Adviser technology: Integration still elusive

Despite dissatisfaction with the level of integration among the products they use, most financial advisers are satisfied with their technology.

That is one of the major takeaways from InvestmentNews’ online survey in July of technology usage and satisfaction; 928 advisers participated. (See the rankings of the most popular technology products with advisers.)

Even though advisers have complained about their technology for years, analysts were not surprised by the survey’s findings.

“Satisfaction is often measured more by the adviser in the form of, “I have figured out how to do it,’ instead of asking, “Is this the way I should be doing it?’” said Alois Pirker, research director at Aite Group LLC. He noted that advisers have learned to live with shortcomings in the products they use and “have molded their processes” accordingly.

Whether that’s the reason, the advisers surveyed seem pleased with their technology choices. In the category of customer relationship management software, for example, 86.8% of the respondents indicated that they were somewhat to very satisfied with the products they are using, compared with only 13.2% who indicated they were somewhat to very unsatisfied.

Those percentages were almost identical for portfolio management products and even more tilted toward favorable in the financial planning category (93% versus 7%).

Fifty-one percent of the respondents identified their firm as a registered investment adviser, 30% as a financial planning firm and 19% as being affiliated with an independent broker-dealer.

Respondents’ assets under management were evenly distributed.

Integration is the area where advisers were less than pleased.

Only 17.1% of advisers indicated that they were very satisfied with the level of integration among their products, while 49.3% were somewhat satisfied.

By contrast, 25.4% reported being somewhat unsatisfied and 8.2% very unsatisfied. All told, 66.4% of advisers are satisfied with technology integration while about a third — 33.6% — are not.

“ROOM FOR IMPROVEMENT’

“Integration is still the big challenge, even though your best-in-class providers of CRM might be starting to talk to those in portfolio management, said Darrin Courtney, wealth management research director at The Tower Group Inc. “Based on everyone I talk to, there is still tremendous room for improvement.”

Analyst Scott B. Smith with Cerulli Associates Inc. believes that advisers perceive the issue in a different way.

“While advisers find judging this feature or that feature about financial planning or CRM as subjective, for them, integration is objective,” he said. “They say, “I should not have to re-key this client data again and again between these programs; it’s stupid.’”

All analysts agree that the integration issue won’t go away soon because there is little agreement over cross-industry data standards. (See the ranking of the 20 most popular tech products with advisers.)

Another surprise in the survey findings was the lack of enthusiasm among RIAs about adopting either of the unified technology platforms under construction at two of the industry’s major custodians.

TECHNOLOGY PLATFORMS

Big initiatives are under way at Schwab Advisor Services and TD Ameritrade Institutional to develop technology platforms meant to attract new RIAs (typically, breakaway brokers from wirehouse firms) or to retain and further cement ties among firms that already use the custodians’ services or technology.

While millions of dollars and a lot of other resources are being invested to build these platforms, findings from the survey suggest many advisers are unwilling to uproot themselves from their current technologies to take advantage of them — at least not yet.

When asked the question: “Would the new technology platform under development at Schwab Advisor Services make you consider dropping your current technology platform?” 81.3% of respondents answered “no,” while 18.7% said “yes.”

Things looked far more balanced and favorable to Schwab’s plans when survey results were limited to those RIA respondents that already use the firm as their primary custodian. In this case, among 218 total respondents, 42.2% selected “yes” while 57.8% chose “no.”

“These results validate our strategy of offering choice to advisers,” Brian Shenson, a managing director with Schwab Advisor Services, wrote in an e-mail.

“Schwab Intelligent Integration meets advisors’ varying needs by delivering a turnkey integrated technology platform and a modular solution that works with existing technology in their office. We’re working with a set of CRMs that represent a diverse group of solutions. We’ve chosen ones that over 50% of our clients already use and that have the ability to drive traditional CRM tasks, as well as firm analytics and work flow,” he wrote.

Two different offerings are under construction as part of the Schwab Intelligent Integration project. The first slated for completion is OneView Office, a turnkey platform that will include a highly customized version of the Salesforce.com customer relationship management application as its central offering along with PortfolioCenter for account management.

A second solution, slated for later delivery, is to be called Schwab OpenView Gateway and will provide advisers with the latter application but a choice between Microsoft Dynamics and Junxure from CRM Software Inc. for their CRM.

OPEN ARCHITECTURE

When survey respondents were asked if TD Ameritrade Institutional’s new technology platform would make them consider dropping their current technology, 86.9% of all respondents said they wouldn’t switch.

In an interview to discuss the finding, technology product management director Jon Patullo of TD Ameritrade said the question may have been poorly framed and did not accurately delineate the approach the firm had taken in it open application programming interface initiative, which is fundamentally different from the more turnkey, rigid offerings Schwab is pursuing.

“The No. 1 thing advisers told us [prior to beginning the project] was that they are happy with their existing systems,” he said. [But] advisers told us they want to gain efficiencies through integration of their existing applications.”

When existing TD Ameritrade RIA clients were asked if they would consider a change to the new platform, 47% said “yes,” and 53% said “no.”

With its open application programming interface initiative, TD has provided a development environment to a dozen partners, mainly third-party independent technology vendors that can pass its security muster. That environment mimics the open-application programming interface for TD’s Veo back-office account management and trading platform.

Two dozen other firms are in the process of gaining access to the development environment, which should allow advisers using many popular and independent third-party products to access the Veo system, using their applications without having to adopt the TD platform.

For example, two applications that are very popular with advisers are already far down the road of developing integrations with the Veo platform — Redtail Technologies’ CRM application (which also boasts a popular document management offering) and MoneyGuidePro from PIE Technologies Inc., which was the most popular financial planning program among survey respondents.

“In essence, the survey findings are encouraging, in that we are not looking to lock advisers down,” said Zohar Swaine, managing director for institutional strategy and product organization at TD Ameritrade.

SLOW TO CHANGE

“Advisers are just fiercely independent,” said Mr. Courtney. “Especially the guys who came from the wirehouses. [They] perceive any big platform as something that will threaten that independence, even if the custodians are picking best-of-breed products.”

Change is slow among advisers, noted Mr. Pirker, who said that the size of the advisory firm, and its level of maturity and sophistication, must be taken into account in technology decisions.

“Despite being outdated or inefficient, an advisory firm’s systems are something they have gotten used to,” he said, adding that the custodians will have an easier time attracting breakaway brokers who are setting up shop from scratch.

Established firms will become interested in the new platforms only after they have hit a threshold, Mr. Pirker said.

“Our research has found that when a firm reaches $100 million in assets under management, they start to realize that the way they have worked so far is not efficient. As they grow revenues, expenses keep pace — and that is the point at which they really perk up and take notice of integrated platforms,” Mr. Pirker said.

CRM

In the category of customer relationship management, the survey found two leaders among the 25 products and vendors listed as choices: Junxure, from CRM Software Inc., which is used by 21.2% of the respondents, followed closely by Redtail Technology with 18.1%.

No other product attained double digits in the survey results, though 7.5% of advisers selected Salesforce.com, which might portend well for Schwab’s turnkey platform offering.

Only 3.8% indicated they were currently using Microsoft Dynamics.

Among respondents, 0.4% reported using Seibel CRM, which also happens to be the single CRM offering on Fidelity Institutional Wealth Services’ WealthCentral platform, which has now been deployed for two years.

FINANCIAL PLANNING

Among the 14 financial planning applications listed in the survey, MoneyGuidePro was selected by 26.5% of the respondents, closely followed by Money Tree with 26%. Products from Morningstar Inc., eMoney Advisor and Emerging Information Systems Inc. each were used by less than 10% of the respondents. The next application with any significant share was Finance Logix from Oltis Software LLC with 3.5%.

PORTFOLIO MANAGEMENT

The category of portfolio management software produced the most highly fragmented results.

When asked which portfolio management application they used, 20% of the respondents selected “none” and 9.5% selected “other.”

“It really comes down to the many types of business models you have among firms,” Mr. Courtney said. “There are so many different needs and so many niche players meeting them, it will be a long time before you are going to see consolidation there.”

Schwab’s PortfolioCenter application was selected by more advisers surveyed — 21.1% — than any other.

Among other products and vendors, only Albridge Solutions received responses in the double digits, with 14.9%.

Two other vendors showed significant portfolio management market share: Morningstar Inc. (19.9%) and Advent Software Inc. (12.8%).

Morningstar’s Principia CAMS was selected by 6.4% of advisers, while the remaining advisers who selected the company as their provider of portfolio management software use Advisor Workstation and Morningstar Office.

Among advisers who chose Advent, 7.3% use the company’s legacy Axys product, 3.9% use its Black Diamond Performance Reporting and 1.6% selected the newer Advent Portfolio Exchange.

Gauging categories where adoption remains low was an important facet of the survey.

In the area of re-balancing applications, for example, 70.7% of the respondents said they do not use such technology.

Given a choice of 10 compliance technology products, 69% of the respondents chose “none” when asked which they use.

Similarly, 65.4% of respondents are not using account aggregation technology.

And even with a list of 14 products to select, 47.8% of the respondents indicated that they use no document management technology.

[email protected]