Evaluating ROI in FinTech solutions

June 27, 2017 by Patrick Meyer

about the author:

Patrick Meyer

Account executive

After graduating from the University of Wisconsin-Madison, Patrick helped individuals with their insurance needs. Now in the FinTech world, Patrick is driven by his desire to help advisors adapt and profit from the ever-changing financial landscape.

All too often, decisions are made to simply check a box. In business, certain trends appear and it may feel like you have to follow or be left behind and run out of business. This is the underlying trend of many advisors that I speak with about FinTech; they went to a conference or talked to a colleague and feel they need to check that box immediately or else see their clients run for the hills to anyone who is offering those services.

I work in sales, so I should be the last one telling you not to buy more. But the truth is, in many cases you should not. A recent study by Investment News says that 53 percent of advisors plan to spend more on technology in 2017. This study is not groundbreaking by any means. Spend a few minutes on the “#FinTech” conversation on Twitter and you will see a large number articles detailing the growth of spending in the RIA space.

Forbes also published an article discussing how the same advisors who planned on spending more on technology are also projected to lose 40 percent of their revenue due FinTech. This is mind-boggling to me. As a business, to invest in anything that costs your company money without an ROI is nonsensical.

As much pressure as you may feel from all these sources to step up your digital game, it is important to remember a simple question that can dictate your business decisions: will I make money by investing in this technology?

This is rarely a straightforward “yes” or “no” answer. Therefore, to help make it easier, I have laid out a few key items to consider when evaluating the ROI on your software.

Will it be used?

This sounds like common sense, but all too often I hear advisors purchase software because they read an article urging them to do so or have a colleague with a process that works using a particular piece of technology. They then purchase the software only to log in once, realize that they do not have the time for training, and then give up on it entirely.

The honest truth is that no single software is perfect for everyone. Good technology is geared to be adaptable and scalable in order to fit the wide range of firms that use it. What this means for the buyer is that you need to be committed to getting past the initial learning curve (with the help of training, of course) and implement the new workflows into your company. There is no magic button to this, and you should not commit to change unless you are fully prepared for the work that comes along with it.

Does it save you time?

Most FinTech is not an entirely new idea or process. Instead, it aims to simplify workflows, cut down on inefficiencies, and return a precious commodity to the buyer: time. Now, if it takes a seasoned user more time to deal with business operations while using the software than without it, the software is most likely not a good fit for your practice.

Will it increase retention in your client base?

This might be the hardest question to both answer and quantify. I previously mentioned that most technology is geared to save time. However, a less tangible benefit is client loyalty. In the age of digital ads and robo-advice, loyalty is the second most precious commodity. Sometimes, a monthly newsletter or an easy-to-understand financial plan may not drive savings. However, it does make solidify your relationship with your client.

This loyalty also extends beyond not losing your current book of business, but this kind of service is what consumers talk to each other about. Additionally, if your service is superior to the offerings of your competitors, consumers will hear about it and may soon become your clients, as well.

Can you charge for its use?

The last means of evaluating the ROI on a potential technology purchase is the simplest. Can you charge for its use? If so, it is simple math. Take the potential profits and subtract it from the cost. If that number is large enough, make the purchase.

Click here to learn more about improving your ROI with financial planning software.


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