Integrating technology into financial planning

Technology is helping financial planners reduce costs and improve efficiency. But how can firms strike a balance between integrating technology and maintaining a human angle?

Financial planning has become so complex that the days when an advisory business could be run using a couple of spreadsheets and some good interpersonal communications skills are long gone. However there is a challenge in striking the appropriate balance between the use of technology to save cost and achieve greater efficiency and the need for personal interaction with clients.
How much technology?“We are all heavily involved with technology,” explains financial planner Andy Hart (at Serenity Financial Planning), who provides adviser training through his online service The Voyantist. “Apart from sitting down with the client and having a conversation, there is nothing we can do as financial planners without technology. Some people are focused on automation, productivity and doing things in the fastest and most straightforward way possible. Others perform repetitive tasks that could be done in a more efficient way. I believe the first option you should choose is to outsource to technology.”

For example, using simple scheduling software such as ScheduleOnce and Doodle Pro can save time when setting up appointments as clients can arrange meetings directly in a financial planner’s diary, he says. Hart has tried to graph the complexity of harnessing technology by drawing a mind map of how it can be used in individual aspects of a financial planning business, such as marketing, document management and task management.

Two conclusions, and one obvious question, spring from this mind map. First, there are many types of technical tools available. Second, there is no overall integrated financial planning enterprise resource tool offered by large software providers like SAP that businesses of various types can use to run their entire operations. So, how does a financial planner establish how much to invest in technology to run his or her business as efficiently as possible? 
"You need someone who is highly competent technically but has the soft, interpersonal skills to deliver the advice" Barry Horner, CEO of Bristol-based Paradigm Norton, says his firm uses technology primarily for cashflow modelling. However, he says both “good people and good IT” are needed for it to work. “It’s how you harness both of those things. I don’t think we will see a time when the technology will completely take over because it is the one-on-one advice that people really appreciate.”

Paradigm’s strategy depends upon client expectations. “A lot of our clients are used to the sort of interaction they get when they use their smartphone. They are used to quick access, high quality, easy to use information,” Horner continues. “They like online access to their portfolios, for example. Our clients are quite often overseas and they want to be able to dial in any time of the day and have a look at their portfolio. That’s what clients expect these days. Especially if you’re competing with private banks – which is where we get a lot of our work from – they expect the same level of quality reporting.”

Paradigm Norton is a 50-employee business with 750 clients scattered internationally. In terms of systems, the firm uses FinaMetrica for risk profiling and measuring capacity for loss and volatility. For cashflow modelling it uses Voyant, as well as Microsoft's SharePoint and Office 365 software for its back office. It uses an independent wrap platform for holding client data. “The trick,” says Horner, “is to get all those systems speaking to one another.” 
Value proposition Five financial planning software platforms

Voyant – US-designed software that launched in the UK in 2009, this leading financial planning software has advanced cashflow modelling capabilities

Prestwood Truth – Developed in the UK, this is the most established cashflow modelling software on the market, Truth incorporates a range of different features

Prestwood Professional – The more advanced offering from Prestwood also provides an integrated back office system on top of its core cashflow services

PlanPlus – A Canadian firm with over 25 years of experience, PlanPlus offers similar cashflow modelling to Voyant

FinaMetrica – The most widely used risk profiling software in the industry, FinaMetrica’s tools are incorporated in Voyant, Prestwood and PlanPlus software
Horner says that a small firm could find itself faced with a technology bill of between £50,000 and £100,000 depending on what products and capabilities it chooses and how much these are customised for their particular use.

At Bloomsbury Wealth, Robert Lockie CFPTM Chartered FCSI, Investment Manager and Branch Principal, grapples with similar issues. The firm uses customer relationship management software and a cashflow planning tool, but still finds it has to use a homemade workaround to move data between the two at the beginning of a client relationship. “We could spend a lot of money to have links written. That might cost us £10,000 and it would take us quite a long time to get our money back. So it’s not worth it. We are a small firm of a dozen people. You have to pick what is right for your business.

“We had an advantage when we bought our cashflow planning system because we had previously attempted to write our own tool from scratch and we knew what we wanted it to do. So we were able to ask vendors detailed questions about functionality, which makes selection of a system much easier. The most important thing is to have a clear idea of what you want. Technology companies will try and sell you all kinds of stuff that suits them and may not suit you.” 

So while the size of a financial planning business is not everything, and there are plenty of very small operations employing just a couple of people, a certain amount of technology is vital. This is particularly the case with lifetime cashflow forecasting and modelling tools. Lockie says: “Proper financial planning would be difficult without it.” 

Paul Etheridge MBE CFPTM Chartered FCSI, the innovator behind Prestwood’s well-known Truth software, is very clear about the value of such tools. “I have been using a lifetime cashflow forecasting tool with clients for over 25 years. It has provided a sound foundation on which to build clients’ financial plans and allowed them to engage properly in the planning process by seeing what their future will look like (based on their own assumptions) in differing circumstances. Without doubt, no technology can replace what can be achieved by a qualified, trained and experienced financial planner – but that same financial planner can provide a level of service to clients that cannot be achieved (or easily achieved) without the use of first class software.” 
One-on-oneSo how far can integrating technology and automation in the financial planning process go? Essential as it is, Horner says, “It can only go so far. If you are in the investment management business and all clients want is portfolio construction numbers, then we now have robo-advice. But when clients come to see us they want something more. We had a client who came to see us and was concerned about the impact of his personal wealth on his children. That’s a very personal conversation. It could be a one or two-hour discussion and IT doesn’t play a key part in that conversation. A lot of our clients want to discuss their long-term plans and whether they are affordable, and we will work on the cashflow modelling to show the affordability. So you need someone who is highly competent technically but has the soft, interpersonal skills to deliver the advice. It’s this combination of skills that I think will be key to building financial planning businesses in the future.”

He adds: “It very much depends on your business model. If less human contact is workable, then a cheaper, total automated robo-advice system will be suitable for those sorts of clients. But we find that what people tend to want is to be asked how they are doing, if anything is missing, or how to structure their affairs. They may previously have done their financial planning themselves and it’s become so complicated that they prefer someone they can talk to and then leave it to them.”

So, in summary, the extent of the automation you choose for your financial planning operation depends on the type of client and the sort of service they require, the size of the business and the extent to which it is economic to invest in IT tools. There is no one-size-fits-all model for market practitioners, but at the same time they could not imagine being able to run a financial planning business without a selection of technology tools at their fingertips.
Published: 10 Nov 2016
  • Financial Planning
  • Operations
  • The Review
  • technology
  • software
  • robo-advice
  • fintech
  • financial planning
  • artificial intelligence

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