Greg Friedman, CFP™, of Friedman & Associates in Novato, California, is a technology columnist for this journal and designer of Junxure-i, a customer relations management software program for advisors. He equates the exercise of evaluating and investing in technology with the experience of buying a house. Says Friedman, "One house is the right size, but there's no backyard. Another house has a great backyard, but the house is too small. You can find a great neighborhood, but the house has no garage. All the properties have their strengths, their pluses, but they also have some fairly significant negatives. It's the same with technology. Planners always find themselves in a position of compromise. Getting a vendor to build that missing garage isn't easy."
Adds William Vlaxny, CPA, CFP™, of Chicago Tax & Financial Services Ltd. in Huffman Estates and Chicago, Illinois, "The impact of technology in financial planning can be summarized by the following question: Does that quill and parchment come with spell check?"
Or as Steve Doucette, CFP™, of Lexington Advisors in Ixxington, Massachusetts, bluntly puts it, "It is a good thing we are not saving lives. We have a long way to go."
So what would planners' ideal technological world look like? Technology nirvana, according to the planners we spoke with, includes everything from a truly comprehensive financial planning software package to better assistance with compliance issues. And while the level of frustration with technological shortcomings and the time required to manage technology is quite high, planners also show an understanding of why things are the way they are. But if nirvana is still a ways off-if it can even truly be found-how can planners snatch at least a little piece of heaven in the meantime? How do they manage the complex technological issues that already exist, and how do they work around the gaps?
The Search for the Holy Grail
Hands down, one software "killer application" that does it all- financial planning, portfolio management and contact management-is number one on planners' wish list, their Holy Grail. Give them one comprehensive program, some say, and they could service the 500 clients that accountants can handle supported by various comprehensive tax software programs.
David Landers, CFP™, of Landers & Associates Inc. in Rye, New Hampshire, says planners need a financial software suite similar to Microsoft Office. "We need software that will enable us to import the results from client questionnaires, write financial plans, e- mail the plans to clients, and download, format and e-mail performance data. Seamless integration and ability to send continuously updated PDF files to clients is the only way to keep a financial plan current. It's useless to generate a static document because it will be obsolete in six months. And because none of the applications we use are integrated, we are constantly re-entering data. It's all these redundant tasks that keep many planners at just 100 clients. There's plenty of high-end tax software that enables you to e-mail tax organizers to clients, accept a completed form from them that you can automatically upload and generate the tax return, and e-mail a PDF copy of the tax return back to them. There's no reason we can't do that with financial planning."
Patrick Doland, CFP™, of Reason Financial Advisors Inc. in Northbrook, Illinois, explains, "I have software programs for financial planning and portfolio management. I'd much rather have fewer software programs. I'd like to sit down with one piece of software, enter the data once and use the program to generate financial plans, analyze the investments and create an investment policy statement. It's not out there. There are many different financial planning programs, but a lot of them don't have large research departments, so they become niche products. They end up doing one thing very well."
What Landers and Doland describe doesn't seem difficult to develop, but planners stress that there's no collective professional push for that ideal. What's more, they say they can clearly see that it's to the software developer's advantage to concentrate on a niche market, just part of the practice pic. Planners acknowledge, too, that the very independence and creative nature they cherish is often a strike against them in the software developer's court.
Says Thomas M. Kiddle, CPA, CFP™, of Valley National Group in Hethlehcm, Pennsylvania, "If you gather 100 planners in a room and ask them how they do business, you'll probably get 100 different answers to how to do financial planning. It's difficult for one software developer to provide everything for all planners. It's difficult, but not impossible."
Jo Day is a technology columnist for this journal and co-founder of the Phoenix, Arizona-based Trumpet Inc., a firm dedicated to helping planners streamline workflow through a focus on document and contact management. Says Day, "Advisors who have been in the business for a while realize that just as it's next to impossible for planners themselves to be experts in every facet of financial planning, it's unreasonable to expect one software developer to cover all the bases. Planners want to simplify their lives. They want one tool to run the practice, but if they look at what they're asking for in terms of their own business, they are able to see they may be asking for too much."
How might Day adjust planners' dreams? "Instead of looking for one software package, I like to look at what's the best in class. My feeling is that it would be better to have different applications that focus on one area and talk to each other rather than wish for one application that can do it all."
Spotlight on Portfolio Management
When it comes to making improvements for specific applications, Friedman says the technology industry needs to focus on portfolio management. "My wish list isn't broad, it's deep," he says. "There are a hunch of different portfolio management vendors circling around and they are close, but most vendors just can't accomplish some of the things I think are so important. And the ones that come the closest to what I'm looking for, their pricing puts them out of reach. As the first one in the game, they name their price and it's awe-inspiring."
Friedman's portfolio management ideal is an application service provider model, meaning it's Web-based; maintained and upgraded outside the office; and has all the accounting, reporting and management capabilities of some of the most popular current solutions. "I don't want to lose anything," he says. "There are some ASP models out there, but they don't do model portfolios or allow you to do fee billing."
Friedman would require daily account consolidation where the application sweeps in the data from various sources and ensures accurate reconciliation. Reporting, too, should be Internet-based. "Planners should be able to log on, look at management-type reports and control the reports their clients have access to. Otherwise, you can foster a really bad habit such as checking performance on a daily basis. That doesn't reinforce our long-term message," says Friedman.
He also wants account aggregation-the further ability to have other accounts, debts and liabilities like credit card debt, mortgages, even frequent-flyer accounts-all managed by the same system and included in a report along with assets. "I'd like manual data-entry capability so I could add, from my office, an asset such as a new vacation home. This would give clients a real dynamic balance sheet."
Another important feature to Friedman is an alert system. "I've mentioned to many vendors and they all agree it's a valuable addition, but nothing happens. The alert would work this way: If you set a client up, for example, with a 60/40 split between stocks and bonds, you should be able to set parameters so that when that allocation goes out of whack, you get an alert. This would really advance money management from where it is today, where I have to go through a foot and a half of reports to see what's different. I should be fishing on a boat and get an alert that tells me this portfolio needs to be looked at because it is outside the parameters. This is classic computer work-what computers excel at. The system should alert us that the portfolio is out of balance and then we can spend our time deciding what to do, not determining if it's out of balance."
Additionally, Friedman would like a "desktop copy of the latest version of the data with some kind of rudimentary functionality so that when the Internet doesn't work, we can work." Hc says, "I don't want to be completely blind in the event our Internet connection fails. If data resides locally, at least I can look at accounts, answer simple questions. It's a client service issue."
Friedman's final wish leads into our next category, better integration. he notes, "The ideal portfolio management system should have an open database structure with the ability to import and export data from other applications freely. Proprietary database structures lock you in. I want to be able to take the whole database and putit in Excel if the company disappeared tomorrow. all these companies talk about developing an open database structure and claim to want it and be working on it, but if that were completely true, they'd already have it."
Better integration, increased Productivity
In lieu of the one "killer application," planners express the need for better integration and they highlight specific, smaller areas that could use improvement. In discussing planners' complaint on the lack of integration, Lloyd Painter puts it bluntly: "None of this stuff seems to work together. We have an expensive client database program-we love it-but it's not integrated with Microsoft Outlook or my Palm Pilot. So I have this great database of client names, addresses and phone numbers, but there's no way to get the data into my Palm Pilot without re-entering it. That's a real frustration. We have a wonderful asset management program that doesn't sync with our client database. We have a wonderful asset allocation program that doesn't sync with the asset management system. All these programs use common information, but there's no way to share that information. It's such a waste of time. It seems like many of the software providers concentrate on what they do without giving much thought to the big picture."
Financial Computer Support Inc., of Oakland, Maryland, is a software development firm dedicated to bringing efficiencies to advisors and planners through the use of technology. Says its president, David C. (Dusty) Huxford, Jr.: "Planners need to have the data aggregated, consolidated and reconciled into an open- architecture database to be used seamlessly with the variety of software products at their disposal.
"This 'Holy Grail' docs not exist to the extent that planners want it. Pieces of it may exist, or various combinations of it may exist on a proprietary platform. But it does not exist in the true open format that all vendors endorse so that planners can be assured the data is not at risk, and that it will not be held as a bargaining chip later if a planner elects to leave a vendor."
Like Jo Day, Huxford believes planners will be better off using multiple vendors able to share data rather than a single vendor controlling all of a planner's data. To this end, Huxford's firm has tried to bring together various software vendors used by planners in order to agree on some type of standard so data could be shared seamlessly, but efforts to date have failed. Has he given up hope for complete integration? No.
"It is slowly coming to reality," he believes. "As improvements are made in various programming languages and as the various software providers move to openarchitecture databases, it is becoming easier and easier to share data. The Internet and user demand is forcing all software vendors to reconsider their position on data sharing. They are all beginning to figure out that seamless data sharing leads to usable information. Planners need information, not just data. There is a big difference."
Andrew Tupler, CFP™, CSA, of Tupler Financial in Raritan, New Jersey, looks to technology as the edge his small firm will need to compete in the future. And although he says there have been significant improvements in the last year, he'd like to be able to send more interactive online applications to his clients and have the ability to accept electronic signatures. "Tliis would speed things up between us and the clients and cut down on the paper we have to store in the office," he says.
Going along with wish number one, Tupler would like to see greater help and standardization in the paperless office arena. 'The technology is there now, but it requires customization and is therefore expensive," he says. "Most of the planners I know who have gone to imaging didn't take an off-the-shelf product and implement it themselves. It's been quite a project."
Huxford adds that compliance is an area that is beginning to appear on planners' technology wish lists. he explains, "With the terrorist activities that are occurring worldwide today, along with the moves being made by the sec and NASD, planners need reliable and affordable compliance services. Many planners are unaware of what compliance mandates already exist, let alone what is lieing proposed. They need to become more aware and ensure they are meeting the requirements of the various compliance and regulatory rules. The compliance arena needs to tic back into the same consolidated data the planner is looking for, as I described earlier. Until the compliance tests are run against the consolidated data, the planner's headaches have only just begun."
Vlazny notes that the financial planning professional is caught in "balancing the use of technology and the regulations that control our profession," and he points to e-mail as an example of this dichotomy. "E-mail allows the user to communicate directly with an individual at a near-instantaneous speed. However, e-mail is considered correspondence and therefore subject to compliance review before sending it. As a result, how effectively can e-mail be used? The NASD says e-mail is correspondence. The idea that you have to print and file cmails almost negates the benefits."
But What About Now?
While it's great to dream about technological nirvana, perhaps planners should not be drawing up a "technology wish list," but rather, constructing what Jo Day calls a "technology road map."
"It's easy to get wowed by sophisticated applications and forget the everyday," she says. 'When you're thinking about investing in technology, it's useful to focus first on what's not working for you now, what you do routinely where you could be helped by a software system. It's easy, when you are evaluating software, to get distracted by exceptional functionality and miss the basic day-to- day things that happen in your firm. For example, do you anticipate a satellite office in the future? Are there remote users? These are important questions in developing a technology roadmap."
They are not easy questions to answer, cither. Planners like Vlamy note that it's already a Herculean task to evaluate financial planning and investment management software. "There are four or five major tax packages that do it all, hut that's not so for financial planning," Vlazny says. "There are so many choices for contact management, financial planning, forecasting and simulations, portfolio reporting, and compliance, that it seems impossible for any planner to devote the time and energy necessary to review, understand and decide on software packages."
Not only are the choices overwhelming, says Vlazny, but many require a leap of faith. "I've based many of the choices I made on the reputation of the vendor, but can anyone tell me that all the newcomers out there are going to be around in a year or five years? You could invest in a software package and two years later it'll be obsolete or out of business. So do you take the plunge and commit to stay with something, knowing that once you commit to a road, it's virtually impossible to move from one road to another? There aren't too many bridges between the roads. Do you start at the bleeding edge where it costs you a fortune, or wait for prices to come down? Of course, you have financial concerns, but it's more an issue of time. How many planning firms have the time available to really evaluate technology? And how many can devote the time necessary to manage technology? It's an age of complexity and most users can't deal with complexity."
Planners also lament that the complexity doesn't end once you buy a product or sign on the dotted line. For example, Painter says his firm has four servers and it's impossible to get one IT person who understands all of them. "If our system has a hiccup of some sort, often we can't get one person to come and make the repair and that leads to a greater outlay of time and money," he explains. "For that reason, coupled with the lack of local technology resources, we're learning as much as we can ourselves, far more than we ever wanted to know." [Editor's note: See Greg Friedman's column, "Do You Need an IT Consultant...or a Different One?" in this issue of the Journal.]
In addition to complexity in evaluation and maintenance, Patrick Doland notes that cost is a factor he wishes could be improved. "As a sole practitioner, I am always afraid that if I spend the money and buy the product or service, the maintenance or the learning curve will be too steep," he says. "That worry scares me away from making the investment. If products and services could be easier to leam, people would be more willing to adopt new technology and experiment with new products. I hesitate to give up a software program I've been using for a while, even though a better one may exist, because I know what the disadvantages are with the program I have now. If I shift to another program, not only does it take me quite a while to figure out the whistles and bells, but it takes time to discover what the new weaknesses are."
Finally, Painter adds that as an industry he wishes developers could better stick to their release schedules and offer better post- sales support. "Many seem knowledgeable only up to the point of sale. Beyond that point, they don't seem to know too much. It ought to be easier," he says.
It's a Catch-22
Vlazny sees the financial planning profession's choice on implementing technological changes unfolding like this: "Planners can put their head in the sand and do nothing or choose to do it themselves at the cost of not having a life after computers and financial planning. Or they can hire a consultant who will allow the planner to have more time but not have any money left to enjoy the additional time."
He adds, "Unfortunately, we are in a profession that is paralleling the growth and dynamics of the technological age. Both are subject to constant change and the need to adapt to these changes."
Laurie A. Siebert, CPA, CFP™, of Valley National Financial Advisors in Bethlehem, Pennsylvania, concurs that technology is likely to become more of a part of every planner's world. "As the Financial Planning Association and CFP Board continue to do a great job promoting financial planning, the need for financial planners will snowball, forcing many advisors to look to technology to help them handle more clients," she says.
And that technological nirvana, or at least a piece of it, is closer than some may believe. David Drucker, CFP™, of Sunset Financial Management Inc. in Albuquerque, New Mexico, believes strong technological progress is on the horizon. "In five years, there will be no desktop software. Everything will be run from secure Web sites with various degrees of collaboration by clients, planners and related professionals, automatic backups of critical firm data and continuous updating of online software systems. My practice is rapidly moving in that direction."
While financial planners' characteristic independence is likely to remain a stumbling block to this kind of progress, think of how far planners have already come, observes Lloyd Painter. "I can remember when you had to know something about programming to use a computer," he says. "So there's been some improvement. Hut looking forward, I expect the frustration will be a constant."
This article originally appeared in the March 2004 issue of the Journal of Financial Planning.