When it comes to technology upgrades, advisors often make the same mistakes their clients do with investments: they buy in the moment, without a plan.

That’s the critique of Michael Goodman, president of New York-based Wealthstream Advisors. “I see it all the time,” he says. “They bought something because they thought it was a good thing at the time, and then they forget about it.”

Goodman was among a panel of advisors dishing out frank observations about RIAs and technology at Financial Planning’s Disrupt Advice conference in New York.

He stresses advisors must understand first how the technology they are buying will fit into their practice, and then test it out before bringing it onboard.

“Buy with a strategy in mind,” Goodman says. “Don’t just buy the shiny thing you see at conference or read about in a magazine. How does this purchase solve an overall goal and coordinate with other technology you have?”

RIAs have to also realistically look at their firms and determine if they can add upgrades in a useful way, says John Augenblick, president of New Hope, Pennsylvania-based Rockwood Wealth Management.

Michael Goodman, president of Wealthstream Advisors (left) and John Augenblick, president of Rockwood Wealth Management, debate how advisors can evaluate the ROI of technology purchases.
Michael Goodman, president of Wealthstream Advisors (left) and John Augenblick, president of Rockwood Wealth Management, debate how advisors can evaluate the ROI of technology purchases. Patrick McLain

Often, he says, advisors drown as their technology stack melts into a puddle of inoperability.

“Advisors need to understand that tech providers are better and faster at pushing out features than our firms are at digesting them,” Augenblick says. “To keep up with the evolving iterations requires a combination of time set aside for training, as well as clearly identifying a person in the firm who is designated as the ‘super user’ for that particular software.”

Such an effort requires employee buy-in, says Jennifer Goldman, head of consulting firm My Virtual COO. “Advisors need to pre-sell the benefits of the upgrade to their team before implementing,” she says. “Without the pre-sell, adoption is low and ROI is low.”

EVALUATING ROI
Determining the return on investment of a technology purchase is among the hardest tasks for advisors, the panel agreed.

Goldman suggests time tracking to learn which tech investment reduced an advisory’s workload. The right technology should eliminate some steps within a workflow, she notes.

“Talk to other firms that have adopted similar technology and ask them about the impact on their business,” she says. “Just make sure those firms spent time vetting the technology before buying, spent ample time implementing and learning it, and rolled it out to clients properly.”

Doing due diligence before buying technology is essential, Goodman agrees. “You can’t half-ass the tech investment. You’ll be in a worse position if you get the wrong technology. I’ve made the wrong decision by not doing my proper due diligence. It’s so expensive if you choose the wrong software.”

But Augenblick challenged the idea that advisors take an ROI approach to evaluating a technology upgrade.

“ROI isn’t the right approach,” he says. “Advisors should consider great tech akin to having running water, electricity, and an internet connection at their office. Bad tech will tarnish their brand and weaken relationships with current and future clients. Bad tech will also impair their ability to attract and retain the best advisory professionals to their firms.

“Their best people will want the best tools — failure to provide them with great tech tells them their time and their contributions to the firm are not valuable.”

Goldman says there are subjective ways to measure a technology investment’s impact on a firm, be it a happier staff, energized advisors with more time to speak with clients, or even staff interest in making more changes. “The firm craves more wins and positive outcomes that come from making the right tech changes,” she says.

THREE FACTORS
While Wealthstream’s Goodman acknowledges determining the ROI of tech purchases is difficult, it cannot be abandoned. “Technology costs money, and we are for-profit businesses,” he says.

Goodman says advisors should keep three factors in mind to measure the ROI of a purchase: increased practice efficiency, client appreciation and compliance.

He acknowledges new technology can also carry an intangible value for an RIA practice. “Are you having greater comfort because you know there is less chance of human error?” he asks. “The right technology I believe creates better employee satisfaction. That’s hard to quantify.”

The compliance nightmare of not having digital records is real, though. “When the SEC does an audit now they want everything in electronic form. They’re not goingto be happy if you can’t produce what they want.”

Another reality is that growing your practice in a digital age means advisors cannot put off investments, Goodman says.

“You’re never going to get past a certain size if you don’t use technology,” he says, describing how he switched from making financial plans in Excel to using planning software.

“You’re not going to be able to do as good a job for as many without technology. What are you going to do? Write financial plans by hand?"

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