Financial Advisors

Does Building Proprietary Financial Planning Technology Make Sense?

By Osric Grant, Head of Enterprise Sales at eMoney Advisor

If we learned anything from 2020, it's that our companies and service models need to be able to pivot quickly. In the wealth management industry, the “pivot” took a few different forms—including consolidation or merger activity, digital transformation, or adopting financial planning as the new growth model.

A key component of a smart pivot is technology. Having the right technology— and technology support—in place to enable your team and clients to adapt is more critical than ever.

Your primary focus in times of normalcy and times of crisis should be the experience and success of your advisors and investors—not necessarily building technology or patching together the software your firm built 10-15 years ago.

So then, why do firms build and maintain their own technology?

The Case Firms Make for Building Their Own Tech Stack

Some firms want to keep investors within their own tool so they can share with them other products or services available for purchase. Proprietary technology may be an effective upsell channel for firms, serving as a highly customizable, distinguishing platform.

Other firms may struggle to find the “perfect” tool—one with all of the features and functionality they want, at a price within budget.

For others, they might see it as an important way to demonstrate their value to advisors and differentiate their firm in the market.

But in each of the cases above, when you build your own software, you also have to maintain and train users on your software, which requires long-term investments in people and hardware.

The Case for Partnering with an Established Provider

I've worked with many firms who fit into the categories above, and some struggle with the decision of investing to keep a legacy platform operational or partnering with a best-in-class vendor. I’m here to tell you that firms can still grow planning revenue and bring in new talent by working with an established technology partner.

For firms considering their own financial planning tech, I'd like to pose a few questions for consideration.

First, brand names matter. Even in software. According to Cerulli, when advisors consider a change in firm affiliation, they place critical emphasis on the technology and level of autonomy available to them. They want the best, whether that’s a sports car or financial planning tool. When offered a Ferrari or a Toyota, they’re going to choose the Ferrari every time.

Going beyond gimmicks, if you want to attract top talent, the technology you offer should play a role in your firm’s talent strategy—both for recruitment and retention. Partnering with an established vendor to implement a tool your advisors are familiar with adds strength to your firm's value proposition.

And after a year like 2020, when many firms struggled to survive—let alone sustain operations, is your firm prepared to maintain your financial planning experience? For example, what happens when tax rates change, and new regulations are announced? Can you guarantee you'll have the right resources if the needs of your advisors and clients change?

Is your internal team prepared for the security requirements that come with systems that house and transmit sensitive financial information?

Something else to keep in mind is the power APIs and software configuration can bring to your experience. A trend I see is firms selecting a planning tool that meets their functionality needs and then uses enablers, like APIs and configuration, to bring their vision to life and make it their own.

To do this well, you really need to partner with a vendor whose sole focus is their product and their client experience. Because their client is you. They have the resources to ensure they’re on top of your needs and the latest industry, technology, UX trends, and best practices.

The reality is, designing and building software from scratch isn't a quick task. It could take years to implement while advisors are ready to find a partner right now.

Tech Partners Are Worth Your Consideration

Planning technology has evolved. Top vendors can offer new and novel ways to meet your needs, goals, timeline, and budget.

And, with so many advisors uncertain about their firm affiliation in the coming year, choose a partner that can help you attract top talent from other firms and retain the talent you already have.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.