As capital markets firms move from a transactional, sales-based model to a holistic, client-based model, information has become the greatest enabler -- and the biggest deterrent. "To become their clients' primary adviser, relationship managers need all the information possible to meet each client's life goals," affirms Darrin Courtney, research director at TowerGroup, a Corporate Executive Board company. "But getting data from across traditional silos, as well as held-away data, outside market data and increasingly, social media data, is a considerable challenge."
While the challenge of integrating data sets is greater based on a firm's size and longevity, the task is far from impossible, Courtney suggests. "Determine which information is most important for your advisers to see," he advises. "Then build out from there."
This advice certainly rang true for LotusGroup Advisors. The Denver-based active-investing firm was founded in 2007 as a two-person shop with the intention to quickly morph into a much larger entity, according to Andy Seth, LotusGroup's managing partner and cofounder. From its inception, LotusGroup managed all client assets, including held-away accounts. But, Seth recalls, during the firm's early days, time-consuming manual data management and analysis processes took a big bite out of sales and relationship-building.
"Originally we logged into more than 100 external accounts, keyed in the details of every trade made and, the following day, went into our portfolio management system to add the information," Seth explains. "It was insane."
Selecting a Solution
By early 2009 LotusGroup realized that it needed new technology to address the inefficiencies, starting with held-away account aggregation. After considering -- and discarding -- outsourcing as too slow and inefficient, Seth reports, the firm evaluated a handful of packaged data aggregation solutions, and in mid-2009 it chose Woburn, Mass.-based ByAllAccounts (BAA). "BAA was speedy, accurate, adaptable and scalable," Seth notes. "So our thought was: If we can get it to work, and understand its potential, then we can move on to adopting our next set of technologies."
As a straight-forward self-service tool, Seth says, BAA only required a month to deploy, but it proved transformative. "With the time savings provided by BAA we were able to grow assets under management by 35 percent over the next seven months," he recalls. Using these new revenues, LotusGroup set out to streamline its back-office processes in early 2010. According to Seth, the firm analyzed three approaches: offshoring, deploying multiple individual applications, and adopting an all-in-one integrated solution. LotusGroup even brought on an intern just to crunch vendor evaluation data, Seth recalls.
After five months and about two dozen vendors, LotusGroup selected Marietta, Ga.-based Interactive Advisory Software's (IAS) integrated wealth management platform. "Not only was the IAS system based on one relational database, it also automated rebalancing," Seth says. "This was a primary driver for making the solution affordable. Plus, IAS provided a back-office outsourcing service. This gave us one [vendor] throat to choke.
"In addition," he continues, "we didn't want to self-host because everything in our business runs from the cloud -- right down to the phone system. Although there were other integrated solution vendors, at the time they weren't offering SaaS. Finally, they also needed to be a BAA partner, which IAS was."
From Theory to Reality
Ultimately, however, selecting the vendor turned out to be the easy part, according to Seth. With accuracy integral to its business model, LotusGroup opted to include transaction history, rather than just historical returns, in the IAS conversion. "Naturally, we asked IAS whether they'd done a conversion like ours before," says Seth. "But we didn't ask them if they'd done it with our particular portfolio system."
Consequently, the standard implementation relationship -- in which the vendor conducts the conversion and the client provides support -- proved unworkable, Seth reveals. "One day we arrived to find 120,000 errors in a particular process," he recalls. "That's when we knew the relationship needed to change." So LotusGroup took over the lead, with IAS providing support. While this reduced the implementation timeline to four months, "This came at a cost," Seth says, "because I couldn't sell [during the implementation]."
Fortunately, the returns on the technology have been phenomenal. Since the February 2011 rollout, the firm's assets under management have grown a whopping 64.5 percent, Seth reports. In addition, LotusGroup opened its first physical office, hired three employees and is actively seeking two more.
Further, Seth notes, LotusGroup leveraged his Six Sigma knowledge to "playbook" numerous other processes, such as converting to online secure signatures. "This cut client onboarding to about 48 hours," he says. "In all, we adopted 18 new technologies. There's no paper here anymore."
Nonetheless, Seth sees room for improvement. "BAA logs into accounts and downloads data into IAS," he explains. "If we could set up models and instruct BAA to execute hundreds of models-based trades [during the process] -- that would just kill it."
On the IAS side, it's about quality control. "We employ a third of a full-time equivalent just for quality control," says Seth. "We measure everything and regularly provide IAS with detailed inaccuracy metrics; we'd love it if their standard was the same as ours --which is 100 percent accuracy."
Not surprisingly, the technology providers are keen to respond to LotusGroup's concerns. Calling Seth's idea "interesting," Cynthia Stephens, VP of marketing for BAA, says, "We would need to look at the technical as well as compliance and legal aspects." Adds IAS CEO John Philpott, "We're working with Lotus Group to achieve data perfection."
Regardless, LotusGroup is more than pleased with the new solutions. "We're in the business of building trust, and technology enables us to do that," Seth emphasizes. "BAA and IAS have helped us achieve our potential, and we absolutely couldn't live without them.
"Most important," he adds, "we believe the existence of such technologies makes this an exciting time for our industry. It's the 'FedEx effect' -- no one was doing overnight before FedEx. Similarly, what we've proven can be done just elevates everyone's game."
Sidebar: 3 Technology Selection Tips
Technology often can help financial advisers strengthen their client relationships. Here are three tips to help you select the right technology solutions for your firm:
1. Consider Cloud-Centric Solutions. "Clearing firms, and others, are developing packaged SaaS solutions," says Darrin Courtney, research director at TowerGroup. "But particularly for large firms, there's no solution that integrates multiple 20-year-old proprietary systems with third-party vendors out of the box."
2. Expect Regulatory Compliance. "Look for partners that track regulatory changes and keep up with those updates," suggests Cynthia Stephens, VP of marketing for ByAllAccounts.
3. Stress Client-Facing Access. "A robust client portal -- where adviser and client can manipulate and add value to data -- is almost mandatory," says John Philpott, CEO of Interactive Advisory Software. "We're seeing adoption across the board."Anne Rawland Gabriel is a technology writer and marketing communications consultant based in the Minneapolis/St. Paul metro area. Among other projects, she's a regular contributor to UBM Tech's Bank Systems & Technology, Insurance & Technology and Wall Street & Technology ... View Full Bio