Historically, the various software and technology solutions serving financial planners has been very fragmented. Independent firms were often stuck with small, homegrown solutions for financial planning, client relationship management (CRM), and portfolio reporting software, and/or working with 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 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 proprietary solutions, which both invites in new firms to innovate and also 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 infamous "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 holy grail solutions.

As of now, these trends are still underway and will be playing out for many more years. Nonetheless, the direction is clear, and remarkably positive for both startup firms - who have more opportunity for growth and success than ever - and also 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!

Financial Planning Software Of The Past

Historically, 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, client relationship management (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 was could be somewhat clunky and inefficient, the reality was that the best software solutions were at the largest firms.

By contrast, those advisors who were in the independent space struggled. The options were few and far between; many solutions were either tiny struggling software companies or even homegrown software originally built within a planning firm and then sold to other advisors, or in the case of CRM in particular, large non-industry-specific platforms that simply had a lightly customized template for advisors to overlay on top (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 size and scale necessary to internally create and offer the best proprietary solutions.

The end result of these challenges was that many advisors within larger firms effectively became captive to their company's software solutions, as going independent meant taking a step down in software and technology, and even if there was a competitor with "comparable" technology (which was often hard to determine) the change still meant walking away from your client and business data, which was often embedded within and effectively "held hostage" by the current employer and its software. In essence, proprietary software at large firms was simultaneously a business enhancement for advisors who worked there, and shackles that made it hard for them to leave (which helped the firms justify the investment into the software in the first place).

For those at smaller or independent firms, they weren't necessarily held captive to a platform because of its technology, but the alternative wasn't much better: making a decision from amongst the very limited small-company solutions available. And although the planning firm might own its data in such a scenario, migrating it from one software platform to another was difficult and expensive, or outright impossible as well. And in the meantime, the software evolved very little, as most of these "tiny" firms simply didn't have the resources to reinvest for growth and development.

The Impact Of The Digital Age

Over the past several years, the technology landscape for financial planning (and other industries) has begun to shift dramatically as financial planning enters the digital age; these changes are being driven by two major forces.

The first is the rise of the internet and an ever-growing amount of bandwidth has made it possible to interact with software primarily through digital connectivity. The end result of this change: software no longer needs to run on your computer in order for you to use it. Instead, it can exist "in the cloud" and still be accessed from your computer. Although the near term benefit is simply that firms no longer have to buy their own hardware to run local installations of software, the longer term impact is far more profound: with cloud-based computing, your software can be accessed from any location, and any device... which also means it can be accessed from any employer and on any advisory platform.

The second major trend has been the emergence of Application Programming Interfaces (APIs). The basic concept of an API is that software is built with various hooks and openings, which allows programmers from other companies to program their software to connect with, latch on to, and interact with the first software. Think of it this way. When you use your computer, you don't actually interact with the physical box full of computer parts; instead, you use a keyboard, mouse, and monitor to see and interface with your hardware and software technology. Software of the past was like having the computer with no mouse or keyboard; you could see what it was doing on the monitor, but you had no way to interact with it. When software is built with an Application Programming Interface - the key word being "interface" - it's like building in a mouse and keyboard, so other software can now interact with it. The end result - software packages are beginning to "talk" to one another and communicate.

The Future Of Software For Financial Planners

So how will these trends play out for financial planners and impact their use of software in the coming years? There are several powerful implications.

The first is that the center of gravity for industry software is shifting, from proprietary solutions within companies to independent companies that can serve a wide range of advisors across companies. After all, from the software company's perspective, when advisors can access any software from any place - without needing to rely upon the software produced by the firm they work for - the potential base of advisors that can use the software grows. As a result, the number of advisors who use independent software solutions can become greater than the number of advisors using a proprietary solution... which means the independent software companies become the largest, and it's no longer good business strategy for firms to create their own proprietary software. In practice, this trend is already underway; for instance, financial planning software MoneyGuide Pro now has far more users than even the largest of the major wirehouses or insurance companies, as does Redtail CRM. In fact, now even major firms with a significant number of advisors and hefty resources typically don't build their own proprietary solutions from the ground up; instead, they use (or private label) an independent provider's solution, and at the most simply adapt and partially customize it from there to fit their company's and advisors' own specific needs. The reason this really matters? With a larger pool of potential advisor customers in play, the business opportunities for technology start-up firms serving the advisory industry is far greater, and the pace of software innovation and entirely new solutions for advisors is accelerating, after being relatively stagnant for years.

Another consequence of the shift from proprietary to external (or private-labeled) independent solutions is that advisors now have more flexibility than ever to change which firms they affiliate with, confident that a similar (or exactly identical) software solution will be available on the other side. In other words, if you're used to a certain financial planning and CRM software solution within one firm, there's a good chance you can use the same software at another firm as well (albeit perhaps without quite the same customizations). In addition, key client data is more accessible than ever, as the API connections are built between various software companies. The end result: advisors have more flexibility to affiliate with whatever company is the best fit for their business and client needs, and have a newfound freedom and flexibility to make changes without being shackled to their current firm because their client and business data is held hostage. In fact, the explosion of quality independent software solutions has likely done a great deal to grease the wheels of the breakaway broker trend.

The rise of the software API also bodes well for another eternal challenge of advisors: finding the software "holy grail" - that integrated solution of CRM, portfolio management and reporting, and financial planning software with communication and business management tools, all on one central platform. Over the years, a high quality software "holy grail" has been forever out of reach. Most software providers only know how to program their software niche, not a holistic solution, and those who have tried often end out producing a solution that sacrifices quality and flexibility on the alter of integration; the end result is that the integrated software may have all the different components talking to each other on one centralized platform, but each part of the software is inferior to standalone best-in-class solutions in each category. With APIs that allow software to integrate, though, a new "holy grail" solution emerges: to simply buy the best-in-class solution for each and every type of software required (CRM, financial planning, portfolio reporting, etc.), and get an independent programmer to use the available APIs to make all the software components integrate and communicate cleanly with each other!

Financial Advisor Middleware And The Rise Of The Independent Integrators

In turn, this leads to what is now just the early stages of a major new trend in the advisor space: the rise of the "middleware" programmers and integrators specialized in the software that is built for advisory firms. Just as the iPad and Android platforms have drawn in a plethora of software companies designing "apps" for people to use, so too are software companies and programmers emerging who will work with advisory firms and the available software APIs to make integrated, custom-programmed solutions for the firm's specific needs built on best-in-class software infrastructure.

Early examples of this trend include companies like AppCrown which markets software integrations for advisors using the Salesforce software infrastructure and API; similarly, TD Ameritrade's Veo open access initiative is designed to encourage these types of integrations and growth in this space. Ultimately, such integrators also help to support use of the large open-API software platforms in the first place, too; for instance, much of Salesforce's growth in both the financial advisory and other industries has been built on the backs of integrators who sell their own services, and support the sales of the cloud-based platform along the way.

In the long run, this presents significant challenges for industry-specific solutions (e.g., Junxure CRM) to compete with larger platform (e.g., Salesforce) solutions and an army of integrators recommending it, although thus far this shift has been tempered by the fact that industry-specific solutions are really built for the industry and are often ready right out of the gate, while with software adaptations from outside the industry it can take a lot of adapting and integrating to really make the software viable. Nonetheless, the pressure is on for many industry niche firms to continue to adapt rapidly, or figure out how to develop a broader API to make their software more customizable, as the size of the opportunity for startup firms as middleware providers and integrators is going to attract a lot of new providers (and even venture capital to fund it) to serve advisors.

Perhaps the biggest benefit of all these trends, though, is simply that the software being developed for advisors today, especially using the infrastructure of the cloud, is simultaneously cheaper (especially when accounting for the servers and hardware no longer required), far more efficient (due to both the API integrations and the accessibility), showing more innovation (with the introduction of new startups), and just downright superior to anything we've had in the past. It may not be long before every firm can have its own "holy grail" solution, built to its own planning/investment philosophies, processes, and specific needs and desires; it won't be technology that replaces planners, but instead tools that significantly augment them.

  • http://www.hullfinancialplanning.com Jason Hull

    I’d expect an increase in the number of open source applications over the next couple of years. Someone at some company is going to get sick of having to rewrite the same darn calculation over and over again and is going to open source the software, and that’ll start the tide, if it’s not already. I imagine that there’s an opportunity for some smart team of former devs at an i-bank to create a services company based on open sourcing a platform which could be a healthy and thriving little company. Not that I’m endorsing as such, but I am surprised nobody’s taken a crack at it and raised a little funding to try to make a go of such a platform.

  • http://www.getadvisordeck.com Cameron Nordholm

    Hi Jason – I think you’re spot on. The whole open source movement is about solving these types of shared pain points so the whole space can move forward. You’re seeing this in storage (Box, Dropbox), CRM (Salesforce), and in the accounts data integration space. For independents, there are increasingly interesting solution such as Blueleaf.

    In fact, just a couple months ago we released our first open source contribution (django-calcxml on Github, you can Google because we can’t embed links here) which provides easy implementation (with a little coding) of calculations for advisor and consumer audiences.

  • http://www.pathfinderfs.com David Jacobs

    I have to disagree a bit with gist of this article.

    1. Moving to the cloud does not mean more open, although it can mean easier software/server maintenance. For example, moving your data out of MoneyGuidePro is just as difficult as moving it out of Naviplan, MoneyTree or any other desktop of cloud based system. This is true for Redtail, Protracker, Junxure, etc.

    2. APIs can potentially be even less open/flexible than having direct access to the database of a desktop version.

    3. Integrators like AppCrown are the modern day equivalent of those who extended programs like ACT for the industry. Yes, you get the advantage of using a solid base, but the extensions are poorly written, and will only get better if they get enough traction to devote the necessary resources. And there is no inevitability that will happen.

    So while moving to the cloud has certainly simplified application management. It has definitely not done anything about vendor lock in. And I don’t see the quality of the apps improving any faster today than they did 10 years ago. If anything, I see innovation (in terms of capabilities) currently going backwards as more limited versions are released on the web.


  • http://www.pathwayplanning.com/ Greg Brown

    Another shift I see is a move towards simplicity and ease-of-use. In my opinion, most CRM, financial planning, and portfolio management software is clunky and packed with too many unnecessary features. A few innovative software companies, such as inStream and Blueleaf, really “get it” when it comes to keeping it simple.

    Both platforms are a quantum leap in terms of usability and provide beautiful, clean and simple reports (both PDF reports and in Blueleaf’s case, “live” reports, which is essentially a dynamic client portal better than anyone out there). I suspect clients aren’t looking for 20+ page financial plans and 10+ page performance reports; they want simple, clean reports that are easy to understand.

    As a former engineer with a knack for technology and software, I was in awe of how far behind the times most financial planning software was just a few years ago. It’s refreshing to see a real explosion of new offerings and innovative ideas from independent software companies.


  • https://pro.riskalyze.com Aaron Klein

    So true. When you empower advisors with the tools to demonstrate how deeply personal their service can be, that’s when technology is really working for the advisor.

    Case in point: when our advisors show a prospect the level of risk they’re taking on in their current portfolio. There’s nothing that makes them sign the transfer paperwork faster.

    (And that’s what led us to build Worst Wirehouse Portfolios, by the way. It’s funny, but we’ve heard horror story after horror story about the portfolios that prospects walk in with.)

  • http://4diq.com Chris Blakely

    This article really nails it – with one caveat. There are still too many financial institutions that lock in advisors and their clients by holding data hostage. Companies that depend on the current order to charge advisors higher prices. This is slowly changing as I believe there are enough advisors who are also sick of the status quo and are seeking a more integrated option.


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Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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