Advisors Look to the Future - Morningstar Advisor

Morningstar Advisor Magazine June/July 2010 Issue

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Advisors Look to the Future

by Joel P. Bruckenstein | 02-11-10

Continued from page 1.

The highlight of the conference for many was the general session during which ex-presidents Bill Clinton and George W. Bush were interviewed by TD Ameritrade Institutional president Tom Bradley. Both former presidents were surprisingly frank with their remarks on topics ranging from terrorism to the economy. Overall, the audience loved them.

If there was one disappointment during the conference, however, it was at the end of this session when it became apparent that neither former president was conversant in the Securities Exchange Act of 1934 or the Investment Advisors Act of 1940. Clearly, the whole issue of reforming the regulations that apply to investment advisors and/or registered reps when they provide advice to clients is something the former leaders of the free world know nothing about.

Moving back to technology, one of the highlights of the conference for me was Martin Carmichael's session, titled "Information and Data Security for Advisors." I had never met or heard Carmichael, TD Ameritrade's chief security officer speak before, but he immediately wowed me with the depth and breadth of his knowledge. Even more impressive was his ability to discuss complex security issues in a way that even the less-technology-savvy advisors in the audience could easily understand.

For example, Carmichael gave a concise explanation of an attack on Google that originated in China. According to Carmichael, this was a highly sophisticated and targeted attack using vulnerability in Adobe Reader. The attacks appear to have originated from servers associated with agents of the Chinese state, or their proxies. Attackers sought passwords for Gmail accounts and other intellectual property.

So what should the average advisors do to keep out intruders? Carmichael offered a number of tried and true solutions that most readers should be familiar with. These include the use of up-to-date antivirus software, anti-spyware software, firewalls, and software patches.

According to Carmichael, the ultimate security tool at advisors' disposal is sound decision-making. For example, each time you add another plug-in to your browser, you potentially weaken its overall security. While some browser extras, such as Adobe Flash Player, might be business necessities, others have no business purpose at all. Carmichael suggested that you refrain from adding anything that is not absolutely necessary to your browser. Installing unnecessary plug-ins is stupid, he said. Carmichael was also critical of those who download unnecessary applications. "People put toys on their computer every day, and it compromises security" he said.

When asked about two-factor authentication, such as a user name and password plus a randomly generated number, Carmichael said it is a step in the right direction, but it is not foolproof. He cited the "man in the browser" attack whereby malware waits to launch itself until after you log in to a financial website. Once you log in, it then launches and begins doing whatever evil task it was programmed to do.

Carmichael is in the early stages of developing a highly secure log-in solution for TD Ameritrade Advisors that he expects to exceed the security provided by any advisor-facing solution available today. As an intermediate step, TD Ameritrade added security questions as an additional layer of security while it works on a more-sophisticated security solution.

"Leveraging Social Media to Grow Your Business," hosted by veteran journalist Andy Gluck, provided insights from Jessica Maldonado and Bill Winterberg on how to best utilize these new tools. Maldonado suggested using LinkedIn to cross reference your LinkedIn contacts with a database of HMW individuals. If a LinkedIn contact is connected to a HNW individual you are targeting, you can then ask for an introduction.

Winterberg suggested that Twitter is a great tool to engage in circles that you would not usually engage in, perhaps because of geographic or other barriers. Christopher Winn provided some cautions about the compliance dos and don'ts surrounding social networking. While I found this session informative, I could not help questioning whether or not social networking was the best use of advisors' time when most are lacking fundamental technologies such as CRM and document management. One also has to question the ability of many advisors to execute a social-networking strategy when they lack a marketing plan and/or a marketing budget.

Spenser Segal of ActiFi's session titled "Breaking Through the Clutter--How to Make Informed Decisions about Selecting CRM" included some useful nuggets of information as well. While I strongly disagree with Segal's statement that the technology itself is mature and sufficient, I do agree with him that advisors (and vendors) need to devote more resources to maximizing CRM usage, workflow, integration, training, and scalability.

Finally, Bob Veres, publisher of Inside Information and perhaps the best trend-spotter the financial advisory profession has ever seen, outlined five key trends in his session titled "The Prosperity Agenda." As the name suggests, Veres is very bullish on the future of the independent RIA model. One of the five trends Bob mentioned related to technology. Bob says that advances in advisor technology are setting the stage for increased productivity. "Within five years," he said ,"you can cut your operating expenses in half by deploying the proper technologies." That's a very encouraging thought!

Aside from the strong practice-management and technology sessions, I noticed one other encouraging phenomenon, technologically speaking, that I've never experienced at a custodian-sponsored event before: Traffic at the booths of technology sponsors in the exhibit hall was noticeable higher than that of other exhibitors. Michael Wilson, Morningstar's director of marketing for advisor software solutions, told me that he was so busy that he was exhausted and losing his voice at the conclusion of the event. When I stopped by to visit with Fujitsu and CEO Image Systems, I could not get near them, they were so busy. Virtually every technology vendor I passed, including AssetBook, Broadridge, IAS, Junxure, MoneyGuidePro, and Orion, was engaged in conversations with one or more advisors throughout the event.

I'm convinced that the renewed interest in technology exhibited by advisors at this conference bodes well for the future of the profession, and it suggests to me that Veres is probably on to something when he predicts low expenses and higher productivity for advisors in the coming years. For those who embrace technology, the future looks bright indeed!

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Joel P. Bruckenstein, publisher of T3: The Newsletter, is the industry's expert on applied technology for financial professionals. In addition to his monthly columns, Bruckenstein consults with companies large and small to help them achieve higher returns on their technology investment. For more information of Bruckenstein's consulting services, or to have him speak at your upcoming event, please visit www.joelbruckenstein.com.

The author is not an employee of Morningstar, Inc. The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar.

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February 12, 2010 9:07 pm

I absolutely agree with Joel's assessment and I believe that advisors should implement practice critical technologies (like CRM, document management, etc) first and foremost before branching out to other practice growth strategies. You MUST have your infrastructure in place to support a growing practice!

However, for those advisors that have implemented and embraced technology, developed and follow a written marketing plan, and have a clearly defined succession planning strategy, a great next step to maximize effectiveness in the growth strategy is to work social networking into their business/marketing plan.

Perhaps I'm biased. But this is an area where some advisors have been very successful in developing direct new business and, maybe more importantly, have developed and solidified their brand and leveraged their marketing dollar (since many social networking sites are FREE).

- Jessica Maldonado, Overland Park, KS