It’s easy to feel confident about your firm’s IT budget in January. Everything is organized and approved, and you have a clear picture of what the next 12 months of technology expenses will look like. Now you can focus on clients and not worry much about tech until your next budget conversation or quarterly review, right?
Suddenly, it’s summer. Four advisors’ laptops have failed, two new hires have pushed up your licensing and archiving costs, and somehow your software renewals have gone up 20% even though you didn’t add anything new.
In comes the inevitable question: “Why didn’t we know about this?”
It’s one of the hardest questions to get as an IT provider, because the answer is usually, “You did know. Or you should have.”
Surprise technology expenses are often predictable months before an invoice arrives. Here are four common budgeting mistakes that can turn foreseeable, simple expenses into costly problems for an advisory firm.
1. You budget by looking in the rearview mirror
The easiest and most mistake-prone budgeting strategy is looking at what you spent last year and assuming you’ll spend the same amount next year. It’s simple, and past costs can be a good starting point, but that’s not forecasting.
A useful budget looks at where your firm is today and what it will need in the months ahead. Information from 12 months ago can only tell you so much.
Last year’s spending is a rearview mirror, not a road map. Before you finalize next year’s number, look at aging equipment, upcoming renewals, staffing plans, compliance commitments and firm initiatives. Once you have that information, you can build the budget around what’s ahead instead of what already happened.
2. “It still works” is your replacement strategy
There’s always one computer. It’s loud, the battery dies constantly and even simple programs stall when you open them. If it’s yours, you’ve built habits around its shortcomings (and you probably keep it on the charger).
“It still works,” you say. But how long will it keep going when it’s already on its last leg?
“It still works” is a very low standard for something an advisor relies on to serve clients. For an RIA, it also isn’t the right test. A device that can no longer receive security updates, or can’t run your firm’s encryption and endpoint protection, is a risk to client NPI and a weak spot in your Reg S-P safeguards, even if it still turns on.
When these struggling computers finally give out, what could have been a planned expense becomes a rush to buy, set up and secure a replacement as fast as possible, usually in the middle of a client week. That kind of speed is not cheap.
3. You treat renewals like autopilot
Auto-renewal is built into nearly every recurring cost now. It saves you from tracking another due date, but it also means subscriptions stick around long after anyone meant to keep them.
Just because a subscription is set to renew doesn’t mean it should. You may no longer need it, may not know who’s using it or may not be sure it’s still worth the money.
Put renewal dates on your calendar and review each one before it auto-renews. You may find you’re still paying for a Microsoft 365 license, archiving seat or cloud storage account belonging to an employee who left two years ago. That’s more than wasted money. An account that outlived its owner is also an access-control gap, and promptly removing departed staff from systems that hold client information is part of protecting it under Reg S-P.
The same review is a good time to confirm each vendor that touches client data is still the right one, since amended Reg S-P also expects firms to oversee the service providers they rely on.
4. Your growth plan and IT budget have never met
One day in December, there’s a meeting on the calendar for “Next Year’s Firm Plan.” The week after, another one pops up for “Next Year’s IT Plan.” Keeping them separate leaves technology out of the firm’s big decisions and leaves whoever owns IT guessing about where the firm is headed.
New advisors, a new office, an acquisition or a book of business you’re bringing over, and hybrid or remote schedules all come with technology costs, planning needs and security and compliance considerations. If those conversations happen separately, the costs will meet on an invoice when you least expect it.
Bringing them together lets leadership, your CCO and your IT provider plan for growth as one team. If you know where the firm wants to go, you can estimate what technology it will need to support clients today and where the firm is headed next.
A good IT budget shouldn’t have surprises
When you see replacements, renewals, security and compliance needs, and growth-related expenses ahead of time, you can build an IT budget that works with your firm and gives you a realistic view of the year ahead.
What’s hiding in your IT forecast?
The right IT budget can’t predict the future, but it can give you the fewest chances to say, “I didn’t see that one coming.”
Want a clearer picture of what your firm’s technology expenses could look like next year? Schedule a 10-minute discovery call with CyberSecureRIA and we’ll help you identify what may be on the horizon.
Call us at 865-622-9304 or visit our website.
