Financial advisers should take note of the iPhone application that Personal Capital Technology Corp. launched last week.
The firm is providing a set of slick account- and investment-tracking tools to anyone who wants them. They are the types of tools that every adviser should offer to younger prospects or the children of clients.
As Michael Kitces, director of research at Pinnacle Advisory Group Inc., pointed out at last week's Financial Planning Association conference, the world of advice is changing.
“With cloud-based planning documents, instant data updates, and advisers and clients communicating more frequently than ever ... the key question for advice givers is what value they will be able to add,” he said.
Whether advisers like it or not, younger investors perceive meeting face to face or talking on the phone a bit old-school. Generation X and Y investors already prefer using the sorts of tools that Personal Capital, Mint.com and dozens of other startups in the financial services realm are providing, which is why advisers should get on board.
With the debut of its iPhone application, Personal Capital has added Universal Checkbook, a feature that makes money transfers and bill paying easy. The feature is free for the time being, though the company does plan to start charging for the service eventually.
That will make Personal Capital many investors' hub of choice for moving or sending money, or paying bills from the firm's iPhone or iPad application or website.
This would mean fewer visits by investors to their multiple bank or brokerage account providers.
“Going beyond just viewing to actual doing,” is how Personal Capital chief executive Bill Harris put it, adding that the firm tracks $3 billion in assets.
He isn't yet sharing the assets under management (they were nearly $11 million as of the last ADV filing) or number of paying clients that the company's registered investment adviser has. Personal Capital could follow in the footsteps of Mint, the trailblazing budgeting and investment-tracking website that is now a household name with 7 million users. Mint was launched in 2005 and received a major popularity boost after presenting at the Finovate 2007 banking technology conference (InvestmentNews, Oct. 8, 2007).
The plucky startup, with a mere 1.5 million users then, was purchased in 2009 by Intuit Inc. for $170 million and has since grown even more rapidly.
Guess where online registered investment advisory Personal Capital gave a presentation last week? Finovate 2012 in San Francisco.
During and after the company's presentation, the consumer Twitterverse was abuzz about how neat its tools are.
Personal Capital was launched last fall, and I have written a few stories about it since then (see the online version of this column for links to those and a slide show I put together on the iPhone app), but it remains to be seen just how much traction the company has gained with consumers.
With all the media and consumer attention focused on the firm, chances are good that it will grow, which could prove very positive for advisers.
In fact, advisers should point to Personal Capital and Mint as examples of the kinds of tools that custodians, broker-dealers or large RIA firms should build themselves or offer through a partnership arrangement.
Yes, I'm suggesting that advisers offer free, easy-to-use, do-it-yourself online personal financial management tools that can aggregate all of a client's diverse accounts.
Rather than see those tools as competition, advisers should view them as an entryway to the human touch, sophisticated expertise and in-depth experience that only a financial professional, and not an online service, can provide.
What remains to be seen is whether large, staid financial services firms will be nimble and flexible enough to offer future clients the gateway tools that they increasingly will be demanding. Much depends on where the tools fit in firms' business models.
TURNING TO PROVIDERS
Currently, Mint is free to its users, and Intuit earns revenue from companies that pay it to provide users with information about their services, such as insurers and banks trying to attract customers in the market for low-cost auto policies and checking accounts.
Personal Capital, on the other hand, earns its revenue in a manner quite understandable to advisers: fee-based asset management.
The idea is that once online clients have become successful and find that managing their investments has become too complicated, they naturally will turn to the provider of all those nifty tools. After all, since those investors already trust Personal Capital with their investment data, why not trust the company to manage the investments themselves?
Another factor that might fuel significant growth is an agreement in the works between Personal Capital and MyNewFinancialAdvisor .com, a startup I wrote about recently (InvestmentNews, April 15).
In separate discussions, each firm has acknowledged that MyNewFinancialAdvisor.com will begin referring to Personal Capital the qualified leads it generates with assets under management below its threshold of $250,000.
These may be signs that a change is coming.