Historically, the various software and technology solutions that serve financial planners have been very fragmented. Independent firms were often stuck with small, homegrown solutions for financial planning, client relationship management (CRM) and portfolio reporting software. Alternately, they were forced to work with software providers that simply didn’t have enough resources for growth and development. Advisors with larger firms often had access to the best software, but since it was a proprietary solution of the parent firm, the advisor effectively faced a world where key client and business data might be held captive.
As the world transitions into the digital age, though, this landscape is rapidly changing, due both to the accessibility brought about by having near-universal access to “the cloud” from any computer or device and any location, and the emergence of application programming interfaces (APIs) that allow disparate software packages to integrate in a way that has never before been possible.
These changes in turn are driving several new emerging trends. The first is that now independent software companies are often larger and better developed than home-grown proprietary solutions. This development encourages new firms to innovate and makes it easier than ever for advisors to change firms knowing that they will have more portable client and business data and access to similar (or even better) software after making a change.
In addition, the growing integrations through software APIs are rapidly bringing advisors towards the “Holy Grail” of a unified central solution for CRM, portfolio management and reporting, and financial planning software, which is further driven by a growing number of “integrators”—firms that help adapt software packages through their APIs to develop customized advisory-firm-specific Grail solutions.
As of now, these trends are still under way and will be playing out for many more years. Nonetheless, the direction is clear, and remarkably positive for both startup technology firms—who have more opportunity for growth and success than ever—and advisors, who may enjoy software in the future that is simultaneously cheaper, more efficient, more innovative, more integrated, and just downright superior to anything we’ve ever had in the past.
How We Got to This Point
In the past, the world of software for financial planners was very fragmented. Large firms (i.e., wirehouses and insurance companies) developed their own proprietary solutions, typically integrating together (at least partially) the financial planning, CRM and portfolio reporting software into a unified package. Although the integrations were often limited (at least by today’s standards), and the consolidated software could be somewhat clunky and inefficient, the reality was that the best software solutions were at the largest firms.
By contrast, advisors in the independent space struggled. The options were few and far between; many solutions were tiny, struggling software companies or even home-grown software originally built within a planning firm and then sold to other advisors. In the case of CRM in particular, large, non-industry-specific platforms simply had a lightly customized template for advisors to overlay (e.g., Act! and Goldmine). For independent RIAs, there was often little choice but to accept what was offered and make the best of it. Independent broker-dealers often tried for more, but struggled with the lack of scale necessary to internally create and offer the best proprietary solutions.