Financial Advisors

Financial Advisors: What is Your Relationship with Technology?

Gone are the days of thinking of technology as something that comes in a box with instructions or as merely a tactical decision that adds a bell or a whistle or just provides an efficiency shortcut to your service offering. In our new operating environment driven by an accelerating rate of change, technology needs to become a central core component to your firm’s strategy; central to who you are and what you represent.  That is because technology will continue to feed on itself and evolve exponentially. The only way to keep up to remain relevant and competitive is to learn how to partner with it.

But, how exactly does a financial services firm partner with technology? By definition, a strategic commitment always demands a large investment of time to build a depth of connection and an active working relationship to arrive at that partnership level. By studying early successful examples in the development of advisor–FinTech partnerships, we see a focus on openly collaborating, continuously iterating, and learning together. Firstly, this leads to not just innovative technology for its sake, but purposely directing it to its most maximal use to solve key problems and goals. Secondly, this type of strategic relationship is not only for well-honed solutions for today’s pain points, but also a working partnership to be ready to explore ongoing and future problems and challenges. This is a new vital survival skill that needs to be developed to differentiate your firm as a leader in the evolving financial services arena.

The Institute of Innovation Development is continuing to explore and report findings on this important topic by interviewing both FinTech firms and financial services firms to better understand and learn from current partnerships being developed. We recently reached out to Institute member Bo Howell, CEO of Joot (formerly CCO Technology) - a FinTech software-as-a-service company focused on supporting small and middle-sized advisory firms with regulatory compliance – to get his practical experience from the trenches of these burgeoning industry relationships.

Hortz: From your working experience and perspective, where are we are in the adoption of FinTech solutions in compliance?

Howell: We see that many small and middle-sized advisors are still cautious about using technology in regulatory compliance because they are worried that a failure in the system can cause damage that far outweighs the benefits of the system. The operational efficiencies gained by software can quickly be eliminated by a regulatory failure that results in an SEC or other regulatory sanction. 

We understand their concerns because we walk in their shoes. We serve as CCOs and compliance consultants for many advisors and we are deeply aware of the risks and complexity of regulatory compliance. Unlike some vendors that are pushing FinTech, we are not merely technologists, we are subject matter experts that use technology to make regulatory compliance easier, safer, and cheaper.  We are 100% focused on the working partnership between compliance and technology.

Hortz: What other roadblocks do you see that are preventing advisors from considering FinTech in the compliance space?

Howell: Too many advisors think of compliance as simply the cost of doing business. It has a negative connotation. Advisors know that a compliance violation can hurt their business, but they don’t appreciate how it can help their business. It can support back office operations by driving greater efficiency and handling repetitive, time-consuming tasks. This means people can focus on higher skilled activities that require judgment, exception handling, and high touch. Good technology can also free up your people to focus on revenue-generating projects. In other words, finding the right technology solutions for compliance can indirectly grow an advisor’s business.

Another reason that advisors don’t focus more on compliance is because it’s a proxy for the SEC and government regulation. When advisors think of compliance, they see government-created speed bumps and roadblocks. As business owners, advisors hate red-tape and they certainly don’t want to embrace it.

As a result, they commit just enough resources to maintain compliance. As I noted earlier, we want Advisors to realize that compliance, like every other part of their business is essential and can benefit from technology. We want to change the negative perspective on compliance. We view compliance as a method for ensuring the safety and stability of the business and client assets. A good compliance program acts as an insurance policy for advisors and their clients. It can also increase the trust that clients and employees have in the advisor.

Hortz: Are there any best practices or real-world advice from the trenches on how FinTech companies can develop into strategic partners with advisors?

Howell: My recommendation to any advisor looking to partner with FinTech is to understand the technology company’s approach to collaboration. For example, a FinTech provider that develops a solution that they think you need and merely tries to sell it to you is not a true partner. They’re just another company trying to sell you a product. A true partner will take time to understand you and your business. They will have subject matter experts in-house who will ask you to identify your pain points and then work with you to build solutions that satisfy those pain points.

Sometimes that means the technology partner will develop proprietary solutions, but at other times they will identify good solutions that already exist in the marketplace and work with you to integrate those into your infrastructure. A good partner will also identify a short-term improvement that you can implement while the better solution is being developed. In other words, they won’t leave you hanging for months or years while the technology is being built.

Additionally, a true partner will help you solve all problems related to a matter. Often advisors will have problems that can’t be solved by technology alone. A vendor will tell you that they can’t help you and drop the subject. A partner will work with you to find a solution, whether it’s their own products and services or someone else’s solutions. Many technology companies are only interested in building a scalable product to sell you. At best, they may offer some services around that product, but few will endeavor to solve, as in our area, all your regulatory compliance needs.

Hortz: What did you learn from your earliest advisor clients that most helped in the development of your compliance technology offering?

Howell:  Like many FinTech companies, we were focused solely on technology. But as the number and diversity of our clients grew, we were increasingly asked to help in areas where we didn’t have a technology solution. We had a hard choice to make: Did we want to be a technology vendor or something more? After a lot of discussion and soul searching, we realized we had to do more to be a true partner to our clients. So, we started offering compliance support and outsourced CCO services, which complimented our technology. When we didn’t have a proprietary solution, we partnered with other firms to meet the client’s needs. We didn’t realize at the time how much this would benefit our technology.

As we deepened our relationships with our clients, our understanding of their business and pain points grew stronger. We also accelerated the feedback cycle. As a result, we could better understand their perspective and we used that viewpoint to change our product roadmap. Products that we thought we needed to develop in version 2.0 of our platform were pushed back; products we thought we would develop in a year or two were moved forward; and products we were not focused on were added to the roadmap.

We also learned to get our clients involved sooner in the development process. Instead of giving them a prototype or finished product to use, we brought them in to give use feedback on the initial designs and scope of the system. We then used this early feedback to develop products that we knew our clients would use. The best example of this is our Policies & Testing Manager, which we are building right now. For advisors that participate in our beta program, we reviewed initial designs with them and got their feedback before we started building the product. We do this in a way that minimizes the time commitment needed from our clients, but maximizes their collaboration on the technology development. FinTech is not a commodity, and advisors should participate in relationships that offer collaborative development access such as our beta program.

Hortz: Any final suggestions or thoughts you would like to share with advisors?

Howell:  Regulatory changes and other compliance activities are overwhelming advisors adding more to the already high demands of their daily activities. Unfortunately, this makes it hard for many advisors and CCOs to think strategically about compliance. FinTech can become an extension of the advisor and firm. That means the technology must come with collaborative support from the technology partner. They need to be committed to a partnership and not just looking to grow upstream.

Advisors also need to change the way they think about compliance. It’s not all drudgery and restrictions. We want advisors to realize that compliance can help their business grow and stay safe using technology. So we came up with “Joot” as the new name of our firm - a word that doesn’t have an established definition. Our goal is to redefine the word so that advisors think of Joot as the modern approach to compliance; an approach that is based on technology AND collaboration.

The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Bill Hortz

Bill Hortz is an independent business consultant and Founder/Dean of the Institute for Innovation Development- a financial services business innovation platform and network. With over 30 years of experience in the financial services industry including expertise in sales/marketing/branding of asset management firms, as well as, creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms, including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His wide ranging experiences have led Bill to a strong belief, passion and advocation for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to address a business environment challenged by an accelerating rate of change.

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