David E. Hultstrom, a self-described Excel geek, is pretty comfortable with technology. The fee-only advisor, who custodies with Schwab Institutional, tends to use a lot of the software that Schwab provides. But he also likes to pull additional software tools from different sources, cobbling together what he needs himself, even his own Monte Carlo simulations.
The tech programs he does buy for his independent RIA, Financial Architects, must have one common denominator: they need to play well with his other software applications, including the Schwab tools he uses.
“In an ideal world, it would be awesome if everything worked like that,” says the Woodstock, Ga.-based financial planner and his firm's chief investment officer. But of course this is not an ideal world, he says.
These days, in addition to the service that reps come to expect, custodians also offer multi-layered technology platforms that can make the difference between a well-honed office and one that is constantly trying to pick up the pieces. But independents are a fiercely self-sufficient crew, and they often like to cherry-pick their own technology applications. So it's crucial that all these technology tools talk to each other. The word here is integration, and it's what reps want, particularly as they grab a software program here and technology application there to layer on top of their custodians' offerings. (Often, independent RIAs have multiple custodial relationships.)
“I don't think there's a silver bullet out there where everything is on one platform,” says Alois Pirker, research director with financial services research firm Aite Group. “But a lot are working on it and we're seeing more development in that space.” Pirker is currently researching the way reps use software, and what RIA firms are doing to integrate different programs with one another.
Integration is such a crucial issue for small firms, that it is often the central factor in their software selection process, outstripping other factors. Hultstrom, for example, currently favors a client relationship management (CRM) program called Highrise, but he's considering switching to Salesforce.com, because his custodian Schwab recently stitched Salesforce.com into its platform as part of its newest initiative, Schwab Intelligent Integration. While his original decision to opt for Highrise wasn't made lightly, using a CRM backed by his custodian would allow Hultstrom to integrate more data with potentially fewer keystrokes. As Hultstrom notes, there are good reasons to move to a program that is more widely preferred and used.
“There are advantages to not being the outlier,” he says. “If you're using an industry leader, the option of being orphaned goes down. Someone will likely build a connector to port everyone over.”
Indeed, many software providers try to design their applications with the major platforms in mind. Redtail Technology is a perfect example. Although 28,000 users log in daily to Redtail's CRM tool, Redtail's institutional and broker/dealer manager Chris Roberts believes there's more room for adoption on the independent side. And so, Redtail tries to work with as many custodians and independent software firms as possible from Albridge to MoneyGuidePro and from Schwab to TD Ameritrade (TDA). TD Ameritrade recently opened its Application Programming Interface (API) to Redtail, allowing the CRM maker to build a beta product that will interface with TDA's system — and its advisors — within a few months.
“Most offices are using four to five pieces of software,” says Roberts. “So we thought why not make CRM at the center of that?”
Besides a heavy focus on making its CRM program work easily with outside platforms and custodians, Redtail has also recently rebuilt itself from the ground up, says Roberts. The new CRM version, tagged Project Leapfrog, now allows reps to update their calendars by dragging and dropping items into the tool. It also permits easier changes to client addresses and phone numbers and can embed images of clients into digital files in order to match a face to a voice — and give the program a more 21st-century feel.
“When people judge products now, they're so used to using Twitter and Facebook,” says Roberts. “So you definitely want to have a look and feel of something they're using on a day-to-day basis so they're accustomed to it.”
Of course, cost is essential, too. Aite Group's Pirker notes that independents are particularly careful before investing their own money into software — as the cost comes right from their own pocket. For example, priced at $65 for up to 15 users, with no additional cost for integration, Redtail is attractive to many advisors.
“[Independents] have to slap down their own credit card,” says Pirker. “So they scrutinize the sale much more. They don't want to overspend. It's their own money.”
Of course sometimes buying an entirely new suite of software applications for your RIA firm is not an option. And in cases like those, there are some applications out there that can act as a bridge between different tools that don't talk to eachother.
That's the idea behind Precise FP, a data collection tool that's designed to help investors transfer financials and personal information to their adviors just once. The software makes it easy for other programs to extract that information, regardless of the brand or whether the different applications are integrated with one another.
“We wanted to be platform independent, browser independent and independent independent,” says Precise co-founder Don Whalen, who is also a financial planner based near Atlanta, Ga. “We wanted something that could talk to any application, because advisors in the independent world like to change applications. And we didn't want them to feel that by using us, they were married to any one program.”
Precise FP can be used as a bridge with everything from financial planning software MoneyGuidePro, which Whalen himself uses, to CRM programs including Redtail, Junxure and soon Grendel. With a background in IT, and working mostly in the forms area with business software giant SAP in his previous career, Whalen has a unique aptitude for data mining and integration. These skills helped him after he opened his own financial planning firm and realized that the way he and his peers collected information from investors was much too haphazard. “It became woefully obvious there had to be a better way to get client data,” he says.
Today more than 200 firms use Precise FP, which went live three years ago. It costs $19.95 a month for unlimited use, or $199 a year.
Keeping It Simple
Tailoring a custom technology platform with outside offerings isn't for everyone. Some advisors just want to hit the shelf, pick up one big-box solution, and be done. Some advisors would rather not take time away from their clients to ensure that all their software is properly integrated and without glitches. TD Ameritrade understands this. To cater to such advisors, the firm recently rolled out its Veo advisor platform, which works with 25 outside vendors, which have access to the TD programming interface. Soon advisors using TD Ameritrade Institutional won't even need to log onto Veo to send a client trade through. As early as this Spring, they'll be able to place orders directly through their CRM, financial planning or portfolio management system.
“Advisors are always looking to be more efficient,” says Jon Patullo, director of technology product management at TDA. “And by opening up the API, they can work with multiple vendors and not have to re-key their data into multiple systems.”
TDA executives say advisors seem happiest when they're not forced to switch from an existing program every time there is a platform upgrade. They want the tools they've grown accustomed to to just work.
“They spend a lot of money and time, and it's not easy to just switch systems,” says Patullo. “So we want to give them the flexibility to use the system they want, the one that works best for them.”
Whalen couldn't agree more that reps should have the freedom to select the programs they want. But he says integration is an easy word to bandy about. It means different things to different people.
And so, he says, an independent RIA should pay attention to a whole host of factors when choosing technology: whether advisors are comfortable using the program, how steep the learning curve for using the tool is, how likely the technology is to stick around for a while.
“I'm going to spend a lot of my time in my CRM and financial planning applications, and if I cringe every time I open it, that's not good,” says Whalen. “And then we put a lot of faith in that company to stay in business. Ask anyone who has had to transition from one program to another. It's a nightmare. It's difficult for me, and I think of myself as a big propellerhead. For a sole proprietor without an IT background like myself? It's a big deal. So you have to think of all these things before getting on board with them.”