When David Drucker and Joel Bruckenstein wrote a book about technology innovations for advisers in 2002, many readers were skeptical of their recommendations to use email and create a website.
The authors, both experts in wealth management technology systems, said advisers needed to find new ways to connect with clients. Eventually they were proven right, and "Virtual Office Tools for a High Margin Practice" sold thousands of copies, a lot for such a niche publication.
Today Drucker and Bruckenstein are pushing a new agenda that is certain to rub some financial professionals the wrong way: Wealth advisory firms should fully automate their businesses, rid their offices of paper and get more adept at using cloud and mobile technologies.
The authors spoke with Reuters about these and other ideas in their book, "Technology Tools for Today's High-Margin Practice," which is due out early next year. Edited excerpts follow.
Q: How do advisers get new technology innovations past compliance?
Bruckenstein: Whenever somebody feels uncomfortable with something in this business, the first line of defense is to say "I'm not sure it's compliant."
Advisers shouldn't use compliance as an excuse not to do this. They should find out the best practices surrounding different technologies by talking to their broker-dealers, custodians or even regulators. Outside experts can also help advisers deal with concerns they have about keeping their client information safe on new technologies.
Q: Some of the innovations you suggest sound expensive. Is this really worth it?
Bruckenstein: It's pretty self-evident that technology pays for itself many times over in this business. For example, rebalancing software can cost tens of thousands of dollars. But if you have a medium-sized practice, you probably have a full-time person doing nothing but that. The software costs you a lot less than the person.
If you're not spending at least 4 percent of your annual revenue on technology, you're probably not spending enough.
Q: Why is cloud computing, the technology that lets users store data in remote locations instead of on traditional infrastructure in their offices, one of your favorite tools?
Bruckenstein: If you have all your data on a server in your office and that hard drive crashes, you have to fix it. But if you're running in a cloud-based system, with a company like Salesforce or RedTail, they're maintaining the hardware.
The cloud can also help companies avoid making big capital outlays for hardware every few years, and it helps keep things running smoothly in natural disasters.
Q: You also stress the importance of going paperless. Why?
Bruckenstein: In the typical adviser office, 85 percent of data aren't readily accessible, and nobody can find information when they need it. It's unstructured and unorganized.
Q: What's the best method for going paperless?
Bruckenstein: A lot of advisers just scan in their documents and save them onto their server. The problem with this is you essentially have a photograph that is not searchable.
Instead, advisers should invest in content management software that creates indexed and searchable documents. Or they can outsource this work to a company like Laserfiche or Docupace.
Q: You also expect to see advisers get more mobile. What are some key ways this will happen?
Drucker: In the old days, a typical client meeting might involve printing out a lot of paper - an agenda, graphs and so forth. Nowadays advisers are just showing the clients the data on an iPad. Also, a lot of advisers are making use of the mobile applications designed by their custodians, which allow them to use their smartphone to go into their custodial account and check their clients' balances, and even do some trades.
Bruckenstein: Another key feature of mobile devices is alerting. If you own a particular stock across all your clients, you should set up an alert for when the price moves more than 5 percent.
Q: You've said that only 10 percent of firms are hitting your ideal standard for technology utilization. How many will be hitting that ideal five years from now?
Bruckenstein: My crystal ball is not that good, but I think in five years it'll still be less than 50 percent.
Independent advisers are generally a relatively conservative lot. They're charged with the responsibility of being good shepherds of their clients' finances. And so any time they're confronted with something new or unknown, there's a natural hesitancy to be an early adopter.
(Reporting by Jennifer Hoyt Cummings; Editing by Lauren Young and Lisa Von Ahn)