Why pay for an application to help write Investment Policy Statements?
A common concern we hear these days of market turmoil and lowered advisor revenues is whether it isn’t cheaper to write Investment Policy Statements with a word document instead of using a dedicated application. We disagree.
How much is your time worth and what could you be doing with that time savings (servicing existing clients to help retain them? marketing for new prospective clients? training your staff to help save you even more time?)? Let’s say that your time is worth $250 per hour. If you could save just two hours a year, the cost of IPS AdvisorPro® would pay for itself. If using the application saves you even more time, the cost of the application more than pays for itself.
How does IPS AdvisorPro® save you time? Two major ways:
1) It helps you create IPSs more quickly. Most of our users suggest it takes them about 15 minutes from start to finish to create a new IPS for a new client. If you use a word template, the estimate is usually more like two hours. First, you have to find the template on your system, which for some is its own challenge. Second, you need to fill in all the blank spaces or replace the old information. This requires great care, because it’s too easy to leave information from the last client’s IPS in the document (we call that “client information overlap”). Then, because each client is different and your template is probably not responsive to those differences, you need to review each word of the document to make sure it is all applicable for your current client. All of that is taken care of in IPS AdvisorPro®, so all you have to do is choose the client type, enter the new information in a questionnaire format, choose the asset allocation model you’ve previously designed, and print the IPS. Savings on just the first IPS: about 1 hour 45 minutes x $250 = $437.50. If you gather three new clients a year, that’s an approximate savings of $1,312.50! If you gather ten new clients a year, that’s an approximate savings of $4,375!
2) When you update a client’s IPS at your annual review meeting (you are doing that, aren’t you? well, probably not, because it takes so long…) the savings can also be substantial. In a word document, if the client has changed a few things and you’ve changed your procedures (e.g. your re-balancing triggers are different now than they were last year, which needs to be reflected in your new IPS), then you need to make those changes manually. If you are being really efficient, that might only take you 30 minutes. If you have 100 clients, then updating those 100 IPSs is likely to take you 50 hours or longer. With IPS AdvisorPro®, you make the changes to your procedures one time, and then broadcast those changes to all your documents, so you know you are saying exactly the same thing to every client. Let’s say that one change takes you 30 minutes. You then make the minor changes to each existing clients questionnaires, which should take you only 5-10 minutes before you print out the updated IPS. (Note that since all your IPSs are in one place, you can quickly find any IPS you want without any hassle.) So our time savings total for updating 100 existing client IPSs is 20 minutes per client plus one-time effort to make the broadcast change for a total of about 30 hours and about $8,200 per year. (1/3 hour x 100 clients, less one change @ 30 minutes = nearly 33 hours per year x $250 = $8,200)
Total savings: up to $4,375 for new IPSs each year and up to $8200 per year to update your IPSs. Does that make the $495 per year cost of IPS AdvisorPro® seem worthwhile?
We haven’t mentioned some other considerations:
* Using IPS AdvisorPro® allows you to delegate the actual creation of the initial IPS. Rather than taking your more valuable time, you can have your lower cost assistant create your IPSs.
* Having a systematic way to create this important document (the IPS) will help standardize things, which typically lowers the stress of having to create a new document each time, it helps clarify for your staff what their role is keeping them happier, and it almost always improves the quality of your work. You’ve take the time initially to do your best, creative work, then with a system, you get to use that best work over and over.
* Lastly, having a quality IPS that reflects your practice can help you avoid lawsuits, or should one arise, helps protect you. Being subject to a lawsuit is always expensive, but much more so if you lose!
Norm Boone
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