The 4 Biggest Tech Pitfalls Advisors Face

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By Marcus DiNitto 

As the world becomes increasingly connected and business more dependent on technology, there are certain perils advisors should have on their radars.  During conversations with multiple advisors, several tech pitfalls stood out: security, staying current, social media and the cost/time equation.

Cyber Security

To David Barnes, president of Heber Fuger Wendin in Bloomfield Hills, Mich., cyber security is by far the greatest technology risk the financial advisory industry faces.

“The biggest tech pitfall by far is cyber security,” Barnes said. “It just eclipses everything else. Anything else is dwarfed in comparison to the cyber security concerns that we have.”

Barnes’ firm, which specializes in helping community banks manage their investment portfolios, is vigilant when it comes to protecting itself against cyber security threats. That vigilance includes “pages and pages” of policies and procedures, maintaining and updating the firewall and continuing education.

“We have annual cyber security training for our employees. I went to about a dozen cyber security meetings, seminars or webinars last year, and I’ve been to probably a half dozen this year,” he said. “You’ve got to stay on top of it. We’re constantly vigilant, as is our IT services provider, about cyber security.”

Staying Current

With technology evolving so rapidly, an advisory can easily get left behind and find its systems out of date.

“I’ve found the bigger the firm, the slower they move as far as updating or implementing current versions of office software, such as Excel, Outlook, those types of tools,” said one advisor who has been in the business for nearly two decades. “Sometimes we’re a version behind, so it’s little challenging when the clients can update immediately as soon as the new version comes out and it might take us six months to a year.”

Jeff Vaughn, senior financial advisor at Merrill Lynch in Charlotte, N.C., is wary of technology that isn’t scalable – that is, it can’t grow along with a firm’s business.

“If you’re using some old software and the company (that produces it) either goes defunct or they quit updating the software, you may not even be able to use it anymore or it may no longer be applicable,” Vaughn said.

Social Media

While social media is a valuable prospecting tool for many advisors these days, it comes with its own set of risks.

David Lustig, financial advisor at Wealth Management Solutions in Newport Beach, Calif., uses LinkedIn for marketing purposes but realizes that by doing so, his message may end up in the ether.

“You don’t know what the reaction is from the other side when you’re using technology,” Lustig said. “If I do any type of marketing using technology, you may know if someone opens a link that you send to them, but you don’t get their response, unless they respond back to  you.”

Weina Hou, financial Advisor with Merrill Lynch in Berkeley, Calif., has another warning for fellow advisors on LinkedIn: incessant and endless pitches from recruiters.

Cost vs. Time

An advisory can save money by managing its IT systems in-house, but outsourcing may be worth the extra dollars.

“Bringing it all together on your own is cheaper than having somebody else do it, but it’s very time consuming,” said Michael Menzies, CEO of Pembroke Asset Advisors, “so unless you’ve got very good time management, you can waste a lot of time on tech that may be cheaper but not necessarily more effective.”

Marcus DiNitto is a freelance writer and editor based in Charlotte, N.C.   He specializes in native advertising, business and sports. Marcus earned his MBA from the University of North Carolina-Charlotte and did his undergraduate studies at the University of Wisconsin-Madison. 
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