Articles About Financial Advisor Technology & FinTech

One of the not-so-secret “secrets” of financial planning is that relatively few advisors actually generate the bulk of their income by getting paid for financial planning advice. Instead, despite the growth of financial planning in recent decades, the reality is still that most advisors get paid for financial planning through the subsequent products that are sold for implementation, or the subsequent assets they gather or retain through financial planning as a value-add.

And while arguably this is still not a bad way to build a business model around financial planning, the fact that financial planning remains rooted primarily in product sales and asset gathering has influenced – perhaps more than most advisors realized – the way that our financial planning software is built.

In fact, with its focus on investment accumulation (for retirement and college) and insurance-related scenarios, most financial planning software may be little more than a product sales and asset gathering tool shrouded in financial planning terms. Areas that are highly relevant for financial advice but not for product sales – from tax strategies to debt management to cash flow and budgeting – remain remarkably absent from most financial planning software tools available today.

Given that financial planning is a complex, intangible service that may be beneficial for clients but is hard for them to conceptualize, having tools to illustrate financial planning strategies, help clients adjust their behavior, and show the value of the advice we’ve delivered is essential. Yet in a world where most financial planning software remains so product-centric, have we progressed to the point where the financial planning software is not facilitating real advice, but limiting its growth?

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For most financial advisors, it’s rare to get a new client from their website. And if they do, it is likely because the person was already referred to them, and simply checked out the website along the way.

Yet in today’s world of digital marketing, a growing number of advisors are using their websites to form a trusted connection with strangers who turn into bona fide prospects, and eventually become clients. And in fact, the tools and techniques to doing so – from building an ongoing connection that engenders trust, to drip marketing those who aren’t ready to do business yet – are remarkably similar, when it’s digital marketing or traditional networking.

However, the sad reality is that most financial advisor websites simply are not designed in an effective manner to bring in new business, and are commonly missing key details, from photos to help visitors form a personal connection, to a clear description of services and pricing, to having a “lead magnet” that can be exchanged for email addresses to ensure there’s a way to bring site visitors back in the future.

Fortunately, though, these are all problems that can be fixed. In today’s article, we look at some of the best financial advisor websites and how they’re designed to bring in clients, and there’s even a financial advisor website design checklist of some of the key items you can get started with yourself!

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As we move through the fourth quarter, this is the time that fund companies start publishing their estimates for end-of-year capital gains distributions – a tax event that can have significant ramifications for investors, yet one for which its remarkably difficult to aggregate together relevant information across a wide range of investment companies.

Until now. Financial advisor (and Chief Investment Officer) Mark Wilson of The Tarbox Group has (re-)launched his Capital Gains Valet (or CapGainsValet for short) service, which pulls together all the reference links for investment company capital gains distribution estimates to a single site location. And the service is made available to advisors and other investors for free (Wilson simply asks for donations to his charity of choice).

And notably, in a year where markets have been relatively flat but many funds have significant embedded capital gains due to the past 6 years of a raging bull market, it becomes especially important to plan in advance for year-end distributions… both for those who might consider selling a recently-purchased fund with a large gain looming, or who may wish to defer buying a large-gain-distributing fund until after the end of the year. Or alternatively, at least focus on the asset location benefits of placing such gains-distributing funds (especially those with large embedded capital gains) inside of a retirement account in the first place!

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At the close of week’s eMoney Advisor Summit, the financial planning software company made a ‘surprise’ announcement that it will be integrating with its financial planning software competitor MoneyGuidePro.

Yet the reality is that this announcement wasn’t actually new – it had been previewed earlier this year at the T3 Advisor Technology conference – and the integration is actually between MoneyGuidePro and the new eMx Select platform, a comprehensive client Personal Financial Management (PFM) solution plus advisor dashboard that eMoneyAdvisor seems to be positioning as a new central platform on which an advisor could run his/her entire business.

From the MoneyGuidePro perspective, its users will likely be happy to have a new and more robust PFM solution to use with clients, and the integration plugs a gap in the MGP client experience. But in the long run, the pressure is now on MGP to continue to stay one step ahead of eMoney Advisor’s own financial planning software, or risk finding that their integration is a form of Trojan horse strategy that gives eMoney Advisor the chance to showcase its own software to MGP users and then solicit them to come over for the entire eMoney Advisor solution.

More generally, the decision of MoneyGuidePro to integrate with a perceived competitor certainly makes the point of the rapidly increasing importance of having a PFM portal that delivers a strong financial planning experience for clients. Though ultimately, the real news of the eMoney Advisor decision to unbundle eMx Select is that it is shifting from being “just” financial planning software to instead becoming an increasingly open architecture central advisor platform suggests that Fidelity may even be positioning the software to compete against TD Ameritrade’s Veo and Envestnet’s emerging platform solution. Which may well have been Edmond Walter’s vision all along.

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While much has been written about the disruptive “threat” of the robo-advisors, the reality is that even after several years, their market share is still a miniscule fraction of 1%. Robo-advisors have had limited success, even in areas with little or no head-to-head competition against traditional financial advisors, like working with Millennial clients.

In fact, the struggles of most robo-advisor platforms have been so significant, they’ve been increasingly pivoting to work with established financial services firms, or to become available to individual financial advisors, in the hopes that such partnerships will allow robo-technology firms to gain the volume and scale they need to succeed.

Yet the caveat is that individual financial advisors rolling out web-based “robo” tools to reach Millennial clients will probably be even less successful than the pure robo-advisors have been! After all, the challenge of client acquisition costs is equally difficult for human advisors as it has been for robo-advisors, yet most existing advisory firms are even less attuned to the challenges of how to effectively execute a digital marketing plan!

Ultimately, this doesn’t mean that “robo-advisors-for-advisors” solutions will be worthless for all, but the key point is to recognize that advisors who want to serve Millennials must start by crafting a service model that is actually relevant and valuable for Millennials, have a means to market to Millennials, and then add a robo-technology solution on top to aid with the implementation. Advisors won’t be able to “out-robo” a robo-advisor; at best, the opportunity is to leverage robo-advisor technology as a part of a broader holistic service offering for Millennials, where advisors can focus on their strengths, and use technology to improve the efficiency of the process... but only for advisors who can solve the marketing challenge first!

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Yesterday, Blackrock announced that it was acquiring FutureAdvisor, one of the three original and “pure” robo-advisors who have been gathering assets and managing ETF portfolios directly for consumers. And despite FutureAdvisor having “just” $600M of AUM, and an estimated $3M of revenues, Blackrock’s purchase was rumored to be in excess of $150M.

However, it appears that Blackrock’s strategy was not simply to buy FutureAdvisor to expand its direct-to-consumer solution, but instead to pivot FutureAdvisor to become a robo-advisor-for­-advisors solution, and license/offer the technology platform to a wide range of broker-dealers, insurance companies, banks, and custodians to turn their human advisors into tech-augmented "cyborg" advisors. In this context, as the world’s largest asset manager and a leading player in the ETF space already, the Blackrock deal appears to be visioned primarily as a means to further grow the size of the ETF pie and the Blackrock (iShares) market share by driving distribution to its ETFs through this new technology platform. The robo-advisor is now a distribution channel.

For financial advisors, the “good” news of the Blackrock deal is that “robo” tools may soon become increasingly available to a wider and wider range of advisor platforms. And ironically, because iShares – like Schwab’s Intelligent Institutional Portfolios – can profit from the underlying ETFs held in the portfolio, the future Blackrock FutureAdvisor solution may even undercut existing robo-advisor platforms, as the established financial services industry players continue to apply more and more pressure to the direct-to-consumer robo-advisor solutions. In other words, advisors and established firms are now driving the cost of robo-technology down to zero, relying on their ability to profit from the ‘traditional’ channels of manufacturing investment products (e.g., ETFs) and delivering personal financial advice, and out-commoditizing the robo-advisor commoditization.

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Yesterday, Envestnet ‘surprised’ the FinTech world by announcing that it was buying data/account aggregation company Yodlee for a whopping $590M, at a 70% premium to Yodlee’s valuation at its IPO less than 12 months ago. Yet looking at Envestnet’s apparent strategy of building a “Holy Grail” technology platform solution for advisors, that includes CRM, portfolio accounting, and financial planning software, it’s not entirely surprising that Envestnet decided they wanted to own the data that feeds the engine, too.

From the broader industry perspective, though, Envestnet’s acquisition of Yodlee may make some competitors nervous. There are relatively few data sources for quality account aggregation data in the first place, especially ones that include a holistic picture of household cash flows (and not just investment account/performance data). And with Envestnet now owning one of the top two players (the other is the Intuit API that powers Mint.com), and having its own financial planning software given the recent FinanceLogix acquisition, it raises the troubling question of whether competing financial planning software providers like MoneyGuidePro (which relies solely on the Yodlee solution) could someday be left in the lurch.

More broadly, though, the Yodlee acquisition marks a massive uptick in what has already been an incredibly hot technology category. Just under two years ago, I predicted that account aggregation and Personal Financial Management (PFM) solutions would become the hot new category of advisor technology, and earlier this year (before any major deals had yet been announced) that 2015 would be the year of Advisor FinTech. Now it’s not even the end of summer, there have been over $1B of account aggregation and PFM-related providers in just the past 6 months alone, and suddenly the biggest problem may be that there are almost no players left to acquire… unless someone new comes along soon?

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