As the nature of financial advisory firms have evolved over the years, so too have the tools used to support them. In the past, when financial “advice” was mostly about product sales, having a “Contact Management System” was key to tracking all the activity with prospective and prior customers. As advisors have increasingly evolved towards actual advice, supported in an ongoing relationship, so too have the software tools evolved to a far more comprehensive “Client Relationship Management” (CRM) solution.
Yet the emerging problem is that the demands on software, from features and capabilities to integrations, to create productivity gains for advisors have resulted in solutions that are increasingly complex… to the point that now it’s actually become difficult to do effective due diligence on financial advisor CRM software solutions in the first place!
While some advisors will tackle this challenge by hiring a technology consultant, and others will simply invest an extensive amount of their own (or their staff) time to do the analysis, the practice management solutions firm ActiFi has produced a “CRM Selection Assessment Tool” to do the heavy lifting at a fraction of the (time and financial) cost. Leveraging what may be the most comprehensive series of advisor CRM software reviews ever, the ActiFi solution guides the advisor through an extensive questionnaire about the nature of the business, its needs, and some of its other vendor/provider relationships, to provide a personalized recommendation of which of the various advisor CRM tools is the best fit for that particular practice.
The Evolution Of Financial Advisor CRM – From Contact To Customer Relationship Management
The early days of financial planning were mostly transactional; an “advisor” was paid for the sale of a product, and growing an advisory practice meant turning more prospects into clients, doing more (transactional) business with those clients over time, and networking your way to wealthier prospects who could become wealthier clients. Which in turn meant it was necessary to contact a lot of people, from a pipeline of prospects, to a network of potential referrers, to all the prior people who did business with you once and might again in the future.
To address this challenge, advisors found the need to create systems and tools to manage all the points of contact, and the concept of the Contact Management System came into being. First in paper form – tools like the Al Granum One Card System – and later accelerating with the rise of personal computers into the 1980s (and the birth of ACT! 1.0, the first computerized contact management system).
As the advisory business has evolved in the past 20 years, though – increasingly towards comprehensive financial planning and an assets-under-management business model, all tied to the delivery of ongoing advice – the needs of advisors have changed. While in the past a Contact Management system was sufficient to handle all the product sales opportunities, now advisors increasingly need Client Relationship Management systems, recognizing the shift from customers to clients, and from single-point contacts to ongoing relationship.
Essential And Advanced Functions In CRM For Financial Advisors
According to the recent white paper entitled “Client Relationship Management Software – Key Insights Report” issued by practice management solutions firm ActiFi, today’s modern CRM software tools have evolved far beyond the mere management of a long list of (potential and current) customers and their personal contact details.
While the management of basic contact information remains crucial, today’s advisor CRM is expected to capture holistically all of the relevant details about the client, from their broad financial information (assets and liabilities, insurance policies, etc.), to the nature of their client relationship with the firm (e.g., client segmentation and service tiers), and all the activity being conducted on their behalf on an ongoing basis (task management, often across an entire team that may be interacting with the client). Notably, in practice ActiFi finds that most CRM companies today, from the “Leaders” to the “Laggards”, do a fairly consistent job delivering on the essentials.
Source: CRM Software Insights Report by ActiFi
On the other hand, when it gets to more “advanced” CRM functionality, the field of CRM tools begins to separate. While basic task and activity management is essential, the “best” CRM tools have the capability to develop entire checklists associated with key activities, along with the ability to create workflows that automate key processes across the firm (including getting clients through a multi-stage process that includes several different staff members along the way). Similarly, while basic CRM tools can manage contact information for both clients and also prospects, the “best” tools can manage an entire sales process for those prospects, tracking leads and opportunities and the interactions along the way. Ideally, CRM tools should also be able to track the (digital or physical) marketing campaigns to those prospects, and mass communication activity to both prospects and clients. Across these more advanced tools, ActiFi finds a far greater distinction between the leaders and the laggards.
Source: CRM Software Insights Report by ActiFi
Ultimately, the goal of using the “best” CRM software is to have the most efficient advisory firm – ActiFi’s own surveys clearly show that “productivity gains” are the number one reason that advisors seek out CRM tools. Though in practice, ActiFi also notes that CRM software, and the data it can produce about the state of the business and its Key Performance Indicators (KPIs), can help to facilitate accountability for everything from client service (was the work really done for the client, and how long did it take?) to growing the firm (how many new clients are coming in, who’s bringing them in, and who’s not).
Key Factors In Selecting The Best Financial Advisor CRM – ActiFi CRM Software Insights
So what’s involved in selecting the “right” CRM for your practice? On the one hand, it’s certainly valuable for the CRM tool to actually have advanced features available as the business grows and evolves. On the other hand, as ActiFi’s research found, barely 1-in-10 advisors would really qualify as “Power Users” who maximize their CRM anyway. Though clearly if the features aren’t available in the first place, there’s no possibility to use the tool and the data it produces to better manage the practice… so arguably, recognizing the difference in features is still important (even if they are often underutilized).
Clearly, pricing is a factor as well, and ActiFi notes that there are a wide range of pricing models in effect today for advisor CRM, from paying per-user-per-month, to paying a monthly fee for the whole business regardless of the number of users (often up to a set maximum, beyond which the price does increase again), to getting a discount over time (higher pricing in the first year, lower thereafter), and even tiered pricing for different types of users (e.g., full advisor users pay more than specialized administrative staff that only has access to certain parts of the software that they need). Notably, given this range of models, ActiFi found that a larger 15-person practice could pay anywhere from $500 to $15,000 per year for CRM software! (And of course, it’s important to note that using CRM will often have costs in terms of time and dollars to train staff to use it, and adjust business processes to maximize its value.)
Beyond cost and features, the third big “buzz” area for selecting a CRM tool is the integrations it has available – its ability to push and pull data from other software that is part of the advisor technology stack (including portfolio accounting/trading software, financial planning software, and other technology tools). Here, ActiFi warns that navigating integrations is a complex patchwork, where not all software integrates with all other software, though “ecosystems” of software tools have cropped up that all integrate with each other as part of a comprehensive set of advisor tools. ActiFi also notes that just the word “integration” is not the same across the board; integration might just mean the log-in from one software works for the other as well, or that the raw data shares across the software but that working across both still requires switching from one to the other to get anything done, and only infrequently does it actually mean a truly “deep” integration where the CRM can become the central hub that automates workflow tasks across different software tools.
Financial Advisor CRM Software Reviews And The ActiFi CRM Selection Tool
Unfortunately, as the number of CRM software tools continues to grow, and their complexity increases with more and more “advanced” functions, it becomes more and more difficult to effectively choose which is the best CRM for financial advisors in the first place, because the answer varies from one advisor to the next, based on what features are most important to them! Especially when it is increasingly important that the software effectively integrate with what the financial advisor already uses in terms of other existing software tools and vendor relationships.
As a solution, ActiFi has actually launched a Personalized CRM For Financial Advisors Selection Tool that will go through an extensive series of questions about the nature of the advisor’s current practice, and features are and are not important, other key technology and vendors already in place, and crafts a recommendation of the top 3 CRM solutions that are the best fit for the advisor. The final report provides a detailed explanation of which software tools are recommended, and why, based on the advisor’s input to the guided questionnaire.
To build the list, ActiFi did what is arguably the most thorough review of the leading CRM software tools ever done, evaluating them on well over 100 specific functions that may be relevant in an advisor’s practice, and scoring each aspect of the software’s capabilities (in addition to other important attributes like the strength of the vendor, the affordability of the software, and its flexibility). Virtually all of the leading CRM vendors were evaluated, although ActiFi did exclude some non-industry solutions that lack industry-specific integrations or may be too lightweight for growing advisory firms (e.g., Zoho or Less Annoying CRM), some of the oldest CRM tools that haven’t developed sufficient integration capabilities to be competitive to today’s advisory firm needs (e.g., ACT and Goldmine), as well as some of the newest players (e.g., Wealthbox) that haven’t been around very long yet (though ActiFi noted that they are committed to adding more CRM solutions over time, if they have significant integration capabilities and are becoming widely used). The actual CRM software reviewed included:
Notably, getting access to the ActiFi CRM Selection Tool does have a cost of $299 (readers of Nerd’s Eye View are eligible for a 10% discount using the code Kitces), but given the incredible number of hours an advisor would have to spend to vet the various options, arguably the time savings alone would produce an incredible ROI for any advisor actually trying to make a decision about a new CRM. And of course, the ActiFi team has far more experience evaluating and vetting software tools than the average advisor, who may not even know what to ask and watch out for when looking at software demos.
In point of fact, though, as the range of software tools for advisors becomes greater and the software itself is increasingly capable but also complex (an emerging trend as advisor FinTech is on the rise), it seems likely that more software selection services of this nature may become necessary in the future (and in point of fact, ActiFi plans to continue doing software reviews and aims to provide similar selection tools for other key advisor technology solutions in the future). And for busy advisors in growing firms, the information and assistance should be well worth the time for good tools of this nature going forward (and because ActiFi’s solution has itself been coded into technology, its $299 price point is far less than the cost to hire a consultant to do a similar analysis!).
In the meantime, though, if you’re actually in the market for financial advisor CRM yourself as an independent RIA (or a broker-dealer that allows you the flexibility to choose your own solution), be certain to check out both ActiFi’s free “CRM Software Insights Report” that provides an overview of the key issues and trends, and consider trying out their personalized CRM Selection Tool as well (again, available at a 10% discount to Nerd’s Eye View readers with the code Kitces).
So what do you think? Have you changed CRM solutions recently? What was the experience like for you, and how did you conduct your analysis and due diligence? Are you considering changing CRM software in the future? Does a service like this sound useful and helpful for you?