It issaid that a year is a long time in politics but in the world of technology and software, it is close to an eternity.
The same is true in the world of financial services technology where last year’s technology and software is not only old but almost obsolete, and quite possibly not serving the full needs of those planners and advisers who rely on it.
But despite predictions that the software and technology providers’ market would actually come into hard times, there has been an increase in the amount of groups working in this space.
The growth of master trusts and wraps as technology driven administration platforms is not new, but the increase in the number and variety of financial planning software has been a quiet trend of the past few years.
And like the master trust and wrap market, the new players are not concerned with the deeply entrenched positions of the incumbents and are happy to provide their offering to planners.
In this year’s survey, a number of groups — Morningstar with Adviser Workstation, CARM and newcomer Icicle — have already put up their hand to say they are looking at getting a product out in the next few months.
However, Tom Collins, the principal of the The Tom Collins Consultancy which carried out the survey for this report, says the growth of new technology providers is not being matched by a growth in market share and he questions how they will survive.
Collins says the ongoing survival of these products is driven by a need for some type of return and to continually produce and supply new products, as well as upgrades and improvements is not cheap.
“On the planning software side, the survey did not cover in-house software produced by larger dealer groups but was only concerned with commercial software,” Collins says.
“Given that IWL has about 5,000 sites, or roughly about half the market using VisiPlan, how do other providers survive?”
Aside from this, Collins is also concerned that while product providers are busily adding further products to the technology market, there has been no agreement as to who signs off on such products.
This is a particularly important question, given the reliance planners have on many aspects of the technology chain — from the desktop planning software through the planning platform and into the back-office systems.
“Will planners go back to technology and software providers if there are problems and they have been sued by clients? We haven’t seen this type of thing yet but it is a real concern because we have no system of accreditation in the industry,” Collins says.
“Also, how much do financial advisers really know about the underlying formulae and calculators which populate these systems. There is no industry standard here either, with each provider choosing to run their own systems.”
However, despite the growing number of software and technology providers, Collins says the trend towards the badging of products has continued, possibly in an effort to tackle some of the scale issues already raised.
The big move is the blurring of the lines between what is considered to be planning software, planning platforms and back-office software, and the rise of those products which can work in one, if not all parts of the service chain.
Collins says while such moves would also be dependent on the scale of the players, a number are actively looking at the fusion of software with the platform, not as two integrated systems but as one overall system.
However, steps such as this will require even bigger commitments from advisers, as their choice of software may dictate their choice of master trust or wrap, or vice versa.
This is also evident in the fact that research houses have and are continuing to supply their own forms of software to planners, a step Collins says makes sense considering that across the industry many groups are looking at further aligning themselves with like-minded groups.
So far this has included compliance and training groups teaming up, in some cases to provide services electronically, and the research houses are not shy in admitting why they want to get into providing software and desktop tools to planners.
Morningstar and van Eyk’s plans are well documented.
The survey has also brought out a number of other trends, including the widespread use of the Internet to not only deliver information but also update software (see table). While this has been going on for some time, few groups have taken the steps of actually providing a Web-based system as well, with the exception of IWL’s Visiweb, which is a Web-based version of its well-known VisiPlan software.
Collins says at the moment the main barrier to Web-based planning technology is the speed of the Internet, which is not sufficiently fast enough to transmit data and financial plans in real time while planners are working with clients.
He also says that planners are still reluctant to rely solely on the Web because, as long as the data remains on the planner’s computer system, they still own the client.
But it makes sense that groups would head this way since the issues of cost and convenience are becoming more important as the industry seeks new ways to provide services which have a lower impact on margins.
Another aspect of the provision of services across the Internet is that they can be integrated more closely and as Collins says, can lock in planners in many instances. This is evidenced in the tables which show software and technology is becoming more complex and laden with offerings that it is no longer a simple task to decide to stop using a single product which provides more than just one key service.
It is this blurring of the lines which also makes it difficult to pick what the long-term future of technology will be in financial services.
“Technology moves in ebbs and flows which makes the future a little unsure. We can try to pick who will be the big winners in the future but that is difficult,” Collins says.
“Five years ago, FPI, Lonsdale and Wealthpoint were the big names in financial planning software and VisiPlan was just a small start-up. Now it dominates the landscape, despite the fact that no-one thought it would take off.”
