Financial advisors don’t need an all-in-one app that does financial planning, CRM, and portfolio reporting. They need apps that do one thing great.
About 12 years ago, I wrote a column about a financial advisor app that would do pretty much everything an advisor needs: financial planning, CRM, and portfolio reporting.
I referred to this holy grail of advisor apps as the silver bullet, to suggest that such an application would possess the mystical powers of the only weapon that, according to folklore, could slay a werewolf.
Back in the 1990s, the all-in-one advisor app seemed like a laudable goal. In recent years, however, the silver bullet has been tarnished, and for good reason.
Name one all-in-one financial advisor software system that has been successful. Name just one. I challenge you to do it.
Despite numerous failed attempts, the one-size-fits-all advisor application has never caught on.
Invariably, the vast majority of advisors don’t like one aspect of a silver bullet, or they only want one component of the all-in-one app. And that makes sense.
While a Swiss Army Knife is great for small chores, a wine connoisseur is unlikely to use its corkscrew to open a $400 bottle, a woman probably isn’t going to use its nail clipper for a manicure, and you’re not going to use its miniature wood saw to build a piece of furniture. To do the job right, you need the right tool.
Similarly, advisors are best served by building their silver bullet with apps that do one thing great. If an app you must rely on to manage your practice tells you it can do more than one thing great, be skeptical. It makes no sense.
Web 2.0 has ushered in an era of specialization. Advisors can mold together their silver bullet by utilizing integrations. Web services and application programming interfaces make it possible for portfolio accounting systems to feed data into CRM and financial planning systems.
Over three years have passed since the first generation of integrations were developed among advisor apps, and just about all advisor apps now have at least a few integration partners. Some advisor apps have developed application programmer interface to systematize development of interfaces with other applications. Integration, while not trivial, is common, and deep integrations where meaningful data flow between advisor apps is more common. These integrations are the new silver bullet.
In fact, not only is the all-in-one advisor app becoming less acceptable, but an emerging trend is for advisors apps to be more specialized.
For example, look at LifeYield
, which, suggests the most tax efficient sequence to grow and withdraw assets across multiple taxable and tax-advantaged accounts and, according to Ernst & Young, “can result in up to 33% better after-tax returns and retirement income.”
The app optimizes income distribution strategies for clients using an algorithm developed by chief investment officer and co-founder Paul R. Samuelson
(son of the Nobel Prize winner Paul A. Samuelson
). LifeYield represents a new category of software that not only rebalances portfolios, but optimizes them for income distribution in the withdrawal phase of an investor’s life.
If a portfolio accounting application tried to build an income distribution application like LifeYield, it’s going to get distracted. Optimizing tax-efficiency and income distribution is complicated and the portfolio accounting app has enough other things to do without having to take on that challenge. Automating reconciliation, improving the look of reports, integrating with CRMs and other systems is more important and aligned with a portfolio accounting system’s core competency than branching into income optimization, analytics, or trade order management.
It’s better for a portfolio accounting system to integrate with specialized apps and focus on doing one thing great than to try to do numerous things not so great.
That’s why I say that the all-in-one Swiss Army knife of advisor apps won’t ever be widely adopted. Instead advisors will be empowered to knit together their own silver bullet by leveraging best of bree specialized apps that do one thing great.
The silver bullet for financial advisors is dead!
Long live the silver bullet—the new silver bullet, that is.