Why Accountants Are More Innovative Than RIAs Hot
There are endless jokes about accountants:
What do you call an accountant without a spreadsheet?
Lost.
What do accountants suffer from that ordinary people don’t?
Depreciation.
How do you know accountants have no imagination?
They named an accounting firm PriceWaterhouseCoopers.
Yet, accountants have embraced technology while you, dear investment advisor, have not! Yes, you use Outlook and PortfolioCenter (or Advent or some other portfolio accounting system). You might even use an automated CRM program. But, you are not using technology for your most repetitive, multi-variable process: rebalancing!
Thirty years ago, accountants began to realize that automating tax preparation was possible. Within five years, most accounting firms were using software to prepare tax returns. And now, virtually all accountants use tax preparation software! Would you consider using the services of a CPA who prepares tax returns by hand? Of course not! But, think about it – the same reasons why you wouldn’t want your tax returns prepared by hand are the same reasons why you shouldn’t be rebalancing by hand.
Let’s go back in time to a theoretical conversation between a CPA and a software provider (SP):
SP: Our software can automate your tax preparation.
CPA: That’s ok. We do fine without that.
SP: Don’t you make mistakes occasionally?
CPA: Yes, that’s why we need to file amended returns sometimes.
SP: Doesn’t it take you a long time to prepare tax returns?
CPA: Yes it does. But it would take a long time to learn how to use new software.
SP: Aren’t all the simultaneous calculations a problem? Like dealing with AMT, for example?
CPA: Yes. But I don’t think a software program will do it right either.
SP: What if your competitors start using software and prepare more returns with greater accuracy than you?
CPA: Well, I might have to bite the bullet.
Now, let’s change this conversation to one between an RIA and a software provider:
SP: Our software can automate your portfolio management and rebalancing.
RIA: That’s ok. We do fine without that.
SP: Don’t you make mistakes occasionally?
RIA: Yes, that’s why we need to pay for trading errors.
SP: Doesn’t it take you a long time to rebalance your clients’ portfolios?
RIA: Yes it does. But it would take a long time to learn how to use new software.
SP: Aren’t all the simultaneous calculations a problem? Like dealing with tolerance ranges, location optimization and wash sales, for example?
RIA: Yes. But I don’t think a software program will do it right either.
SP: What if your competitors start using software and can handle more clients with greater quality than you?
RIA: Well, I might have to bite the bullet.
The benefits of automating your portfolio management and rebalancing are many, both tangible and intangible. Tangible benefits include time savings, fewer trade errors, and less paper. Intangible benefits include happier clients, increased capacity, stronger quality control and top-notch portfolio management.
So, why are you waiting?
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