Cloud Technology and the Finance Industry Rat Race

The cloud. The coolest kid on Tech Street, where parents—skyrocketing mobile growth and internet capability—spoil their proverbial children rotten.

Everybody’s talking about it. No longer is the cloud explained as a technology management model, as the basis for your latest email or your last Amazon purchase.  The cloud is transforming into something bigger and more daring.

Many interchangeably discuss the cloud and the Internet as one in the same: a communication network by which resources (information, software, etc.) are sent, delivered and understood. In our context, we are referring to the process of cloud computing. Specifically, what happens when client data and firm resources are transferred to, processed by and powered through the Internet?

We previously wrote about cloud and digital growth in the context of jobs and automation in the finance industry. Every app, including the financial planning and advising apps we covered last time, operates on cloud technology—not unlike the manner whereby its customer service predecessors once operated on manned telephone lines, clunky fax machines and bottomless cups of coffee. When bad weather knocks down a server or two on Amazon’s cloud (which happened this June), millions of Internet users lose access to huge web properties like Netflix, Pinterest, and Instagram.

So—how is cloud technology transforming the financial services industry, and how will it affect you?

By now, the firm who handles your wealth or employs you most likely has a website, participates on LinkedIn and maybe even has a Facebook page. (Connect with us!) This external storage and processing of instantly available information has traditionally defined the cloud model. Although these are central uses of cloud technology, they are less important components in the growth of the financial services industry.


What technology challenges does the cloud address?

Data. Data. Data. So much data all the time. Thanks to the same technology that supports cloud computing, many advisors, clients and financial news consumers are continually flooded by information. This presents a dilemma for the advisor:

1) What’s the fastest, most productive way to present this information?

2) How much information should we provide?

3) How can we use it to form sturdier client relationships?

4) Can we cut costs without cutting value or resources?

Think about the cool factor when an advisor unsheathes the latest iPad and displays a client’s finances, projections, and market data during a consultation. The input and display of that information is the cloud. Sure, many software providers have begun the process with mobile apps, but NYSE Technologies’ move to a cloud-based trading arena this summer may have been the movement’s seismic groundbreaker.

NYSE Technologies’ collaboration with VMware and EMC aims to “create a platform that will allow financial institutions to outsource more of their trading infrastructure to the ‘cloud’ via the Internet.” This represents a major shift away from a storage and productivity medium to a real-time, dynamic processing of business goals.

What are some of the benefits of moving client data to the cloud?

  • Reduced overhead, resulting in lower fees for clients.
  • Faster and more comprehensive client service.
  • Leveled playing field among financial service providers.

Guess what? Of these three benefits, each positively impacts both the advisor and client in the client service relationship. While the first two are self-explanatory, the third is somewhat indirect: When smaller financial services providers have access to the same tools and resources as the industry leaders, they are able to provide enhanced client service without compromising their balance sheets with untenable new hires or expensive marketing campaigns.

The leading platform model for the cloud is known as “Software-as-a-Service,” and its benefits are best explained by finance technology writer, Bill Winterberg:

“[It] has been the most significant innovation to help financial advisors deliver superior service to clients. [Its] offerings in portfolio management, performance reporting, server backup, and document management allow advisors to outsource much of the infrastructure management and technical support, allowing advisors to focus on what they do best; serve clients.”


The Cloud and behavioral economics

Consider two major theories of network effects, boiled down to the context of our “cloud”:

  • Metcalfe’s law – A network is only as valuable as the number of its connected users.
  • Moore’s law – Digital devices improve at exponential rates, making technology accessible to more people at higher supply levels and lower prices.

Put together, we can assume that 1) as more and more financial services consumers adopt mobile technologies, the more valuable the cloud will become to the finance industry, and 2) the development and increased supply of cheaper devices will mean more consumers, increasingly downwards on the economic spectrum, will have access to financial advising and planning services.

These network effects are already in play. According to a recent market research survey, a third of affluent investors use their smartphone to access their financial services; just below 30 percent use a tablet. Tablet usage has more than doubled among these investors this year; of which, 85 percent are iPad users. On the brokerage side, a number of leading firms such as Schwab, Fidelity and Merrill Edge are “providing new account visualizations…and strong transaction capabilities.”

More importantly, a majority of CFOs at U.S. companies agree about cloud computing’s mounting importance and increasing impact on the bottom-line. According to a new survey of senior finance executives by CFO Research, over three-quarters determined that a strategy for the cloud will significantly affect their company’s success through 2013 and early-2014. In addition to cloud computing’s impacts on productivity and client service, the cloud’s back-end provides the host company a big-picture view of their business; one not lost in mountains of excel spreadsheets, and hills of performance reviews.

What is the takeaway? Firms should prepare for the influx of new consumers and develop value on the cloud, a presence on its digital exporters, and a rapport with tomorrow’s centers-of-influence.


Taking off the rose-colored glasses


As the free-market economist Milton Friedman once popularized, you can’t get something for nothing.

It costs money and resources to save money and resources:

  • To save on technology costs, companies have to search for and work with vendors, train IT staff and advisors, and upgrade network resources for cloud.
  • To make information readily accessible, companies must first make sure client data is secure and cloud information transfers comply with privacy standards.
  • To save on paper costs and enhance client consultations, companies must assume risk for performance issues, termination costs, data backups, and lost productivity.


Of course, we cannot forget compliance and security concerns. Regulatory requirements issued by FINRA and the SEC should be considered in the type of information stored, transferred to or processed by the cloud. If possible, companies should pursue a third-party audit of their standards and safeguards.


In the coming months, we’ll continue to write about the intersection of the financial services industry and the digital-technological sectors. As a main business concern of every organization that deals with money, the evolving tools and best practices for tomorrow’s financial advisor or planner will inescapably be both a main strategy and a possible barometer of financial health and potential.


Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Nima Tolooi

Founder, Former Editor in Chief

Nima Tolooi is the founder, web developer and former editor-in-chief of OneBite. He was formerly the Interactive Marketing Manager for Wipfli Financial Advisors, based in Chicago, IL.

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Cloud Technology and the Finance Industry Rat Race

time to read: 5 min