The most important question I ask software vendors who demo their products for me is, "what does it work with?" I haven't seen any package yet that does everything, so advisors need to know if the rebalancing program works with the general portfolio management system which needs to work with their contact manager. I'm optimistic that someday software cooperation will be taken for granted--perhaps because the number of vendors falls by the wayside, making interoperability an easier task. After all, this is what happened to earlier desktop applications, particularly in the realm of word processing.
In pre-Windows days, early PC's offered many word processing programs to choose from. In fact, as email took off and outside writers sent me stories, I never knew if I'd be able to open their documents, or even if the email program would correctly handle their messages. Every transaction was a whole new adventure. It's much simpler today; virtually everyone I work with uses Microsoft Word. How did we get here? Weren't there any word processing packages that were just as good?
WordStar was probably the first true word processing program. Released in 1978, it became the de facto standard in the early days of personal computing. Its problems--like the problems of its rivals--were less technical than marketing--such as a failure to keep up with broad trends and to embrace Windows as quickly as other vendors. There's no real reason WordStar shouldn't still be around, but its market share dwindled in the face of more nimble competition. Today, it apparently is no longer manufactured or supported, and it isn't even clear who owned the rights to it.
XyWrite was popular with academics and writers because of its customizable features, and early on it became popular in publishing. In 2001, when it had already passed its prime, a reviewer on ZDNet listed it as one of "our favorite tech flops: The can't-misses--that did." And miss it did, possibly for failing to take full advantage of Windows, but also for missing its market. One anonymous reviewer in a chat room summarized it succinctly: "It's always been a writer's tool, not a secretary's tool." It still exists in revised format called Nota Bene that is popular with professors.
MultiMate was the first word processing program I used, back in the DOS days. It worked with a series of numbered menu items for various tasks, and its main advantage was a similarity to the then-popular Wang word processing terminals. It became a popular institutional-based program, but programmers never even created a Windows version, and it is no longer available or supported.
WordPerfect is the word processing program that came closest to offering a major challenge to Microsoft Word. In fact, it's still very much alive and available in a suite from Corel. It sported a great feature called "reveal codes" that made formatting especially easy. But again, it was slow to make the transition to a Windows version and lags very much behind Word today.
Business school professors will no doubt debate for years why Word became the dominant player and the others only footnotes. Certainly, the ability to work within Windows was a major factor, beyond programming quality. Those who hate Microsoft on principle--and they are legion--cite Microsoft's marketing muscle and possibly unfair tactics in ensuring that Word for Windows became the word processing standard. Perhaps it was inevitable that only one real choice was left, but what is disturbing is that this was not necessarily the best choice. Word is certainly a fine program, but was it better than the others? If Microsoft hadn't been so powerful, and if some other companies had been a little sharper, maybe Microsoft would have been forced to make a better Word to compete--and end users would be the winners.
Today, advisors find themselves in the same position with the products they use to manage portfolios and work with clients. Which will win out, and which will disappear? There is no doubt the industry will eventually coalesce around certain groups of programs, or "suites," designed to work together. This makes life easier for everyone: Students learn how to handle a suite in professional classes and can move quickly into a planning firm. Managing partners can hire support staff with experience in another firm, confident that they know how to use the software they already have.
The big question is who will drive the change? It could be the big custodians and broker/dealers: Schwab, TD Ameritrade, LPL and Raymond James. They have proprietary programs and smaller third-party firms are already making sure their programs work with them, the same way any financial program has to work with Excel.
Of course, it could be the advisors themselves, who may have more power than they realize. The above firms are committed to keeping advisors happy, and if advisors make it clear high-quality software is a priority, the biggest player doesn't have to be the last one standing. The coming years will show whether software change will be something advisors make happen, or whether it will be something that happens to them.
Richard J. Koreto (firstname.lastname@example.org) is editor-in-chief of Wealth Manager.