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From Adviser Guide: Back Office Systems

Q: What should back office software do?

At the very least, software should store client investment data, but you could find it transforms your business prospects.

By Oliver Haill | Published Sep 13, 2012 | comments

At the very least, back-office administration software should provide a database that allows information to be stored relevant to the clients themselves and their policies and investments.

Sue Nutall, owner and lead consultant at Jacana, advises the importance of ensuring this data is organised “in a way that supports complex links but is easy to input”.

Safe to say, if you want to make the most of your client data, a simple few spreadsheets are not enough.

However, if you do not have much data to crunch, you should be able to get by with inexpensive software and ‘cloud’ computing services such as online data storage to avoid the need for expensive server and document storage capabilities.

Steve Billingham, owner and director of Steve Billingham Consulting, says: “It really depends on the nature and complexity of each business, but there are many free/low cost data handling and productivity tools available.”

More complex financial services back office systems now include best advice systems, programs to analyse a client’s attitude to risk, tools for cash flow forecasting and valuation management, the management of correspondence and documents, together with recording compliance information and reporting.

In today’s market, Ms Nuttall believes the minimum any such system should be able to do is:

• allow comprehensive data recording and complex data interrogation;

• provide for efficient new business research;

• allow new business to be processed via the internet;

• allow automatic plan/fund updating;

• provide integrated client reporting;

• allow workflow monitoring and control;

• provide comprehensive income reconciliation; and

• allow efficient, accurate regulatory and management reporting.

But advisory firms need to commit more than just technology budget to their new systems, warns Mr Billingham.

“The issue with most back office systems in the advisory sector isn’t typically a lack of functionality, it’s the firm’s inability to utilise the full functionality available. This is often due to a lack of training, which usually comes at a fairly significant cost.”

Moreover, the evolution of back office systems to include tools for needs analysis or fund selection is not always a boon, argues Richard Stanton, sales manager at Time4Advice.

“In reality, these systems are typically less comprehensive and powerful than the bespoke tools available on the market and many firms find that the compromise they represent, although superficially attractive from a cost perspective, does not outweigh the benefits of using the right tool for the job.”

The advent of the Retail Distribution Review may also require back office systems to be restructured, Mr Stanton explains, with the charging emphasis moving from commission to fees.

He says software must therefore allow “any time spent on any activity to be recorded against a particular client, area of business and member of staff, which should in turn integrate with any client charging system”.

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