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Technology for financial advisors has come a long way in recent years, but probably remains the most complained-about aspect of running an advisory practice. After a decade of covering technology for independent advisors, I don’t know of a single technology product that has not been the subject of complaints. Even software that gets favorable comments from numerous advisors is often the subject of derision among others.

So in providing you with our annual directory of technology companies, it’s fair to explore the yin and yang of advisor technology and professional software. We live in an era in which technology–whether it’s your cable TV system, network server or e-mail system–is consistently imperfect. Even Microsoft, the world’s largest, most profitable software company, with technology that everyone uses on their desktops daily, does not provide a fantastic customer experience.

Is it fair to expect more from a financial services technology company that has just a couple of hundred customers and a few million dollars in sales than you might for companies many times larger? Many advisors will probably say it is.

Technology problems, like the ones you experience in consumer products, are more than mere inconveniences when it comes to business. In business, your income is at stake. Client service is on the line. So tech companies selling business products to advisory firms should arguably be held to a higher standard.

Many advisors say they are willing to pay the cost for superior service and reliability, but in the real world, there is not much evidence to support this contention. Advisors time after time choose the lowest cost route in selecting technology, but still expect it to work just as well as they would a more expensive product. Advisory firms are often frugal to the point of hurting their businesses.

For example, most RIA firms seem to be jury-rigging their e-mail compliance solution. They print out all their e-mails to and from clients or they occasionally back up their Outlook “pst” file and think that is sufficient. They don’t have a written procedure for dealing with e-mail archiving, or people assigned to carry out a routine process for following the procedure. Many RIAs would be unable to retrieve e-mails in the event of a rigorous audit by a Securities and Exchange Commission examiner. While many e-mail compliance products built specifically for RIAs are out there, many, if not most, RIAs don’t want to spend $3,000 a year on the technology, which is about what most e-mail compliance tools cost.

In addition to being frugal, the independent advisor channel is a major challenge to tech vendors because of its fragmentation. The market is segmented between registered reps affiliated with B/Ds and RIAs.

The independent B/Ds generally don’t buy technology for their reps. They usually sign deals to market software for “approved” vendors in exchange for discounts for their reps, or for a cut of the sales by the technology company. For instance, most independent B/Ds leave it to each rep to pick from two, three, or more planning or CRM applications. Each rep is essentially buying directly from the tech companies, and the tech companies are selling and servicing one user at a time. There are some B/Ds that have done some enterprise-level technology adoption, but for the most part only a handful of B/Ds cut deals with vendors to buy an application enterprise-wide for all their reps because their reps are independent and want to choose their own technology.

The RIAs, meanwhile, are totally independent. Their technology choices are not limited to the approved tech vendors selected by the B/Ds. Consequently, the RIAs are using different combinations of software products. Providing customer service to RIAs who are each unique in their business processes, software applications, and hardware is not easy for a tech vendor.

With that huge caveat in defense of technology companies, let’s look at some of the problem areas that tech vendors will need to address in coming months. Keep in mind, the criticism does not make the companies mentioned bad. All of the companies have problems.

In all fairness, I have to admit that my own company does not have a perfect record either, which makes me sensitive about criticizing other companies. When I asked more than 100 advisors for their greatest technology frustrations, I actually had one tell me that my own company was on his list. My company, which hosts e-mail accounts for hundreds of firms, intermittently bounced some e-mail sent to about 50 advisory firms for several days, so I have felt firsthand the wrath of advisors frustrated by a technology vendor, and it was a humbling experience. With all this in mind, let’s look at some of the major categories of advisor technology and where improvement is needed.

Portfolio Management Software. This is the key application on an advisor’s desktop because it contains all of the investment account data she needs to run her business. In the independent B/D segment, the dominant player is Albridge, which successfully sold into dozens of broker/dealers over the past five years, and is likely grooming itself for an initial public offering. With the ugliest of technical issues of pulling in account data from different institutions behind the company, Albridge’s prospects for dominance over the coming five years seem good.

Right now Albridge has little serious competition in going after large independent B/Ds. The only company on the horizon targeting this niche is Investigo. While Investigo has had some success in the smaller B/D market, only Albridge has the scale to take on the largest independent B/Ds that have thousands of reps.

“The data issues with Albridge are not as big as they used to be,” says an executive at one of the large independent B/Ds, who spoke on condition of anonymity. The executive says that reconciliation of client accounts by Albridge has improved in the last two years but “probably will always be an issue that won’t go away.”

Where Albridge is deficient, according to the executive, is in creating customized reports. Reps want to be able to change the fonts and format reports in ways that are more attractive. Albridge, according to the executive, will make more template reports for reps to choose from, but only at a price. Because of their dominance, the executive says, “Albridge has become more money-centered than client-centered.”

Investigo offers greater customization of reports right now, but adding tens of thousands of transactions daily to the Investigo system could pose a challenge to its capabilities, according to the B/D executive. If Investigo continues to grow by serving smaller B/Ds, larger B/Ds will eventually feel more comfortable about migrating to Investigo.

The RIA segment of the market also suffers from a limited number of established portfolio management software (PMS) vendors. Two companies dominate the field: Advent Software and Schwab Performance Technologies.

While Advent Axys is built on database technology from the 1980s, the software is reliable and makes accurate performance calculations. Despite its strengths, Advent has gained a mixed reputation with advisors. “Advent is arrogant and arbitrarily raises my fees by 15% every year,” says Richard Del Monte, of Del Monte Group LLC in Alamo, California. “But who is there to replace them?”

Meanwhile, Schwab’s PMS program, PortfolioCenter, is dogged by concerns over Schwab’s ownership. Four years ago, Schwab said it would not sell the new licenses to its PMS system to advisors unless they custody assets at Schwab. Schwab has since backed away from that position. However, the announcement, along with other aspects of Schwab’s relationship with advisors, has created distrust that persists among some.

Although Schwab is still by far the dominant custodian to small RIAs serving high-net worth individuals, it is in an awkward position as a technology vendor. Some advisors who clear through Schwab say they fear depending on Schwab for technology as well as custody services, despite the fact that company has done nothing in the last few years to leverage its technology in a heavy-handed manner. Meanwhile, some advisors who do not clear through Schwab remain reluctant to buy its PortfolioCenter because they fear that someday Schwab could cut them off.

While the two biggest PMS vendors were in recent years hobbled by these issues, several startups have appeared and are trying to build viable alternatives for RIAs, including Interactive Advisory Software (IAS) from Optima Technologies, AssetBook from Major Technology Resources, and PowerAdvisor from Cornerstone Revolutions. dbCAMS, a longtime PMS vendor, along with Captools, continue to be viable alternatives, but these companies simply are not mentioned all that often by advisors shopping for PMS software.

In a promising trend, two large companies are entering the PMS business. Intuit, the maker of Quicken and Quickbooks, recently partnered with Optima to launch a new PMS package targeting small firms. In addition, a long-awaited entrance by Morningstar into the PMS business should be announced soon. The entrance of two large household names into this arena could change the competitive picture significantly over the next year or two.

Established RIAs are generally reluctant to move their businesses to any of the vendors except Advent and PortfolioCenter because the others are either still working out bugs, do not have all the features they need, or are offered by companies that are small and that advisors fear could fail, get bought, or become unstable. Still, the new entrants could start to become more serious threats to Advent and Schwab. It is difficult, but not impossible, for a small startup PMS vendor to succeed, and the entrance of Intuit and Morningstar could shake things up considerably.

Financial Planning Software. At last count, there were close to 20 vendors providing financial planning software. Among registered reps affiliated with B/Ds, the big players are NaviPlan, from Emerging Information Systems Inc., and Financial Profiles. But additional competition is coming from AdviceAmerica, MoneyGuide Pro, Financeware, and eMoneyAdvisor.

All of these planning applications are Web based, which is preferred by B/Ds because it makes compliance easier and allows them to be a rep’s central repository for client data. A number of the planning software vendors have integrated with Albridge, which allows a rep to have Albridge data on assets downloaded into the planning application automatically on a daily basis. So a rep could update a financial plan with far less data input.

To many RIAs, however, a Web-based planning application is less attractive than a desktop application, and–even though the Internet has been part of their business for a decade–many RIAs still do not feel comfortable about putting their client data on a remote Web server. Despite the reservations of some RIAs, Web-based planning applications are catching on with RIAs.

Fewer RIAs would be comfortable with a Web-based PMS application because it contains the data that can feed all their other programs, such as CRM, tax analysis, or portfolio analytics software; a PMS system has all the history on client transactions. Migrating all your client data from one planning application to another is a relatively simple task compared to changing PMS applications, so RIAs are far more willing to use online planning applications.

While the online applications are gaining market share, desktop applications continue to be popular with a large segment of the RIA market, and there is no shortage of companies selling to reps and RIAs that want to stick with a desktop. Money Tree, Cheshire Software, MasterPlanner, Lumen Systems, and Sawhney Systems are only a partial list.

Until now, most registered reps have not used planning software. The introduction of Web-based applications will turn more advisors into planners. The integration of planning software with Albridge’s PMS system will also promote the use of planning applications by reps because the major obstacle to using planning software has been the data input.

The big complaints about planning software are that it requires too much data input, or that some programs are too complex. Cygnus IncomeMax and Money Tree Silver provide a streamlined interface to ease the data input burden. For advisors who want comprehensive cash-flow plans, NaviPlan Extended has long been the big seller, and version 10.1 will also allow users to limit data input required by choosing different levels of detail for different plans. For advisors who want a goal-based planning tool, MoneyGuide Pro is a good choice.

Despite the variety of products, advisors are often not happy with any one of them. As a result, many advisors still resort to creating their own Excel spreadsheets to make plans or they use multiple products–one just for investment planning, another for tax issues, and yet another for retirement. Over the past five years, my guess is that many of the advisors that previously used spreadsheets switched to off-the-shelf products because they did improve enormously. Expect that trend to continue.

Account Aggregation. With some financial planning applications integrating account aggregation–MoneyGuide Pro is integrated with CashEdge as is eMoneyAdvisor, and NaviPlan is integrated with Yodlee–advisors are seeing a glimpse of the future. If account aggregation applications feed planning software with data, it will cut down dramatically on the need to input client data into the software.

Account aggregation is also a great sales tool. If you manage only part of a client’s money, but can see bank and brokerage accounts he manages himself or with the help of an another advisor, you can point out how to better manage those held-away assets. You can also coordinate buys and sells of securities that you make with trades of another advisor for tax efficiency and asset allocation purposes.

While the great promise of aggregation is within reach, it is still a challenge. Ron Humenny, of Starfire Investment Advisers in Southfield, Michigan, says his firm has been using account aggregation from CashEdge for about a year to pull in data on 401(k) accounts. While some PMS applications don’t have interfaces with many 401(k) providers, CashEdge does. Humenny uses the account aggregation application to pull data daily on the 401(k) accounts and then advises clients on their 401(k) assets, as well as their other investments. Trouble is, the aggregation doesn’t always work as smoothly as he’d like.

In recent months, Humenny says, added security by financial institutions has made it more difficult for the aggregation application to log in to 401(k) and bank account look-up Web sites and retrieve the account data. And getting tech support on the issue has been frustrating, he says.

Humenny hopes that aggregation companies can overcome the additional security features because when aggregation works, he says, it allows him to provide advice on a total portfolio. Bob Klosterman, of White Oaks Wealth Management in Minneapolis, Minnesota, has been using aggregation to work with about 25 clients. While he, too, complains that recent security features have gotten in the way, he says that aggregation, when it works, provides an excellent client experience. “They can come to our Web site and see all of their accounts in one place,” says Klosterman.

Any advisor thinking about introducing account aggregation must realize that there is more to it than simply adding a link to your Web site. Advisors will have to assist clients with creating the log in and password for each of their accounts because clients are unlikely to do it on their own. Both Humenny and Klosterman say they have devoted staff to this task.

Customer Relationship Management. Based on my own surveys and conversations with hundreds of advisors, it is clear that most advisors use Microsoft Outlook for CRM, with ACT! also ranking high. Programs targeted to advisors, such as Junxure, ProTracker, Act4Advisors, Advent Qube, and Schwab PortfolioCenter Relationship Manager, have not caught on with that many advisory firms. The one that I consistently hear the most favorable comments about from RIAs is Junxure.

Advisory firms with two or more employees would be wise to consider a CRM system. It’s a lot more than a contact manager. The biggest advantage is that these programs can help you establish processes for routine tasks that involve multiple people in your firm, and then they allow you to track whether the different people in your firm are following up with their tasks in a process. However, some CRM systems also bring a range of other benefits, such as support for compliance, e-mail compliance, managing required minimum distributions, and tracking marketing and other correspondence sent to clients. Be aware, however, that data input is the key to making such a system work.

For a complete directory of financial planning technology providers, please click here.

Editor-at-Large Andrew Gluck, is president of Advisor Products Inc. (, which creates client newsletters and Web sites for advisors. Advisor Products may compete or do business with companies mentioned in this column. He can be reached at [email protected].

Research editor Liana Roberts can be reached at [email protected].


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