Planners embrace the web

While financial planning software hardly sounds like an area where you would expect to find participants slugging it out, that’s exactly what is happening.

It’s proving to be a very tough market and within a few years experts predict there will only be a few survivors.

With the market rapidly moving to take up web-based technologies and heavy-duty software capable of handling big client volumes and planner networks, it is no place for the fainthearted.

Xplan Technology national sales and marketing manager Jason Hoang believes the slugfest is likely to see only three or four main players left standing.

“Financial planning software is a very competitive industry and there is likely to be only a few survivors going forward,” he says.

“The barriers to entry are high and there are not enough dollars to go around so many players and still make money.”

Hoang believes this means new entrants will struggle.

“Today, updating information for a client review can take minutes rather than days, as it did in the past, and to do that takes industrial strength software,” he points out.

A change point?

Coin Software head of distribution Darren Pettiona is another who believes the landscape in the software market is changing rapidly and the year ahead is likely to prove something of a turning point.

“The market moved somewhat in the last year,” he says.

“We will see a lot more changes over the next 12 months.”

Essential to this has been the move from desktop solutions to what Pettiona refers to as enterprise solutions.

“Financial planning software is moving out of the cottage industry space and into industrial strength software,” he says.

The requirement for robustness is obvious when he points out that a dealer group like the Commonwealth Bank may have over 60,000 clients in its system.

Pettiona agrees some players will find it difficult in the future due to the growing sophistication and functionality of planning packages.

“There is a thinning out of the options in financial planning software,” he says.

“There will be an increasingly commercial structure in the financial planning software space and it will be more like other industries.”

Phillip Thomas, executive general manager, advisory software strategy, at IWL (supplier of VisiPlan) agrees.

“Niche players will find it increasingly difficult, as the leading players are adding capability very fast.”

He argues advisers do not want multiple solutions and are looking for a ‘one-stop shop’ rather than lots of different systems on their desktop.

While interfaces between different applications work in the short-term, Thomas argues planners want seamless integration.

“The niche players will still be around, but they will find it increasingly difficult to get a large footprint in the industry.”

Where to now?

Despite these gloomy predictions, views on the future of planning software vary.

Many experts see the future as totally web-based, while others feel a middle ground, with some tools moving to the web and others staying on the desktop, is the likely outcome.

Distinctions are also drawn between browser-based systems and web-based systems using web services for importing and downloading data and exchanging information. It is this latter approach that seems to be where most growth is currently occurring.

As Corepath managing director Trevor Sinclair notes: “There is an increasing move to the web or ASP-based solutions.”

He is witnessing a growing number of planning businesses move to web services and open systems because the benefits can be significant.

InvestmentLink chief executive officer Peter Philip is another web fan.

“For financial planning, why it is so good to have web-based [systems] is that you are using data that changes daily. Fund data, business rules, etcetera are all up-to-date,” he says.

“It is a huge benefit to have instantaneous changes. Then there is only one set of data everyone is working from.”

This results in significant productivity improvements and cost savings, according to Customer Acquisition and Retention Management’s (CARM’s) chief executive officer Matthew Lock.

He points to the elimination of delays in updating rules and tighter information control as some of the benefits flowing from a web-based approach.

Lock believes many of the criticisms of web-based approaches are no longer valid, particularly ideas about system instability.

“The notion that these systems have the potential to fall over is a furphy,” he says.

“The web is faster than five years ago and it is cheaper. Web systems are getting faster and our system runs at near desktop speed.”

Hoang agrees speed is no longer a problem.

“This is a fallacy spread by competitors. Speed is a non-issue if you have broadband,” he argues.

“The web is the only way to go if you want to deliver the efficiency the adviser community is asking for.

“In the past, people were sceptical due to security and speed issues, but we have shown that that is a non-issue.”

A middle ground

However, critics insist web browsers are unsuitable for some planning tasks, particularly rigorous financial analysis.

“Browsers are not that conducive to financial planning as they are too slow for heavy number crunching,” Pettiona says.

He argues part of the reason systems from Coin, IWL, Framework and BOSS are all moving to Microsoft.Net technology is because it offers “a lot more functionality than that of a browser”.

Thomas is not so sure about the outcome of the web debate, and he expects to see two tribes merge.

“It depends on where you are coming from. I expect things to end up somewhere in the middle of the two approaches,” he says.

“We are seeing a blurring of the line, with many packages not in one camp or the other.”

While Thomas is seeing adoption of web solutions for research and client reporting, he believes the web, particularly browser-based functionality, has many limitations.

“The industry is not moving 100 per cent to the web. There was a belief that the web was a panacea for everything, but now we are seeing an increasingly pragmatic approach, with applications that suit the desktop staying there,” Thomas notes.

He points out many of the newer software offerings are internet-enabled rather than browser-based.

“A lot of companies jumped on the web early and got burnt. The web is suited to some tasks and not others.”

Philip agrees desktop systems will be around for a while yet.

“There will be a long tail of desktop, and people will still be with them for a long time, but there is not a reasonable argument now for staying,” he says.

Developments relating to straight-through processing (STP) — such as the establishment of a rollover hub for the superannuation industry — will push planners away from the desktop, Philip argues.

“Lots of other developments are happening in STP, and if you have a desktop system you won’t be able to participate,” he says.

Lock believes many in the industry would like to move to web-based systems, but are being held back by the expense involved.

“The problem is that a lot of platforms have so much invested in desktop systems that the cost of moving would be horrendous,” he says.

Battling for data control

Costs aside, there are also significant concerns about control of client data. Whether at the planner or the platform level, nobody wants to let go. As Pettiona notes: “We have found that no one wants someone else to control the data.”

This is part of the rationale behind Coin and IWL’s controversial decision to partner and develop industry data standards, with the first being released in May. The Electronic Platform Interface standard covers data feeds from platforms to planning software.

“We are developing one data schema and saying to everyone build to this,” Pettiona explains.

He says the benefit for the partners is they will then only need to build one data engine and schema, which provides considerable savings.

The data control issue is closely linked to the much-promised arrival of STP. Opinion about this is divided between the optimists who believe the arrival of STP is imminent, and those who feel there are still many hurdles and vested interests to overcome.

“We are getting there,” says Thomas, although he acknowledges that with many platforms running legacy systems, the move to STP will be difficult and costly.

Philip is positive too: “We have implemented STP with a number of fund managers, so it is happening.

“It will continue advancing, but it will be two to three years before the whole industry is doing it. Everyone will do it eventually.”

Like many others, he argues the main problem with STP is not at the planner level, but at the platform and fund manager level.

“Planners have been yelling out for STP for years, but platforms need to deliver it,” Thomas says.

He believes many platforms have a vested interest in not moving to STP, as it may eliminate a competitive advantage.

Hoang agrees: “The lack of STP has nothing to do with financial planners.”

He argues the problem rests with investment managers and platforms, and until a set of unified specifications are developed, STP will remain elusive.

The efficiency buzz

However, when it comes to planning software, the word on everyone’s lips is not STP but efficiency.

“For dealer groups, the prime objective is efficiency,” Pettiona says.

“Software is about efficiency, so new systems need to offer this. Dealers want to control the central database so they can centralise administration and reduce repetition of processes.”

The interest is built on the difference efficiency can make to a practice’s bottom line.

Philip cites RMIT research that found filling out applications costs a practice around $25,000 per year, while the typical annual cost for manually downloading fund manager information is around $11,000 per adviser.

“There is a huge amount of rework and re-entry in this industry,” he says.

Data collection is another area ripe for improvement.

“The most inefficient element in the value chain is the collection of data. It is very inefficient and expensive to do,” Sinclair explains.

The drive to reduce these costs and inefficiencies underpins the push for software that improves planner efficiency.

Dealers believe control of the central database is essential, according to Hoang. It also allows information technology systems to be outsourced.

“Dealer groups want a centralised database so they can data mine across the total data and client base,” he says.

Thomas agrees efficiency is now an important driver.

“Since FSR [Financial Services Reform], dealer groups have been looking for efficiency in their business … and it will continue to be looking forward.”

Improving efficiency is also important when a dealer group contemplates moving away from commissions, as it can boost a planner’s ability to make money.

“Dealers believe new software tools can make advice profitable if they make it efficient,” Pettiona says.

He is finding dealers, particularly the larger groups, are looking to push financial planning forward and make smaller plans profitable.

“Previously, planning was very manually intensive, while the new systems allow the use of workflow processes,” Pettiona says.

Tools such as software ‘wizards’ can help dealers achieve standardisation and improve planner efficiency and productivity.

“This leads to standardised processing and a standardised experience for the client,” he explains.

Compliance control

Tighter centralised control of recommended product lists, risk profiles and growth assumptions also assist with compliance.

“This enables them [dealers] to standardise advice and centralise compliance management, which is very inefficient at present,” Pettiona argues.

“Dealer groups want to remove compliance risks. How do they know planners are not using old assumptions and old SOAs [Statements of Advice]?”

The drive for efficiency and control is proving to be a vital factor in Coin’s success, with the vendor recently signing up both Promina and ANZ Financial Planning.

Anxiety about compliance is also driving interest in software templates for SOAs.

Many of the new products include features such as conditional coding to provide dealers with tighter control. This enables the software to self-purge irrelevant material, relieving advisers of the need to wade through unnecessary questions and limiting the opportunities for compliance blunders.

In limited advice situations, Coin utilises software wizards to ensure only the required data is added.

“It also removes the manual edit process so advisers don’t do hours of extra preparation and editing,” Pettiona explains.

FSR has provided the catalyst for more centralised control of compliance, according to Hoang.

He believes the new regulatory regime has led to more generic SOAs, simplifying dealers’ compliance activities by centralising software templates and compliance management.

“FSR has boxed in everyone’s SOAs so that the ‘look and feel’ is all pretty much the same,” Hoang says.