Eight Common Advisor Technology Pitfalls and How to Avoid Them

Professionals looking at code on a computer screen

In a world where there’s an app for everything, client expectations around technology are greater than ever and cyber threats are on the rise, financial advisors find themselves navigating an extremely complex technology landscape.

From back office to client engagement to portfolio management systems and platforms, advisor technology is critical to being effective, meeting client needs and scaling your business. At the same time, choosing the right technology is more challenging than ever.

As technology advances, more and more tools enter the industry with new capabilities. In most cases, these advisor tech tools excel at one specific service, leaving advisors to manage many different technologies all at once while fulfilling their actual role: helping clients meet their financial goals. Meanwhile, advisors are forced to navigate the technology space with likely a limited tech background.

Many of these new technologies are also being rolled out directly to consumers. Clients are used to certain fintech and mobile apps and expect their financial advisors’ technologies to provide the same capabilities they already have in other areas of their lives.

Layered on top of all of this is the need to protect highly sensitive client information during a time when data breaches are to be expected. According to IBM’s Cost of a Data Breach 2022, “for 83% of companies it’s not if a data breach will happen, it’s when.” The average cost of a data breach in the U.S. is $9.44 million.

Eight Common Advisor Technology Pitfalls and How to Avoid Them

To help ensure you are choosing the right advisor technology for your firm, here are eight common pitfalls when selecting and introducing new technology and how to avoid them.

  1. Being wowed by the latest innovation
  2. Rushing the selection process
  3. Underestimating the total cost of the technology
  4. Failing to prepare for a new technology
  5. Not conducting a security review 
  6. Not dedicating enough time for change management and training
  7. Expecting great customer service after the sale
  8. Assuming any advisor technology is a long-term play

1. Being Wowed by the Latest Innovation

From e-signatures to generative AI, the range of technologies available to help financial advisors take care of time-consuming tasks and improve outcomes for clients will only continue to grow.

Determining what you need and why is essential. The key is to make sure your office is leveraging the advisor technologies that will help you achieve your goals.

Start by understanding the technology you have and the capabilities that will help improve the way you work. Set objectives for what you want to achieve with the new technology. Write down your must-haves, your nice-to-haves any deal breakers. Get input from your team so you’re clear on their needs.

Involving your team members in the process – from selection to implementation – also helps gain buy-in. 

2. Rushing the Selection Process

Not dedicating enough time to conduct due diligence on a potential new advisor technology can be a costly mistake. Sometimes due diligence gets rushed because you have limited time before a legacy product retires, or you have some other timeline driving the decision.

Regardless of the reason to act quickly, it’s important to be thoughtful and intentional about finding and testing new technologies before you make your final decision. The more complex or integral the new advisor technology is to your operations, the more time you should dedicate to finding the right solution.

3. Underestimating the Full Cost of the Technology

Typically, the price quoted isn’t the total cost of ownership. This is the case for a few reasons. For example, software licensing fees may be based on the number of people using the technology. If you’re in growth mode and plan to bring on more people, this may require you to purchase additional licenses.

Many technologies also offer premium offerings and charge an additional fee to access these features, as well. If you require any sort of customization or additional professional services, expect to pay extra for this expertise.

Some technology also have data storage limits, where you may only be allowed a certain number of clients in the system or a maximum amount of data you can store on the tech provider’s servers. Exceeding the limit may induce penalty charges or a more premium subscription – or worse, you may not be able to fully use the technology. Be sure to ask vendors for a thorough breakdown of charges and factor scalability into your calculations.

4. Failing to Prepare for a New Technology

Just because a solution is marketed as turnkey doesn’t mean it will solve all your problems or that there will be no work going into the implementation. Determine and write down the steps that will be necessary before you can go live.

Start with cleaning up your data. You will always be disappointed if you think a new technology is going to make the data better. Assess if and how the new technology can integrate with your existing CRM or other systems. Laying out all the work that has to happen before implementation will help you narrow down your list of prospective technologies and form a realistic timeline for the project.

5. Not Conducting a Security Review

The SEC is looking at the rules around working with third-party vendors, and while security is always top of mind for advisors, many may not necessarily know the right questions to ask a new vendor. Create a list based on any specific security concerns you may have and be sure to:

  • Ask the right questions on security-related compliance standards their technology adheres to (e.g., System and Organization Controls, Payment Card Industry Data Security Standard, etc.).
  • Request copies of their security-related policies and procedures (be sure to read and understand them).
  • Ask if any security incidents occurred within the last year. If they have, ask for details related to the incident and the steps taken to remediate it.

If a vendor only provides general answers and doesn’t have documented policies and procedures, these are red flags.

6. Not Dedicating Enough Time for Change Management and Testing

There will be early adopters among your team eager to test out new technology, and others who need more convincing and support. Articulate the why behind the change to employees. Explaining what the new technology will enable them to do that the existing technology can’t will help get people on board.

Providing sufficient training and enough time for your team to get comfortable with the technology will help ensure your office is leveraging the new technology to the fullest. Always plan for delays, bugs and unforeseen issues that may come up any time you work with a new vendor.

Create separate technical and functional go-live dates. A technical go-live is when everything is stood up and ready to go. A functional go-live is when you feel comfortable with it, you’ve tested it and you’re ready to start using the system. An extra week of doing something the old way is not going to hurt as much as launching a week too soon and having the technology not work when you’re in front of clients.

7. Expecting Great Customer Service After the Sale

It’s easy to assume that you are going to receive the same level of attention after you make a purchase that you received during the sales process, but this isn’t always the case.

To know exactly what you will get, make sure the vendor has a documented Service Level Agreement that spells out the resources available to you, the response time in the event there is a problem (and how they measure that response time) and the financial implications of missing specific deliverables and deadlines.

8. Assuming Any Advisor Technology is a Long-term Play

Technology advancements and changing business needs will likely require upgrading new tech within two years. Keep adaptability in mind when making your selection.

Technology vendors should be continuing to earn your business by regularly rolling out new features and providing agreed-upon service levels. Look at their record of ongoing improvements and customer service.

Next Steps

Feel empowered to own and run your business. New advisor technology is never going to be the key to your success. Having a really solid business model, proprietary processes and procedures and understanding what it is you do best will help you choose the technologies that will help you improve and grow.

It’s critical to do your due diligence when you introduce new advisor technology. Learn more about how Carson helps our partner firms acquire the right technologies to help them do what they do best: support clients.

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