One reason it's so difficult to develop new technology for financial advisers, or perfect the ones they use right now, is there is no universal standard for data in the financial services industry.
The digital platforms at each bank, broker-dealer, custodian, record keeper, insurer and asset manager use a unique language to define and process information. The way one platform accounts for an equity, for example, is likely totally different than another.
Imagine trying to build a house if the wood was measured with the U.S. system, the dry wall with the metric system and the flooring in some other system you've never seen before. That is sort of what fintech vendors have to contend with, only with thousands of different variables, said Lex Sokolin, founder of AdvisorEngine. The discrepancies make seemingly simple tasks like opening accounts, moving money or executing trades much more difficult to code.
"The language is rarely common, and everyone is selfish and greedy, meaning they don't release their data, or they release their data in different ways," Mr. Sokolin said.
So, one fintech vendor may get 1% of the financial firm's information, while another gets 15%.
"The companies play kingmaker," Mr. Sokolin added.
Mr. Sokolin is skeptical the advice industry can get there any time soon, but he offered ideas for how it could be possible.
One way could be increased use of data aggregators like Envestnet Yodlee or Plaid, which already take disparate data sets and normalize them for third-parties to use. The problem is it could be expensive, with the data aggregator capturing all the revenue (hence why aggregation companies command such large valuations).
Another idea is blockchain, the distributed ledger technology behind digital currencies like bitcoin. It's far off, but blockchain could provide a standardized way for exchanging data without requiring firms to change too much of their legacy systems.
"You couldn't get UBS and Morgan Stanley, or Schwab and Fidelity, or LPL and Transamerica to reveal the inner workings of their data layer and then mutualize it," Mr. Sokolin said. "But crypto consortia provide a neat excuse and a bunch of cost savings to do it."
His third idea is a third-party group pushing the industry toward an agreed upon standard. This could come from a regulatory body, which is what has happened in Europe. But groups like the International Securities Association for Institutional Trade Communication (ISITC) and the Fintech Open Source Foundation (FINOS) believe they can get the industry on board without government interference.
"Every single constituency is knee-deep in this," said Lisa Iagatta, ISITC chairwoman and Fiserv's director of account management for investment services. "It's not just 'garbage in and garbage out,' it's the quantity of data. We need to have clean, accurate, up-to-date data powering the decision-making process."
If the industry can set aside competitive differences to agree upon a universal standard for how data is collected and processed, it would improve operations and pave the way for next-gen technologies like artificial intelligence, Ms. Iagatta said. That would make the all-in-one "frictionless" platforms so many firms are working toward much easier to build.
Meanwhile, FINOS is trying to get the industry to better embrace open-source software, technology built using free and publicly available code. The idea of sharing for free may seem anathema to the competitive nature of financial services firms, but FINOS director of member success Tosha Ellison said open-source software can dramatically improve time-to-market, cut development costs and improve security.
When it comes to things like creating charts, moving money or compliance functions that have to meet regulatory standards anyway, there's no reason for firms to try to reinvent the wheel, Ms. Ellison said. Just customize a version of code already built.
"There is so much software that doesn't confer a competitive advantage," she said. "Don't open-source the stuff that does, but there's a lot of boring stuff that your developers don't want to do, that's not interesting … Why develop that on your own?"
There are even many robo-advice tools available that open-source firms can use as they look to introduce their own digital advice offerings, she said.
While the idea of competing Wall Street firms working together on technology might seem impossible, Ms. Ellison said there is precedence. In 1992, the industry adopted the Financial Information eXchange (FIX) protocol to standardize how securities are transacted on electronic trading platforms.
She believes this can happen again, and is starting to see progress. Goldman Sachs, JP Morgan Chase, Morgan Stanley, UBS and Wells Fargo are all active members of FINOS.
Consider apps like Uber that can pull in maps from Google, overlay real-time information about car locations and seamlessly add in payment processing.
Now imagine building a similar system for financial advice. The customized, next-gen experience that clients and advisers want becomes much easier to build when the technology and data are standardized and consistent.