New Tech — Should I Try It?

You don’t want to be too early when it comes to adopt­ing new soft­ware — you also don’t want to be too late.

Financial Planning - - Contents - BY CAROLYN MCCLANAHAN

You don’t want to be too early when it comes to adopt­ing new soft­ware — you also don’t want to be too late.

Good tech­nol­ogy is a must-have in any suc­cess­ful fi­nan­cial ad­vi­sor’s prac­tice. With so many op­tions avail­able, how­ever, de­cid­ing what new tools to use can be over­whelm­ing.

If you are too far ahead of the game, you may waste a lot of time, en­ergy and money in­vest­ing in prod­ucts that don’t pan out. Like­wise, if you are too far be­hind, you may pay dearly in lost pro­duc­tiv­ity and client sat­is­fac­tion.

How can you adopt tech­nol­ogy sen­si­bly for your prac­tice with­out driv­ing your­self crazy? First, find out where you fall on the scale of in­no­va­tor vs. lag­gard.

Most of us can place our­selves into one of five cat­e­gories. (I’ve adapted the fol­low­ing frame­work from E.M. Rogers’ so­cial sci­ence the­ory called dif­fu­sion of in­no­va­tion.)

In­no­va­tors try all the lat­est of­fer­ings and ac­tively seek out new op­por­tu­ni­ties. Early adopters are a lit­tle slower to adopt but know they will have a lead­ing po­si­tion in ap­ply­ing the tech­nol­ogy in their day-to-day work if the tool is suc­cess­ful. The early ma­jor­ity jump on board af­ter see­ing ev­i­dence it works for oth­ers. These three cat­e­gories make up about 50% of the tech­nol­ogy adop­tion sta­tus.

The bot­tom half con­sists of the late ma­jor­ity — those who be­lat­edly adopt tech­nol­ogy, kick­ing and scream­ing the whole time — and the lag­gards — those who may never im­ple­ment cer­tain tech­nol­ogy.

I con­sider my­self some­where be­tween an early adopter and the early ma­jor­ity. My mind­set comes from my ex­pe­ri­ence in prac­tic­ing medicine. One of my pro­fes­sors said, “Never pre­scribe a newly-re­leased drug for at least six months. Let all the other doc­tors kill their pa­tients first.” This re­ally came to pass as I saw mul­ti­ple drugs go on, then off the mar­ket when wider use showed their true lim­i­ta­tions and side ef­fects.

How does this ex­pe­ri­ence re­late to soft­ware? In my 15 years of fi­nan­cial plan­ning prac­tice, I’ve seen many soft­ware pack­ages come and go. Very few live up to their prom­ises. The ones that do usu­ally are snapped up by a larger en­tity that even­tu­ally ru­ins a beau­ti­ful prod­uct. I’ve been an early adopter and sub­se­quently been to­tally burned.

Other times, I bought per­fectly good soft­ware only

If you are too far ahead of the game, you may waste a lot of time, en­ergy and money in­vest­ing in prod­ucts that don’t pan out.

to be left scram­bling when those pack­ages were pur­chased and killed by big­ger com­peti­tors.

Be­cause of these sna­fus, I’ve de­vel­oped a strong fil­ter for buy­ing soft­ware. Is the out­put valu­able for us or our clients? If not, we prob­a­bly don’t need it.

What is valu­able from a tech­nol­ogy per­spec­tive?

In a nut­shell, must-have soft­ware makes us more ef­fi­cient and/or aug­ments ed­u­ca­tion that pro­vides our clients with fi­nan­cial peace of mind.

My list of “I can’t live with­out” tools in­cludes re­la­tion­ship man­age­ment soft­ware, elec­tronic doc­u­ment stor­age, fi­nan­cial plan­ning soft­ware, re­mote meet­ing applications, ac­count­ing and tax plan­ning soft­ware. And with me be­ing a Twit­ter queen, I use a pro­gram called Cold Tur­key to keep me off so­cial me­dia so I can get my work done. It helps tem­po­rar­ily block dis­trac­tions.

What are tools that help us pro­vide client ed­u­ca­tion?

The por­tal in emoney is valu­able to show clients how they spend money. How­ever, that por­tal is also the bane of our ex­is­tence since we spend too much time and money keep­ing the ac­count con­nec­tions fresh. This drives us, and the clients, crazy. But the ma­jor­ity of clients see the util­ity in keep­ing it up to date.

We help our clients plan for ag­ing and put pro­cesses in place to pre­vent fraud and abuse of our el­derly clients.

Even­tu­ally, I teamed up with a group to cre­ate my own soft­ware ap­pli­ca­tion that helps clients plan for tran­si­tions in fi­nan­cial care, changes in liv­ing sit­u­a­tions, de­ci­sions about when to quit driv­ing and when to get help with health care de­ci­sions.

This tool, Whealth care Plan­ning, has stream­lined the plan­ning for an area of life that is gen­er­ally ig­nored.

In­vest­ment ed­u­ca­tion tools are nice to have, and only partly nec­es­sary for us. We use pas­sive eq­ui­ties, bond funds and in­di­vid­ual bonds for clients with large fixed-in­come po­si­tions, and we only ac­cept clients who agree with our in­vest­ment phi­los­o­phy. We don’t pay for any soft­ware on the eq­uity side as the fund fam­i­lies we use pro­vide a plethora of ed­u­ca­tional ma­te­ri­als, plus there is a ton of pub­licly-avail­able in­for­ma­tion.

I bought per­fectly good soft­ware only to be left scram­bling when those pack­ages were pur­chased and killed by big­ger com­peti­tors.

Our use of in­di­vid­ual bonds cre­ates a higher ed­u­ca­tional re­quire­ment. Most clients do not un­der­stand the nuts and bolts of bond lad­ders and are of­ten per­plexed by bond price fluc­tu­a­tions. Our in­vest­ment man­ager uses bond anal­y­sis soft­ware to show clients the be­hav­ior and char­ac­ter­is­tics of their bond port­fo­lio.

So, what soft­ware isn’t valu­able to us? You might no­tice one big piece of soft­ware I have not men­tioned — port­fo­lio re­port­ing. When I started our firm in 2004, we did port­fo­lio re­port­ing be­cause it is what ev­ery­one does.

Since I started out with zero dol­lars to man­age, I chose a very in­ex­pen­sive, but ad­e­quate, so­lu­tion at the time.

It worked well for close to a decade. Un­for­tu­nately, that soft­ware was pur­chased by a be­he­moth and slowly stran­gled to death.

We then de­cided to go with an up­start that promised great ser­vice, and the per­son who headed it up had a good rep­u­ta­tion.

They did not de­liver, and that was a waste of a year.

Through­out that process, we thought, “Why are we do­ing port­fo­lio re­port­ing?” We tell clients the past does not pre­dict the fu­ture and that short­term num­bers do not mat­ter, yet ev­ery quar­ter we send them this re­port that means noth­ing to their fu­ture fi­nan­cial peace. What clients need is reg­u­lar in­for­ma­tion on how much they spend and save and how much they need to ac­cu­mu­late to reach their goals. Of course, a rate of re­turn must be as­sumed to make those pro­jec­tions, but look­ing back­ward doesn’t pro­vide use­ful in­for­ma­tion.

Two years ago, we in­vited a small num­ber of clients to din­ner in or­der to dis­cuss our co­nun­drum and get their in­put. The feed­back was pleas­antly sur­pris­ing, and we de­cided to quit port­fo­lio re­port­ing.

Con­sid­er­ing that we had grad­u­ated to very ex­pen­sive re­port­ing soft­ware that was driv­ing us nuts, it was a relief to break the chains.

We sent out no­tices on the ces­sa­tion of re­port­ing and just re­cently of­fi­cially stopped pro­vid­ing re­ports. A num­ber of clients emailed us and said, “Yay!!” Only a cou­ple clients had con­cerns, and we made the tran­si­tion know­ing full well that we may lose those clients, and that is okay. So far, they haven’t left.

Soft­ware can make for a love-hate re­la­tion­ship. By us­ing the fil­ters of ef­fi­ciency and ed­u­ca­tion, you can win­now down the tools you need and make bet­ter choices, plus hope­fully stay sane in the process.

Our clients want the hu­man touch, and by the ju­di­cious use of good soft­ware, we can spend more time mak­ing that hap­pen.

The first step is find­ing out whether you are an in­no­va­tor or a lag­gard when it comes to your tech­nol­ogy.

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