Four Software Purchases That Have a High ROI To RIAs Hot

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In my last post, I discussed the importance of developing a technology plan as part of your strategic plan.  Since we are fast approaching year-end and many of you are looking at strategic planning and budgeting for 2013, consider implementing the software solutions discussed below.  The cost of these is sometime viewed as being “expensive” but the payoff of each nearly always makes them a wise purchase. This is particularly true when considering staff time spent running these processes manually. By implementing this software, their time could be shifted to more client-centric and higher-margin activities.


My list below doesn’t consider the more widely used, and typically high ROI software cited as being used in financial advisory firms such as customer relationship management (CRM), financial planning, or portfolio management software. Rather, the list below looks at software that isn’t as widely used in advisory firms.

The 2011 technology survey in Financial Planning magazine pointed out that the top responses to the question “What is the single greatest business challenge you would like technology to solve for you?”

1.       Improved workflow 40%

2.       Time management 20%

3.       Client communication 17%

4.       Locating data within the organization 6%

5.       Locating data outside the organization 5%

Each of these responses clearly indicates that advisors know what they want and need their software to accomplish.  Depending upon the specific challenge faced by advisors, these responses point to the need for firms to adopt the software highlighted below.

Another question in the survey asked “What type of technology investment has yielded a significant ROI?”

The top two responses, not surprisingly, were CRM and financial planning software.  However, just down the list were document management software and rebalancing software. Evidence is beginning to show that advisors are seeing a high return from implementing this software.

Further supporting the need for advisors to utilize these software tools are the responses given in the Investment News Tech Survey. It looked at the types of software and the vendors most often used and also highlighted the percentage of firms not using each type of software. Here is the percentage of firms not using the following software: Rebalancing (70.7%), Account Aggregation (65.4%), and Document Management (47.8%).  No breakdown was given for Reporting software. There are a high number of firms not using software that can help solve the challenges listed above!

From conversations I have had with advisors and vendors, as well as from additional research conducted by some vendors, there is strong evidence that firms are seeing a high ROI from using this software.     

Here are four software additions to your firm that help solve the challenges reported above and also have a high ROI.


Why It Is Important: Reporting software is software that allows advisors to create reports from information housed in multiple sources.  This is most often done when creating quarterly performance reporting for clients.  You probably send a client letter and/or market summary from Word, portfolio statistics or graphs from Excel or another analytics program, and performance reports from a portfolio management system. 

Printing, collating, and mailing reports for each client every quarter is extremely labor intensive, even if the process has been automated a little using a script or macro. Quite a few firms spend days or many hours manually creating and collating these reports.

How It Offers a High ROI: Although there are not any studies that I’m aware of that have specifically focused on reporting software ROI, I have spoken to many of the vendors in this space.  They have provided anecdotal evidence from working with clients.  What typically occurs in the firm is that the time spent on reporting is drastically reduced, from days to hours or from many hours to minutes. Less time and fewer employee hours are needed to complete the reporting process after implementing this software. Employee(s) responsible for completing the task can be shifted other higher-margin tasks after implementing Reporting software.

The cost of this product only runs a few thousand dollars per year. The software is quickly set up and the payoff is immediate when creating your next quarterly report.



Why It Is Important:  Rebalancing provides many advantages to the advisor in addition to moving between asset classes or holdings easily and swiftly. A few of the advantages include:

·         Increased productivity

·          Ability to add scale and capacity without adding staff

·          Increased allocation and trading capacity

·          Improved quality control

·          Improved client service

·         Less worry about portfolio oversight

Not only does implementing rebalancing software offer the advantages, and others, listed above. Performing the rebalancing process manually, or even semi-manually using spreadsheets, is a process is fraught with potential keying errors. 

How It Offers a High ROI: Many of the vendors and advisors I have worked with have examples from clients on how the software has paid for itself, often many times over in a short amount of time.  Typically, the advisors rebalancing process time has been reduced from days to hours, or from many hours to a few hours. Again, your employees can shift their activities to those that offer a higher margin and are more client focused.

Total Rebalance Expert (TRX) put out a white paper last year titled Measuring the Return on Technology Investment Total Rebalance Expert.  The paper details evidence on how TRX has provided a high ROI for their clients.  Although the paper is focused on TRX, the same process applies to implementing any rebalancing software.


Why It Is Important:  Document management software allows firms to more efficiently manage workflow, organize client documents, and retrieve documents in an efficient and timely manner.

Advisory firms need to effectively develop processes and workflows and manage and retrieve large volumes of documents to offer improved client service and satisfy increased compliance demands. In order to manage all the client and firm documents, this software is rapidly becoming a requirement for growing advisory firms seeking to operate efficiently and effectively.

How It Offers a High ROI: As a firm moves away from generating so much paper and moving toward using document management software, the result is a huge reduction in employee time spent dealing with paper documents. When paper isn’t being generated, copied, collated, stapled, filed and delivered, employee’s time is reduced dramatically resulting in needing less employees or shifting of tasks.

One of the leading document management companies, Laserfiche, put out a white paper titled ROI for RIAs: The bottom line impact of enterprise content management for independent registered investment advisors. In the paper, they detail the key areas that impact ROI for advisory firms and how those translate into a high ROI.  Although the report specifically focuses on Laserfiche, the results can be similarly applied to other document management systems.


Why It Is Important:  Aggregation software allows advisors to gather asset information from assets not under their direct custody, providing advisors with a total view of their client’s assets. Client’s sometime don’t realize the importance of having their entire portfolio monitored by their advisor. Providing this service for clients can set your firm apart from the service offering of other advisors. Advisors can also generate additional revenue by charging a fee for managing these held-away assets.

How It Offers a High ROI: Although it is a little more difficult to make a case for aggregation software having a high ROI, I would argue that utilizing the software does provide a high ROI. By offering the service for your clients, you are providing a service not offered by less than half of all firms based on the statistics stated above. Since you can also charge a fee for managing these assets, you can easily recoup what you spend on implementing and managing the aggregation process.

As you begin to consider your technology budget for 2013, consider adding each of these software tools to your technology portfolio.  Consider all the benefits and weigh them against the costs. You will find that each software tool provides a high ROI.

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