Articles About Financial Advisor Technology & FinTech

Welcome to the October issue of the latest news in Financial Advisor #FinTech – where we look at the big news announcements, and the underlying trends and developments that are emerging, in the world of technology solutions for financial advisors.

This month's edition kicks off with a look at the ongoing growth of "new" robo-advisors from established financial services firms, all of which are pricing 40% - 80% higher than the founding crop of robo-advisors like Betterment and Wealthfront, raising the question of whether 0.25% really is the new price point for investment management, or if robo-advisors will be the ones proven to have the "wrong" pricing.

From there, highlights include:

• Riskalyze raises $20M of Series A funding from FTV Capital.
• Yourefolio raises $500k of seed funding for a new estate planning software solution.
• Black Diamond parent SS&C buys Salentica CRM.
• Envestnet buys Wheelhouse Analytics to launch an advisor price benchmarking service for DoL fiduciary compliance.
• Fidelity gives a preview of its new robo-for-advisors, Automated Managed Portfolio (AMP), but it looks more like a traditional TAMP.
• Portfolio performance and accounting startup Addepar rolls out a new Open API as it continues to grow amongst advisors serving ultra-HNW clientele.
• CapGainsValet reopens for the 2016 tax season, with a new "Pro" service for financial advisors handling end-of-year mutual fund and ETF distributions for clients.

You can view analysis of these announcements, and more trends in advisor technology, in this month's column, including a growing number of broker-dealers offering proprietary CRM (which is both an efficiency improvement, and potential handcuffs on independent advisors), new integrations being built directly into rebalancing software as it becomes a more "core" part of the advisor technology stack, and a look at the rise of "InsurTech" solutions to make it easier (and cheaper) for advisors to help clients with term insurance.

I hope you're continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

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Welcome to the September issue of the latest news in Financial Advisor #FinTech - where we look at the big news announcements, and the underlying trends and developments that are emerging, in the world of technology solutions for financial advisors.

This month's edition kicks off with the launch of two new categories of financial advisor technology - AdvicePay, a payment processor to facilitate monthly, quarterly, or annual retainer billing directly from a client's credit card or bank account (without running afoul of RIA custody rules!), along with Snappy Kraken, a comprehensive automated digital marketing platform for advisors, both premiering at the #XYPN16 #FinTech competition in September.

Also in the news over the past month is: McKinsey Consulting buys PriceMetrix, a financial advisor data platform to do benchmarking of advisor fees (necessary to determine "reasonable compensation" in the future under DoL fiduciary!); the launch of a new risk tolerance profiling system called TrueProfile, and the news that the Financial Planning Association is participating in the venture (putting it in competition with companies like Riskalyze and FinaMetrica, which also sponsor FPA events!); RIA In A Box wins its second consecutive "Best In Show" award at the Fuse Orion hackathon (who says compliance tech solutions aren't exciting!?); a new hybrid Robo/TAMP solution named "RobustWealth" launches, aiming to compete with alternatives like Betterment for Advisors but with the capabilities of a full-fledged TAMP; Betterment rolls out a new "Tax Coordinated Portfolio" service, threatening to commoditize Asset Location in the same way it has with Tax-Loss Harvesting; the Balance Financial PFM solution for advisors shuts down (but may live on as a proprietary HD Vest solution); transactional "robo" platforms Motif and Robinhood pivot to an AUM-like fee-based wrap account subscription model, but at a cost that could be drastically higher than other robo-advisors for small Millennial accounts; and a new product called "Screenmeet" launches for advisors, aiming to compete with (more expensive and complex) alternatives like GoToMeeting and WebEx for advisors who just want to do a simple screen-share of a document while speaking to a client on the phone.

I hope you're continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

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Welcome to the August issue of the latest news in Financial Advisor #FinTech - where we look at the big news announcements, and the underlying trends and developments that are emerging, in the world of technology solutions for financial advisors.

This month's edition kicks off with a look at the growing volume of new integrations from independent advisor CRM solutions like Redtail and Wealthbox, which are not only expanding their connections to "traditional" partners like portfolio management and financial planning software solutions, but also "non-traditional" partnerships like Redtail connecting to advisor content marketing platform FMeX and Wealthbox offering a new Slack integration - along with a growing volume of integrations that both companies are creating via Zapier to connect to third-party solutions like the Calendly and ScheduleOnce appointment-setting apps.

Also in the news over the past month is: a looming resurgence from financial planning software provider inStream, as they sign away several key members of the Jefferson National distribution team; the latest V3 version of the WealthAccess PFM portal for clients; the shutdown of competing client PFM portal Guide Financial (as their underlying data provider Intuit shuts down its own Financial Data API this fall); the rebranding of Social Security Timing and Tax Clarity into Covisum; whether FutureAdvisor is about to run away with the B2B "robo" marketplace for banks and broker-dealers as it signs a mega deal with US Bank; how Betterment is opening up a new distribution channel for (smaller) asset managers with a new managed account deal with Cambria ETFs; the buzz around newcomer AdvisorStream and whether they were marketing to financial advisors using fake testimonials; and how the "risk tolerance software" category has become a hot new area for advisor technology, driven less by a demand from advisors and more by a desire for newcomers to emulate the success of Riskalyze, but with the door to new opportunities opening to all as the DoL fiduciary rule drives everyone to step up their process for prospective client due diligence.

I hope you're continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

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In the span of barely 10 years, companies like Uber, Airbnb, Facebook, and Alibaba have experienced explosive growth, far surpassing the growth rate of their respective industries, and despite the fact they don’t actually produce anything themselves.

Yet in fact, that’s the whole point; they are platform businesses, and their role in facilitating a marketplace between consumers and producers is the primary form of value creation, not the production of goods and services themselves. In the process, these platform businesses have been out-competing or outright disrupting their respective industries, raising the question of whether – or when – the platform model will come to financial services as well.

In point of fact, though, the financial services industry is already filled with platform businesses. Arguably, stock market exchanges are one of the oldest and original types of platforms to connect buyers and sellers. And custodians and broker-dealers constitute a form of platform business as well, connecting advisors and the asset managers who want to reach them. Envestnet is quite possibly an even purer form of platform business, avoiding the hassles of actually being the custodian or doing the clearing, and instead just serving as technology that facilitates the matchmaking process between advisors and asset managers.

Still, this means the door remains open for an actual financial advisor matchmaking platform, that connects consumers directly to financial advisors themselves. Prior attempts at this model have largely failed, likely due to the fact that most advisors are such generalists that it’s not really feasible to match them effectively with consumers in the first place. In turn, this suggests that a successful platform in the future will need to focus not on pairing consumers with advisors, but on helping consumers find an advisor who can answer their particular question – which forces advisors to actually choose a niche specialization by which they can be matched. Which means in the end, the real platform opportunity of the future is not a financial advisor platform, but a financial advice platform instead!

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As technology plays an increasingly central role in the business of financial advice, the pace of change is accelerating. After years of limited development and progress – from 2002 to 2012, the biggest “news” for most advisor technology providers was simply that they had finally moved from server-based to a cloud-based platform – the arrival of “robo-advisors” highlighted how far financial services technology had fallen behind. The end result: while robo-advisors aren’t competing much with financial advisors directly, they have set off an arms race of technology firms aiming to serve financial advisors.

To help my fellow financial advisor community keep up with the most important developments, I’m launching what will become a new regular column on the first Monday of every month: the latest in Financial #AdvisorTech.

The goal here will be to highlight the significant news and developments in advisor-related technology over the past month, from major software releases, to big news on new integrations, companies raising capital (or shutting down), and highlighting new #AdvisorTech providers coming to the forefront with new solutions that advisors might want to check out.

In this month’s inaugural issue, we look at the news that RightCapital (a new financial planning software provider) has raised $1M in seed funding to grow their tax-savvy planning solution for advisors, the announcement from EverPlans (an estate planning document value that advisors offer as a perk to their clients) that they have raised $6M in their Series A round (even as some other new estate planning tools like Yourefolio and EstateGen have appeared on the scene), Microsoft’s launch of a new online scheduling tool called “Bookings”, the merger of Citrix and LogMeIn (which may eventually combine together the popular advisor video meeting apps GoToMeeting and Join.Me), how we may truly be past the “peak robo” moment as several more robo-advisors have either shut down or are struggling to retain talent, and a quick look at whether Apex Clearing may be trying to get their foot in the door as a new RIA alternative to Schwab, Fidelity, and especially TD Ameritrade.

I hope you find this new column helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

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The current regulatory oversight structure for advisors is a patchwork combination of FINRA, SEC and state securities regulators, and state insurance regulators, depending on which types of insurance or investment products/services the advisor offers. Regardless of the regulator, though, the compliance process is substantively similar for all of them: the advisor is evaluated based on the final solution that is sold/implemented, and the focus of compliance is on substantiating that particular product recommendation or investment portfolio implementation.

Under the Department of Labor’s fiduciary rule, though, a new standard is emerging, in a manner that transcends the traditional dividing lines of product channels: that the advice must be in the best interests of the client. Which means not only must the product have been reasonable and not UNsuitable… a prudent expert would have to concur that the recommendation itself was actually in the best interests of the client and improved his/her situation.

In today’s compliance landscape, though, this introduces significant new challenges. The financial services industry has not adopted a standardized advice process for advisors to consistently adhere to, in order to demonstrate their fiduciary duty of care and due diligence. Nor is there any clear agreed-upon framework to determine when a particular recommendation is “best” or not, based on a specific set of client goals and circumstances.

Fortunately, technology can help to solve these problems, but will require a significant change from the compliance technology tools today. This may entail a shift in financial planning software (from being a mere analytical tool for advisors to an actual oversight tool for financial institutions), or the development of third-party software that takes an established advice process (or creates a new one) and institutionalizes it with due diligence and procedural checklists.

Or alternatively, the DoL fiduciary rule may actually spawn the next generation of “robo-advice” software, designed not directly for consumers, but as a compliance-driven solution to ensure that all advisors in the organization are giving the same consistent advice… and potentially transforming the financial advisor from the one who crafts the client advice, to someone who instead simply delivers the institution’s computer-generated advice and helps the client take the necessary steps to change their behavior, follow through, and implement?

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While there are an ever-growing number of advisory firms operating on the AUM model and offering “wealth management” services, there is still a significant gap between those that are ultimately still investment-centric, and the firms that are truly focused on financial planning first.

The significance of this difference in the culture of an advisory firm is that it impacts not only the depth of its investment vs financial planning services, but that it also shapes the technology decisions of the firm. Because the investment-centric firm is typically built around its portfolio accounting software as its core, while the financial-planning-centric firm uses its financial planning and CRM software as the hub of the business.

Yet despite the substantively different technology needs of the two firms, the overwhelming majority of advisor technology is still being developed for investment-centric firms, with at best only a token nod towards financial planning goals – even though, ironically, the financial-planning-centric software solutions often command a premium price in the marketplace!

Nonetheless, as the commoditization of investment management continues to drive more firms towards offering comprehensive financial planning services, the technology shift is beginning, from the rise of Turnkey Financial Planning Platform (TFPP) technology solutions, to the rising demand of planning-centric firms for a more financial-planning-centric client experience. Will advisor technology solutions step up to fill the void?

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As the Department of Labor's fiduciary rule proposal was being discussed last year, robo-advisors were hailed as a potential solution to bring low-cost fiduciary advice to consumers. Labor Secretary Perez explicitly touted companies like Wealthfront as being a key part of the fiduciary future. However, it turns out that the final fiduciary rule has created a significant problem for several robo-advisors like Schwab and Blackrock's FutureAdvisor, that use the platform to distribute their own proprietary products.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at what the final DoL fiduciary rule really said about robo-advisors, how robo-advice must be delivered to satisfy the Level Fee Fiduciary requirements, and why the use of proprietary products by companies like Schwab and Blackrock - especially when combined with having investment discretion - may present a serious fiduciary problem when the rules take effect next April.

Which means ultimately, some robo-advisors may need to substantially change their business practices and how they operate in the coming months, to ensure they fit within the DoL's fiduciary rules. The most likely outcome may be for the companies to simply raise their fees, and eliminate their proprietary-product-based profitability, to ensure they're operating as Level Fee Fiduciaries. But doing so will throw a significant wrench in the growth of robo-advisors that were being cultivated specifically as a distribution channel for ETFs. On the plus side, though, it means the DoL's fiduciary rule may be more effective at limiting proprietary products than was initially believed!

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While several of today's leading "robo-advisor" companies were founded in the aftermath of the financial crisis, it wasn't until early 2012 that they finally converged on a common low-cost "automated investment service" model... which, coupled with a surge of media coverage, quickly suggested that they could become the future of financial advice (or at least investment management) for consumers.

However, in the year since established players like Schwab and Vanguard launched ‘competing’ services, a fresh look at the robo-advisor landscape reveals that their growth rates are falling rapidly, to just 1/3^rd their levels of one year ago. Their apparent demise: an inability to scale their marketing to sustain growth rates in the face of increasing competition and challenging client acquisition costs, coupled with a similar inability to grow their average account sizes.

In fact, the combination of rising client acquisition costs and declining average revenue per client may be an outright death knell for the direct-to-consumer robo-advisor movement, as they approach the unsustainable crossover point where the lifetime value of a client, cumulatively, is less than the cost to acquire a single client (given that some have a mere average gross revenue per client of just $50/year!). Accordingly, it's not surprising to see many of the early robo-advisor players pivoting in other directions, using their long runway of available dollars to try to find greater growth traction, with at best one or two that might manage to build a viable brand that survives.

Nonetheless, in the long run we may still look back at this moment as one of significant transition for the industry, not because robo-advisors disrupted human advisors, but because the emergence of robo-advisors was the needed catalyst for the industry to reinvest into the future of financial advisor technology. Already, tech-augmented human advisors are rapidly growing past both their robo-advisor and traditional human advisor peers, and an outright “arms race” of technology is emerging amongst financial advisor custodians and broker-dealers all seeking to be the future platform of choice.

Which means in the end, the direct-to-consumer robo-advisor movement may be dying, with VC funding suggesting Betterment may soon be the last man standing, but the legacy of their technology will continue to be transformative for years to come, just as online brokerage in the late 1990s didn’t disrupt financial advisors but instead became the backbone of how we execute our businesses today!

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Good financial planning software is an essential tool for today's financial advisor. Yet the reality is that it's incredibly difficult to determine what is the best financial planning software... in part because advisors vary in how they use financial planning software in the first place, which means what is the "best" software for one advisor may be a terrible match for another.

In this financial advisor's guide to the best financial planning software, we attempt to clarify what the important criteria are in choosing financial planning software in the first place, in recognition that what might be a crucial "deal-killer" required feature for one advisor may not even matter to another. Whether it's the distinction between goals-based and cash-flow-based retirement projections, to the ease of input, the depth of the output (especially in technical areas like detailed income and estate tax projections), available integrations to other components of the financial advisor technology stack, or the availability of account aggregation and "PFM" tools... the reality is that no financial planning software is the "best" at everything, so trade-offs must be considered.

In addition, as someone who's seen virtually every financial planning software company in the landscape - including some that aren't even around anymore - the end of this guide includes my own brief high-level review of each of the leading financial planning software packages (including some of the newest players, too), to give further context to each software package's strengths and potential weaknesses. Also included are the pricing details of the various financial planning software packages, which still have a remarkably amount of variance for what are nominally "similar" financial planning software tools!

I hope this guide is helpful to you in considering whether you're got the "right" financial planning software, or whether there may be an alternative solution out there that's a better fit for your business and client needs!

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