I recently had the privilege of read the FPA-ActiFi research on Financial Planning Technology. I will let you read the report yourself but there a few things I like to stress when looking at technology.
Technology is an investment that keeps costing you every year, so take time to make your decision. Besides the cost of the software license, there is also human capital to run and maintain it. So make sure you do your research before you jump in.
One method I like to use is a list of features I need for the next five year. Once you have a list, talk to your professional friends and share the list. They will give you ideas. Also, there are blogs and forums that you can find online to give you feedback. I normally weigh each feature as well as rate each feature. The more detailed you are, the better.
Once you have your list ready, start talking to vendors. Ask for a demo and take detailed notes, rating each feature on a scale. You will find that the more detailed the list, the more the ratings will mean.
Price is usually the last item to consider. Do the math and figure out your break even. Take into consideration the time you save when using the software.
Lastly is integration. This is one item that most do not consider, and it is a tough problem. Of course you would love to have two software programs that “speak” to each other, but that is not reality. If you need integration you should input that into your feature list and break even calculations. Integration is especially hard when working with a web application. Two companies need agreements and then they need to spend money integrating.
Be very careful if you are paying for some of this integration. I usually find a technology build is much like home contractors. If it is not in the original specs, then they will have to do a “change order” and tell you how much it is going to cost. I do not think most of you will be in this situation, but it is worth mentioning. If you really need software that will integrate with each other, go to www.yoursilverbullet.com. These companies have agreed to “work” with each other. How and to what extent I am not sure.
Once you have selected a vendor, you are not done. Talk to some of their clients. Most are honest and will tell you the good, bad and ugly. Finally, make sure you have their polices and procedure to ensure client privacy, backup and disaster recovery. Also, make sure you get their test plan and the results of when they last performed a test—get this information at least annually.
If you want a sample of a detailed features list that I created in the past, please send me an email and I will be happy to forward. NOTE: It is not financial planning related. firstname.lastname@example.org.
Ash Bhatnagar, CFP®
RIA Independence Co.