Need a good system when researching tools for paraplanning? Dan Atkinson, head of Technical, Paradigm Norton Financial Planning, provides some suggestions based on the approach he takes to the due diligence process
We often think about due diligence on platforms and financial products. There is lots of wisdom, guidance, and sources of data to help do this. However, what should we be thinking about when we are reviewing the tools of our trade. I’m looking at risk profiling at the moment (no sales calls please!) and have spent some time thinking about this.
What do I mean by tools?
These are the bits of software that we use to analyse a client’s situation, identify potential solutions, and present it to them. This might include cashflow, risk profiling, pension analysis, investment analysis, graphs, word processors, template providers, technical resources, secure messaging. They won’t all apply to every business, but quite a few will.
In the same way that paraplanners are often a key decision maker for financial products and platforms, we are also key stakeholders in these decisions. These are the tools that we will be using day in day out. We aren’t the only stakeholders though.
What do you need the thing to do?
This sounds like a daft question. However, if we don’t answer it, we will be susceptible to shiny object syndrome.
We need to start with why do we want this category of tool? Does it provide something which will lead to better client outcomes (financially or in terms of ease of understanding)? Does it save time? Does it help your business manage risk better?
At this point you might want to think about integrations with your other tools. Rekeying information can waste a lot of time and introduce errors. So, for some tasks it is very attractive to be able to pass data seamlessly between systems. There is often a gap between theory and practice, but it’s an important consideration.
Getting clear on this at outset will help you drill down to a more manageable selection to research. It will help avoid you getting distracted by a super new feature that you get shown which might not be right for what you need. By all means be open to other ideas but have a clear objective.
It is also worth being clear what you do not want the ‘thing’ to do. A great example is in risk profiling. Many tools have incorporated assessments of capacity for loss which is great. However, this might not match up with the way you have decided to assess this as a firm. It’s interesting to see what is happening in this space, but, as an example, it wasn’t something that we were looking for the tool to do for our business.
Your firm may also have strong views on where client data should and should not be processed. For example whilst there are some interesting tools emerging from the US you and your compliance team might not be comfortable with potential privacy risks for client data.
Where might you start?
Having worked out what you do and do not want the tool to do where do you find your options. I took a similar approach to researching funds. I want to identify the ‘universe’ and then filter down.
I found the following two websites particularly helpful for this part of the exercise:
Advisersoftware.com is a website run by Ian McKenna who also runs ProtectionGuru. The Ecosystems tab has helpful image of many of the tools available to UK financial advice businesses. It gives a great overview of the market from which you can dive in, using the directory and insights.
NextWealth is a financial services consultancy headed up by Heather Hopkins. I used their nextwealthdirectory.co.uk website to find out a bit more about the firms and reviews from advisers. They also provide information about integrations.
Narrowing it down
You do need to be quite brutal here. Having started by working out what you needed you should be in a better position.
Remove any providers that don’t provide the features that you need. If the product requires commitment to use other tools as part of an end-to-end workflow that doesn’t match up with what you want then remove these too. If there are poorly rated providers, then you may wish to remove these as well. Document why you have removed each provider in case you get asked in the future.
Hopefully this will have given you a shortlist of 3-4 including your current tool. Do detailed research on what they do, their methods, what people think about them. Visit their websites and look at any outputs that they have available. From this work out what extra information you might need to know such as GDPR and information security.
Speak to them
Arrange a call with the sales team to discuss what you need and go through your questions. Make sure that you are clear on the likely timescales for a decision and whether you are the person signing off the bills!
From this call you are looking to assess whether the tool meets your needs, whether it is usable, and whether the provider seems trustworthy and able to provide you with ongoing support. They should show you a demo of the system and offer you access to a trial.
You might need a few calls to answer all your questions and they will probably suggest this. Communities like the Paraplanners Assembly are a great way of getting feedback about how well systems work. However, you may also want to ask the provider to connect you with an existing user to give their honest opinion.
The elephant in the room – cost
Warren Buffet is often miscredited with Benjamin Graham’s quote “price is what you pay; value is what you get”. I am not saying that you mustn’t approach tools with an unlimited budget approach. This is not realistic. Instead, we must think about what the benefit of the tool is for the cost within our budget.
The cheapest tool might not be the best. The most expensive might not provide the best value for money. You almost need to come up with a benefit per unit of cost measure.
By starting with the value to your clients and business processes you are in a better position to assess value for money. It also puts you in a much better position for the next step when you have identified the tool you want to recommend.
Presenting the ask
If you lead with the cost (which might be negotiable and could be a big number) then it will be harder to get agreement to proceed. You might not even get the opportunity to explain the problem or why the suggested tool would be a prudent investment.
However, if you give clear context and benchmark your solution to it’s peer group (especially your current tool if you have one) this is more helpful and you are more likely to get agreement to proceed.
Summary
Researching tools is quite similar to the processes we use as paraplanners when working for clients. We have the necessary skills, knowledge of what we want, and access to others in the profession who can share opinions.
Start by being clear on what you do (and do not) need. Narrow down the options. Research thoroughly. Assess value for money. Present the ask clearly.
Lastly, do not underestimate the impact of change on people. Changing tools will require learning, changes to processes, and time to let people get used to them. Pick your moment and be aware of other changes, projects, and challenges that might be facing your colleagues. This needs to be factored in.
