Who uses which technology products and are they satisfied? Where is adviser technology going?
The answers to those two questions have been — and will continue to be — the focus of many of these columns.
To get a better handle on the first question, we are winding down a comprehensive survey on technology vendor usage and satisfaction. We've had an extraordinarily strong response so far, and if you haven't already completed the survey (
investmentnews.com/vendorsurvey), I invite you to do so this week before the study closes.
The purpose of the survey, the results of which will be featured in the Aug. 22 issue of
InvestmentNews, is to get a much better picture of technology usage among advisers. We want to know how many are using which technology offerings in several key areas: customer relationship management, financial planning, portfolio management, portfolio re-balancing, document management, compliance and account aggregation.
We also want to know how satisfied advisers are with the technology they use.
Finally, we're asking some questions about the technology offerings of major custodians — which brings us to the second major area we follow: the future of adviser technology.
The evolution of technology in any given business area has its own quirks, and technology in the advisory business is no different. The big problem is that it has been especially slow to evolve.
For years, the advisory technology segment was the province of two distinctly different sources of supply.
On one side, there are the big software companies, such as SunGard and Advent Software Inc., and big data providers, such as Morningstar Inc. These large companies have taken existing, often enterprise-sized technologies and services and retrofitted them to work for advisers.
The results, typically built on older technology, are reliable and stable, but have been relatively inflexible. In many cases, they don't quite fit the business models of registered investment advisers or independent hybrid advisers. This leads to mixed levels of satisfaction and lots of ad hoc tweaks and adjustments, which often impede efficiency.
On the other side, there have been tiny software companies — think PIE Technologies Inc., creators of MoneyGuide Pro — with expertise in one area. Many of these smaller companies were started by advisers who were dissatisfied with the offerings from the big companies. Each was hoping to create the perfect application for all RIAs and advisers.
These smaller approaches have their champions, but major drawbacks have been how slow they have been to integrate with other systems and vendors (which is a systemic industry issue), as well as high prices. On the price front, they're not large enough to benefit from scale and they are expensive vis-à-vis what advisers — many of whom, dare I say, are cheap — care to spend.
Although neither the big nor the small approach has been a clear winner, there have been some notable successes. For example, CRM Software Inc., which produces Junxure, has grown to be an adviser favorite.
Still, even that successful product has captured less than 10% of the market. The fractured nature of the market for advisory technology — which itself is quite small, relatively speaking — helps explain why change is slow in coming: There just isn't that much money to be made in serving the adviser market.
TWO DEVELOPMENTS
Although the financial dynamics of the business don't appear to be changing soon, two new developments may shape the market, perhaps in contradictory ways.
First, new web services for advisers that are adaptations of non-advisory technologies continue to emerge. Services including account aggregation tools, PreciseFP, HiddenLevers.com and others can be bolted onto whatever an adviser is using.
Then there is the approach of Schwab Advisor Services, which has adopted the behemoth providers Salesforce and Microsoft Dynamics technology as CRM choices in the platforms under construction for its adviser clients. A third CRM choice will be the aforementioned Junxure, with which Schwab has a long and tangled history.
One might assume that if an industry giant such as Schwab thinks that it has devised the best solution — which promises to offer economies of scale, efficiency and dependability — most advisers will go with the flow.
But not so fast.
In the adviser world, it seems that not everyone wants a predetermined chocolate or vanilla menu. Vendors in the advisory tech space, who come in a Baskin-Robbins-like array of flavors, will be quick to jump in and satisfy the demand.
The Schwab approach may work, or ornery advisers may stick to their guns and want something else.
TD'S BET
TD Ameritrade Institutional, which is in the middle of developing its open-application programming interface, is betting that advisers will want things their way. TD is working with 30 third-party vendors so that their offerings can connect seamlessly with the custodian's Veo account management and trading system.
If you come away from this thinking that the advisory tech area is headed in many directions, you have a better understanding of why advisers keep sending me e-mails asking where the business is going.
Visit our blog at investmentnews.com/technology.
Email Davis Janowski at djanowski@investmentnews.com
