agreeing to test it on a group of clients and to review and update it weekly until proven. Finally, the firm adopts a system of carrots and sticks to speed the firm-wide implementation of the CRM – any employee found using an old system or a manual workaround receives a $10 fine, while anyone able to spot a problem and fix it is awarded $100.

Firm B lacks a COO and none of the principals have the interest or expertise to step into such a role. On the assumption that the technology behind the CRM is so sophisticated – not to mention expensive – that it will work on its own, the firm hires an outside firm to implement the system. Each of the principals maintains separate points of contact with the third party during the implementation.

The third party, however, lacks real understanding of how RIAs operate and thus makes generalized assumptions based on other firms it has worked with. The result is that they create workflows that have very little to do with how Firm B actually operates. When the implementation is finished and the new system is rolled out staff members are immediately frustrated by the clunky, irrelevant categories. Many staff members, confusing poor customization for limitations of the CRM, quickly give up, reverting to old ways. Firm B now has the worst of both worlds – a sophisticated system that is underused and a legacy system that is underpowered.

Disciplined training and usage

Upon reflection, very few of the issues described above have anything to do with technical problems of the system being adopted. Junxure, Redtail, Salesforce.com – there are plusses and minuses to each. What they have in common, though, is that you have to get far enough along on the systems in order to be able to even evaluate their efficacy.

It isn’t that Firm A purchased a better system; its success was achieved through distinctly non-technological means: thoughtful implementation, firm-wide adoption and disciplined training and usage.

The purpose of a CRM system is to make a firm more efficient. On the margin, it can also improve client service by keeping information at an advisor’s fingertips while they interact with clients. Firm A put itself in a position to improve the time allocation of both principals and staff. That increased efficiency can lead to faster growth and even a higher margin as fewer employees are able to serve a larger number of clients.

The bottom line is before you write a big check for a CRM system, it is crucial to understand what you’re buying – whether it has the core features and functionality needed – and what is required of you and your staff for successful transition. After all, the goal is to make life easier and enhance your practice. Keep that in mind when considering whether to buy a new system based on the quality of its iPad app.

_Rich Gill is Vice President and Head of Focus Connections at Focus Financial Partners, a partnership of RIA
firms across the US and UK with over $40 billion in assets. Gill works out of Focus’ San Francisco office._