2010′s Best Tech for Advisors

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Here’s the best back-office and client-facing tech of the year, along with 2010′s top innovation.

In an annual tradition at Morningstar Advisor, December’s column reviews the best technology of the past year for financial advisors and recognizes three truly exceptional products or services. In previous years, winners were selected for the categories of best hardware, best software, and rookie of the year.

This year, I’m refreshing the format of the best technology column and selecting one winner in each of the following three categories:

* Best Back-Office Technology
* Best Client-Facing Technology
* Innovation of the Year

For each category, I’ll describe the primary objective and selection criteria used to select a winner. My hope is that the new format will resonate with advisors in search of technology that will help streamline their back office, “wow” their clients, and exhibit their firm’s innovative culture.

Before announcing this year’s winners, please take a moment to review the disclaimer: Morningstar has no involvement in the selection process, so please direct all comments and suggestions directly to me. No endorsement of any third party products or services is expressed or implied by any information, material or content referred to in this article. Winners do not receive actual awards other than the right to declare their product or service as an award winner until next year’s list is announced.

Best Back-Office Technology
The Best Back-Office Technology award winner must be a product or service that boosts the overall efficiency and productivity of a firm’s back office and makes a direct impact to the bottom line. It must either improve existing processes and workflow procedures or allow the firm to pursue new business activity without adding significant overhead costs.

Unable to reduce candidates for the award down to one clear winner, I selected two service providers to share the inaugural award for Best Back-Office Technology. To add to the controversy, both providers participate in a realm considered to be of questionable value by some advisors: social media. This year’s winners are Socialware Compass from Austin, Texas-based Socialware and Arkovi from its namesake company of Dover, Ohio.

Without question, social media’s exponential growth has attracted the attention of advisors looking to grow their business and connect with clients and prospects. Earlier this year, Twitter surpassed 20 billion tweets and continues to average well more than 1.5 billion tweets per month. Facebook surpassed 500 million registered users and just last month eclipsed Google as the number one website for all Internet traffic in the United States, according to reports from Hitwise.

But because of compliance requirements, advisors cannot pursue a social media strategy without first having a system in place to capture and archive messages they distribute over various social networks. FINRA released Regulatory Notice 10-06 in January underscoring the need to retain records of communications made through social media sites as required by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110.

Manually capturing and archiving these messages for compliance purposes can prove to be tedious and time-consuming at best. Both Socialware and Arkovi offer automated services that essentially run in the background as a part of an advisor’s processes, virtually eliminating the need to implement lengthy compliance procedures.PAGEBREAK

Socialware Compass contains both an automated message capture and policy enforcement solution. It captures and retains messages broadcast through services such as Facebook, Twitter, or LinkedIn to comply with record-retention requirements. The service also monitors and supervises messages, quarantining any message that the system deems may violate corporate policies. This provides compliance officers the ability to approve or deny suspect messages before they are posted publicly to social media websites.

Arkovi’s feature set is similar to that of Socialware Compass, providing message archiving, surveillance, content moderation and reporting functions across a variety of social media websites, which explains the reason why I selected both service providers to share this year’s Best Back-Office Technology award.

To further justify my decision, broker/dealers and third-party vendors have also recognized the potential social media presents to an advisor’s business, forming partnerships with this year’s winners. In June, Cambridge Investment Research, a Fairfield, Iowa-based independent broker/dealer, selected the Socialware platform in a pilot program to supervise and retain social media communications across its network of representatives. In November, Englewood, New Jersey-based MarketCounsel, a business and regulatory compliance consulting firm to advisors, announced a partnership with Arkovi to integrate its social media capture functionality into MailBanc, a messaging compliance product.

Those who remain skeptical regarding the bottom line impact of social media need only consult with Jeff Rose, CFP, of Carbondale, Ill., cofounder of Alliance Investment Planning Group, affiliated with LPL Financial. Rose’s blog, Good Financial Cents receives an average of 70,000 new visitors each month and 10 to 15 new subscribers per day, and it generates three or four referral phone calls daily. Rose uses social-media archiving services from Socialware.

Before moving on to the next category, here is the short list of products and services that deserve honorable mention: Gmail Priority Inbox from Google, for its intelligent automatic prioritization of e-mail messages; Eikon from Thomson Reuters, for its rich market analytics and research portal; and Advisor X from Tamarac, for providing a custodian-agnostic integrated technology suite for advisors (read more about Advisor X in my November column).

Best Client-Facing Technology
The winner of Best Client-Facing Technology must be a tool that significantly enhances client deliverables or the interaction between advisors and clients. Clients clearly acknowledge the value a firm adds through such technology, either through improved personalized service or increased level of convenience when working with the firm.

This year’s winner delivers on both value propositions for this category. The Best Client-Facing Technology is Mikogo, a desktop screen-sharing application from BeamYourScreen GmbH in Mannheim, Germany. While not a new product for 2010, advisors steadily increased their use of Mikogo’s screen sharing capabilities throughout the year.

Mikogo is a free application that allows advisors to share their computer screen with clients over the Internet. Clients join a meeting session started by their advisor by clicking the Join Session button at mikogo.com. After entering the session ID provided by the advisor, clients are prompted to perform a one-time download of a small helper application that launches the session, but otherwise the interface extremely simple to use for even the most technically challenged clients.

There are many alternative screen sharing programs, but Mikogo emerged as this year’s winner because of its simple interface, ease of use, and no-cost pricing. Russ Thornton, vice president of Wealthcare Capital Management in Atlanta, Ga., uses Mikogo more and more with clients. “The first time they use it, they think it’s really cool,” Thornton says. “They’re blown away because they just weren’t aware this technology existed with such a simple interface.”

Thornton adds that he also uses Mikogo with prospects, creating an experience he says is very well received. “Prospects love the convenient option of being able to see my screen. They’re not sure they want to fight Atlanta traffic to come for an introductory meeting, but with Mikogo, I can walk through a PowerPoint presentation about our firm and provide an in-depth demonstration right over the phone.”

Again, some truly exceptional tools are worthy of honorable mention for Best Client-Facing Technology; Tungle, a scheduling application that simplifies appointment coordination by sharing a public calendar (covered in more detail in my June column); Dropbox and SugarSync, cloud-based file sharing and synchronization applications used to deliver documents to clients; and MailChimp and ConstantContact, free e-newsletter subscription platforms to simplify e-mail communication with clients.PAGEBREAK

Innovation of the Year
The Innovation of the Year award is given to a product or service that introduces a new business practice or service experience to the financial-services industry. Innovative tools transform the way advisors interact with clients, enhance personal and organizational efficiency, or enable the delivery of new services not possible or practical in the past.

Few advisors will be surprised by my selection for Innovation of the Year: the Apple iPad. Ever since its much-hyped unveiling by Steve Jobs in January, the Apple iPad energized the technology industry with its potential to irrevocably change the landscape of electronic devices and specifically tablet computers.

Critics argued that the iPad was simply a super-sized iPhone, and with no camera, USB, multitasking, or Flash support, was merely an overpriced e-book reader. Nevertheless, the company sold more than 3 million iPads in its first 80 days on the market, making it the most successful launch of a consumer-electronics product ever according to Bernstein Research analyst Colin McGranahan (though the category-sharing Microsoft Kinect accessory for Xbox 360 may soon surpass iPad sales records). Many anticipate that at its current pace, Apple will sell more than 10 million iPads by the end of the year.

Does the iPad live up to the hype? I believe the answer is a resounding yes. The iPad’s tablet form factor, intuitive touch-screen navigation, 10-hour battery life, and extensive library of hundreds of thousands of apps make for an extremely versatile device. Apple’s iBooks is an elegant app advisors can use to display full-screen PDF reports and graphs for clients. This device is also well-suited for a paperless office environment; when tempted to print information to a hard copy, advisors can instead send the information to an iPad as an electronic document.

Financial service providers responded to the iPad’s success by building apps advisors can use independently or with their clients. Jacksonville, Fla.-based Black Diamond Performance Reporting created BlueSky Mobile, an app to view real-time portfolio performance reports, London-based Finantix generated Wealth-X, a wealth management and planning dashboard app, and Pershing announced an iPad-compatible version of its popular Netx360 Mobile app (though iPad availability is still pending as this article went to press). Consumer finance apps are also popular among advisors, with many using Marketboard from Thomson Reuters, Bloomberg, and Fidelity Investments apps for iPad.

Apple recently updated the iPad operating system to iOS 4.2 in late November, making it more functional in the business and enterprise environment. Updates enhanced the device’s data encryption protections, added multitasking of applications, and enabled remote lock and wipe capabilities using a free MobileMe account. These enhancements make the tablet more appealing to advisors who may have previously been concerned about security and privacy of confidential information loaded on the device.

Finally, honorable mention in this category goes to Novatel Wireless for the MiFi 2200 Intelligent Mobile Hotspot that configures a personal secure Wi-Fi hotspot anywhere 3G cellular service is present, and Pogoplug from San Francisco-based Cloud Engines, Inc., a device that creates a personal, secure cloud file storage system using external USB hard drives.

Congratulations to this year’s winners of the Best Technology of 2010. I hope you enjoyed the new award categories and are excited about the potential these top technologies may add your business. Be sure to visit Morningstar Advisor often throughout 2011 as I review more tools advisors can use to increase efficiency and deliver superior service to clients.

Happy holidays!