Not long ago, I happened to be in the offices of an RIA shortly after a quarter ended. As with every RIA at that time of year, this advisor was piecing together performance reports to send out to clients.

And I do mean piecing them together. Documents were pulled from various sources-market commentary created in Microsoft Word, performance measurement data from a portfolio management system, client profile information from the CRM-so individual reports could be collated.

The next phase, I was told, would be a week's worth of work in which two highly skilled employees would proofread and error-check each report, making sure each one was complete and accurate before it was sent to the client. Unfortunately, this manual process is still common among many RIAs. Despite making substantial investments in technology in the last few years, most firms haven't advanced to the stage of integrating technology and rethinking their workflow to streamline their work.

Doing the work manually may have been something RIAs could have gotten away with during less challenging economic times. But with asset levels down, compliance requirements up and competition intensifying, making efficient use of technology is no longer an option. As advisors look for ways to boost efficiency and profitability, technology integration should top their priority list. The question, then, becomes: How can I get the most out of my technology?

According to data from Schwab's 2010 RIA Benchmarking Study, the answer is not just to spend more. In fact, the opposite may be true. Our analysis identified a subset of RIAs who were spending conservatively on technology-2.4% of revenues-yet had operating income in excess of 18%. The same analysis allowed us to identify a group of RIAs who were much more aggressive- spending 5% of annual revenues on technology-but much less profitable, with operating margins of 8.3%.

This first group takes an approach to technology that is more practical, deliberate and effective-in a word, smarter. When it comes to implementing technology, they follow a three-step approach that could benefit every RIA.



First, have a clear, practical plan. Too many RIAs try to do too much when it comes to technology. But firms that use a more disciplined strategic planning process will prioritize all investments-including those in new technology-and then tackle a single project at a time.

For example, assume an RIA came to us and said, "We're thinking of investing in three areas of technology-in a CRM system, in a portfolio rebalancing system and in something that would improve client communications." Our counsel would be to pick one. One example, based on indicators in each office, could be to focus on rebalancing. In that case, firms should investigate rebalancing applications and assess the workflow around rebalancing. Using a strategic planning approach, RIAs can determine a successful and focused plan for implementing the right technology.

* Planning tips: Set realistic and achievable technology goals and allocate all necessary resources to achieve them. If you're planning to add new technology to your office, look beyond the purchase to implementation and training as well. Set up a diverse, cross-functional team to manage the selection and implementation process. Make sure your principal is involved and encourages open conversations among all the parties who will be using the technology.



Second, integrate new technology into your workflow and with existing systems. This is the hard part. Fifty-three percent of advisors say integration is among their biggest technology challenges; 47% say the same of changing their workflow processes.

For the most part, RIAs have earned success through their expertise in investment management and their client relationship skills, focusing more on client outcomes than internal processes. Yet RIAs must be willing to take a fresh look at their workflow in order to realize all the benefits of new technologies and, as a by-product, continue to improve the overall client experience at their firm.

Take portfolio rebalancing. This is something many firms still do manually. They start with the current balances in their portfolio management system. Then they export to a spreadsheet such as Microsoft Excel, where one team makes the rebalancing calculations. That team sends their calculations to another team, which creates and places the trades. Finally, yet another team enters the new transactions into the portfolio management system.

This workflow process should be at the top of the priority list when RIA firms bring in new technology. The purchase of rebalancing software, for instance, might lead to a streamlining in which one person can handle the entire sequence of tasks. The activity becomes more standardized-an advantage from a compliance standpoint-and more efficient. It may also provide RIAs more real-time visibility into when their clients' portfolios need to be rebalanced, potentially improving investment performance as well.

Again, these benefits don't come strictly from technology. They come from a combination of new technology with improved processes and documented workflows.

* Integration tips: Examine your workflows and identify where you are playing the role of integrator-entering data multiple times or creating manual work-arounds with spreadsheets or document merges. These processes can offer insight into areas for integration. The next time you plan to introduce a new technology or upgrade an existing one, make sure any new software talks to other applications you have in place and performs these functions natively.



Third, measure the success of the technology you've acquired. At most RIA firms, it may not be necessary or even possible to use sophisticated return on investment (ROI) metrics like payback periods and internal rates of return. These are firms where people often wear several hats and do multiple jobs. Metrics that are more practical for a small business make the most sense. One example we learned from a client was to conduct employee satisfaction surveys both before and after a new technology implementation and then compare results.

Another good measurement technique is to assess time savings. One advisor we worked with implemented a web interface where the firm's clients can find all their data, account information and quarterly reports. The firm found that by changing its report distribution method from paper to online, self-service access reduced the time the firm spent preparing, collating and sending reports by 50%.

By asking the implementation team to identify and facilitate some type of measurement system from the beginning, firms can protect themselves from the "get and forget" syndrome that leaves some RIAs with underused hardware and software, and causes them to spend too much on technology. You don't need to be a fanatic about evaluating what you have; you just need to take stock of what's happening often enough to see your investments through so that you reach your initial goal of implementation.

* Measurement tips: Just establishing measurement criteria isn't the end of the cycle by any means. Continue to monitor progress and determine how you will make course corrections, as needed.

Based on research and experience, it is clear that a focused technology strategy can trump overspending. Firms just need to assemble the right team, define the problem, implement wisely and measure success. Then it's time to start all over again. Get out that list you started with and take a fresh look at your next area of focus. If you're doing technology implementation right, the process of self-improvement is never finished.


Neesha Hathi is vice president of technology solutions for Charles Schwab Advisor Services.