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The T3 conference hit its stride Friday with key speeches and a hum of activity

An IBM big wig cleared up some issues surrounding 'cloud' computing

Monday, February 22, 2010 – 3:42 PM by Brooke Southall and Nevin Freeman
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George Tamer let it be known that technology without a dedicated effort by the financial advisor won't yield great results

Attendees of the Technology Tools for Today conference in San Diego offered two basic reasons for why they had ventured there.

Some of them wanted to keep up with technology. Others want to be certain that technology doesn’t leave them behind.

In his opening remarks, David Drucker, a practice management consultant and co-principal of T3, stoked the paranoia of people of both mindsets.

“Tax laws don’t change as fast as technology,” he said. “Investment theory doesn’t change as fast as technology.”


One fast-moving technology phenomenon is highly-hyped cloud computing.

“The cloud” is a metaphor for the Internet that came from the common use of a cloud as a symbol for the internet in computer networking diagrams. Cloud computing generally refers to a scenario where resource-intensive processes commissioned by many people on regular computers take place on a central server, instead of on each individual computer. This offers a number of advantages:

  • each regular computer doesn’t need any specialized software installed, only the terminal to send and receive data (often only a Web browser)
  • when the software is updated, it only needs to be done on the central server
  • companies can offer “software as a service,” and charge recurring small fees, rather than a large setup cost for a permanent licence to install their software

and disadvantages:

  • users need to be connected to the internet (or the network that the central server is on)
  • it is sometimes difficult to offer the same rich desktop experience with software that is viewed in a Web browser

A simple example is the difference between Microsoft Word and Google Documents; they are each word processors, but Word runs on your computer’s resources, while Google Docs is viewed through your Web browser, but most of the processing and data storage is on Google’s servers.

T3 called on IBM vice president Elaine Lennox to bring us attendees into greater acquiescence with this everywhere-but-elusive subject matter.

Lennox never reduced the definition of the cloud into an easily definable thing during her one-hour speech; in fact she noted that the exact definition is often debated. However, she did ease some anxiety about whether it may be drifting over the horizon without us.

One reason: The cloud will often come to us so we don’t necessarily need to go to it. For instance, advisors using Black Diamond Performance Reporting are already using a cloud-based service; all of the heavy lifting is done on Black Diamond’s servers, and the advisor’s computer only needs to send data entered into the Web browser over the Internet and wait for results to come back.

What can the cloud do that a big corporate IT department can’t? She used the example of her daughter wanting a new e-mail account with Google. She can literally have a new gmail account within minutes from her laptop but if she were to become a Fortune 500 employee it would take two weeks to get set up on the company’s system. This illustrates her point that cloud computing often accommodates self-service applications that require minimal configuration.

World of ATMs

Another good example Lennox gave was the world of ATMs where you serve yourself cash. Your experience is better, faster, more convenient and less error-prone than if you had a bank teller serving you. This is vintage cloud stuff.

A weakness of clouds, she says, is that everyone in it needs to use standardized applications. This has led to a trend toward hybrid clouds where applications get housed on the local server and the cloud gets tapped for more generic computing purposes. “That’s going to be a big trend in the industry,” Lennox says.

Lennox bristled when one advisor stood up and questioned the viability of clouds based on his experience with Yahoo! and other ubiquitous web providers that he deals with. Quite simply, they can not always be relied upon to stay in working order.

“If it’s consumer class, it’s okay if it goes down from time to time,” she said. “For business class, it’s not okay. Not to ding Yahoo!, but we don’t see [IBM cloud computing] as the same as Yahoo! quality.”

Public vs. private cloud

A public cloud is a server (or many of them) running an application that is used by many clients over the Internet. This is the case with Google Documents – Google runs the cloud, and many users take advantage of the service, without being affiliated with Google.

A private cloud is also a server (or many of them) running an application, but this time the application is only accessible to users within that organization. An example of this could be an RIA office running a server-based portfolio management system that advisors could all access via their Web browser.

There is an intra-industry debate about whether a public cloud or a private cloud is preferable, Lennox added. IBM is making a big business in creating private clouds for companies, universities or – in one case – an entire Chinese city that is seeking to attract software companies to locate there, she says.

Lennox made one attempt to bridge the gap between her mighty corporation and the RIAs in the audience. She said that her financial advisor would plead with her for months to visit his office and that she was simply too busy.

Lennox would eventually tell him to just speak to her over the phone. The problem was that he was explaining a chart to her that she couldn’t see.

The cloud, she says, could solve that problem because they could both look at the same chart at the same time.

Return on investment

George Tamer of TD Ameritrade gave a more RIA-centric talk after Lennox spoke. He let it be known that his company’s surveys show that many advisors are not getting a return on their investment on new technology investments.

Success with technology takes conviction and suggestions need to be taken.

“It’s not necessarily a technology issue,” he said. “It’s a dedication issue. A month goes by and they don’t do anything about it.”

He ended on an optimistic note based on seeing top-notch advisors employing technology to good effect. “We know you can get positive returns,” he says.

Another optimistic note was sounded by Michael Golaszewski, managing director of Schwab Advisor Center. He oversaw the overhaul of the website used by RIA clients of Schwab Advisor Services.

Nevin completed a review of the website back in September — “Schwab’s big effort yields big improvements”: https://www.riabiz.com/a/20047 and I wrote an article — Schwab Technology undergoes metamorphosis. Nevin and I ran into him at the breakfast buffet early in the morning and interrupted his consumption of a pastry. We wanted an update of Schwab Advisor Center.

Proactively converted

Golaszewski’s news was that 42% of Schwab’s 6,000 RIA client firms have proactively converted to the new site from the old one that they knew under Schwab Institutional.

The advisors who have made this unforced change tend to be the larger ones or ones that are most technology conscious, he says. Schwab will eventually sunset the old technology but it is in no hurry to do so, he says.

A final interesting conversation I had was with Matthew Enyedi, vice president of RIA services for LPL Financial. Assigned to develop new strategies for his broker-dealer in 2007, he pitched the idea of serving the custody needs of registered investment advisors to his company’s board of directors. It became the first and last strategy he pitched because it was accepted and implemented.

The effect of the change is being felt positively by LPL staff charged with bringing new advisors on board, Enyedi adds. Before they not only had to pitch wirehouse brokers on joining LPL but also on the idea of becoming an IBD rep – as opposed to becoming an RIA.

Channel agnostic at LPL

Now these people can focus on bringing people to LPL regardless of what channel they prefer.

“Recruiters don’t have to direct the conversation,” he says.

LPL has new technology for hybrid RIAs but it was not available for a demonstration at T3.

LPL tends to encourage its advisors to use in-house technology rather than allowing them to pick and choose from a host of vendors. But Enyedi and a colleague say that the conference helped them to better understand other possibilities for widening technology choices for advisors. They added that LPL has embraced one outside vendor, eMoney Advisor LLC of Conshohocken, Pa., and use of its financial planning software has been a positive experience for the company and its advisors.

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Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Dan Arnold

eMoney Advisor LLC
Financial Planning Software
Top Executive: Edward O’Brien

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

Technology Tools for Today
Consulting Firm
Top Executive: Joel Bruckenstein

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