Maybe the clouds are really black: Who owns your cloud-based CRM data?

By Ed Morrow

Intl. Assoc. of Registered Financial Consultants

Company ownership and management can change overnight. Your respected associates and friends could be removed in a flash. It is your responsibility to be sure that what you think is a bright, puffy cloud in a clear blue sky is not really a dark cloud that presages a storm or tornado.

Once upon a time, there was a nice young man named Charlie who graduated from college and took a position in a well-respected store that served as a distributor for electric appliances and electronic components. He swiftly climbed into a sales position and was moving ahead in the world when he began to sense that the locally owned store was being seriously challenged by the “big box” stores.

Price competition was now fierce and the owner was being squeezed. Charlie started working longer hours and traveling greater distances, but he just couldn’t compete on a price basis. And then the store owner announced he was closing. He gave Charlie a nice letter of recommendation and his best wishes.

Soon, Charlie joined a major life insurance company where he could use his winning personality and sales skills. He advanced through attending the company’s schools and then courses offered by the American College. He qualified for the MDRT and tried to attend the meetings as often as possible. His income continued to increase. But the industry was changing and the life company became challenged due to the irresponsible investments made by home office executives. The image of a “life insurance agent” was being tarnished because major players in the industry had received very negative reviews.

Charlie was courted by a brokerage manager for a large, national diversified financial services firm that had “lots of clients and not enough sales reps.” The regional manager implied that he could use the firm’s international reputation and would make a lot more money. And for a while, that is what happened. But Charlie began to sense that many in the brokerage firm did not have sufficient regard for their clients. They would sell them anything and joke among themselves about how much of “brand X” they were unloading on the unsophisticated customers. Despite the prestige of the international firm, the exciting pace and good money, Charlie did not feel at home with the unethical behavior.
One day, Charlie read an article about a moderately sized firm that specialized in offering more training and support to their reps. The payout wasn’t as high, but there was much more focus on the customer. Charlie made the change and soon relaxed. It looked like he finally found his true home. He could sell insurance, securities and even deliver plans on a fee basis. Through the firm’s RIA, he could bring assets under management for a fee. The firm was growing and started bidding for more licensed reps to join them. Charlie took this as a good sign – they were expanding.

At the company’s annual convention, a new customer service tool was announced. The brokerage firm had made a deal with a software company and would be enabling all the reps to have access to a client relationship management (CRM) system. The head office was going to transfer all the customer records into electronic format and enter them into the new system.

Of course, there would be a small monthly cost to Charlie, plus an additional fee he would have to pay for his assistant to access the system. She would be making most of the entries. Charlie could now access the data from his desk, his home or even in a client’s office. How was all this remote processing possible? The home office executive explained that this is a “cloud-based” system. All the data and all the capacity would be on the Internet. Investment values would be updated on a real-time basis, and all the program enhancements were instantaneously installed at no cost or inconvenience to Charlie.

The cloud-based system enabled Charlie to send letters and notes to his clients, but each new mailing was delayed for review and revision by the compliance officer.

Then there came an announcement that Charlie’s financial services firm had been acquired by an even larger conglomerate. Immediately, they began to insist on greater production and started reducing services. Charlie felt that his position was being degraded – back to the environment of the prior firm where everything was about more money and greater profit for the executives.
It was time for Charlie to go out on his own – or form a partnership with a couple of other financial advisors, to share office space, furnishings, equipment and service personnel. His overhead would increase, but Charlie felt that his clientele would support him. After all, he had the records “on the cloud” of all the families and businesses he had served over the years. So Charlie tendered his resignation, leased new space and got a good buy on some very well-maintained office furnishings. He set up shop and decided to send a letter to all his clients with his new address and contact information. He opened up his computer, accessed the Internet and prepared to send out his announcement.

But he could not get into his “cloud-based” CRM database. He sent them a message. No response. He called the software firm and said, “I can’t get into my client records, there may be some problem.” He was then told the bad news. “Our software program was licensed to the broker-dealer. They have all the rights, and they believe all your clients and contacts belong to them now.”

A quick call to his former broker-dealer revealed that was exactly how they looked at the ownership issue. The clients that Charlie had developed and nurtured over the years belonged to them. If Charlie tried to contact them, they threatened legal action. Charlie felt the clients were his – he had prospected to them, sold them on his services, given them good advice and superior service. He helped them decide what to purchase in the way of securities and insurance. They were his clients.

So, he started calling and was amazed to learn that each of his clients had already received a letter from his old firm, and that a new “service representative” was taking over their account. Charlie would have to fight to retain his clients. He could not access any of the electronic client files. Instead of coasting with his 22 years worth of clients, he would be swimming upstream to keep some of them, just at the time his overhead had gone up.
The big questions about your client data:

Who really owns your clients?

Who controls the access?

Who owns the software license?

What are the consequences?

If you don’t own your client data, how can you sell your firm and client base to a successor?

If your broker-dealer changes direction, are you locked in by having all your records in their cloud-based system?

What other programs do you use that are “owned” by your broker-dealer? Could that data be transferred? Could you continue to use the system on a personal basis by just assuming the software service fee?

If your product mix does not include a substantial amount of proprietary products, can you be terminated or your payout rate be decreased? Can your access to client data and files be removed?

Getting your vision focused

A philosopher once said, “If you’re not a bit paranoid, you just don’t understand those who threaten you.” Company ownership and management can change overnight. Your respected associates and friends could be removed in a flash. It is your responsibility to be sure that what you think is a bright, puffy cloud in a clear blue sky is not really a dark cloud that presages a storm or tornado.