The search for a single solution

The evolution of financial planning systems has taken various forms, as the complexity of advisers’ business practices grows. Traditionally, there has been the front-end software, which dealt with managing the advice given to clients, and the back office system that handled the mechanics of investing and running a practice.

But today there are strong moves to have one system in a financial planner’s practice handling both front and back office operations.

One planning practice has been working on creating a single system for its advisers to use. Queensland-based WB Financial Management practice development manager Glenn Pearce says the goal is to run a lean operation - and that aim is applied to software as well.

“We have 20 businesses, so we needed a system that is a robust operation independent of everybody else,” he says.

“We are using Xplan for client management and planning, and a separate cash flow management system which was developed for us as a web-based system.”

WB has a central back office system to link all these components and give the adviser one point of access.

“All the information for the planner comes through Xplan, and we have been running for 12 months payment software that will now be incorporated into the system,” Pearce says.

“We are moving towards a one-stop shop solution, with Xplan now also handling revenue management for the client.”

WB also uses Navigator, Macquarie and ING platforms, mainly for switching investments. All investment and portfolio data is handled through Xplan. “We use N-link for switching investments, but I am sure that functionality will be done by Xplan in time,” he says.

“We have done a lot of customising with Xplan and, as we become more involved with Xplan, it is showing more of what we can do with the software.”

Pearce says it has now added e-mail direct into the system, with Xplan using Microsoft’s Outlook. “We are merging the front and back office into one system, which is offering a lot of efficiencies,” he says.

“It has also been easier with training as the advisers have only to deal with one system.”

Portfolio management

Another financial planning group has developed its own back office system that is being offered to other dealer groups. London Partners Victoria managing director Steven Rowley says the portfolio management system - Australian Portfolio Administration (APA) - was designed with a stockbroking background. “Previously, most financial planning software didn’t have direct shares access or support,” he says.

“London Partners had a stockbroking background. The system had been built for direct equities and at that time it was the only system in the market.”

Rowley says clients want the adviser to do as much of the paperwork for them as possible, while also giving strong investment returns. “They can go to an accountant who will take away some of the paperwork, and financial planners who can access managed funds, but very few financial planners have stockbroking programs.”

Rowley says APA can provide client data on any asset class and is designed to produce a snapshot of a client’s portfolio. “The system lists investments for the year for all asset classes, plus the returns,” he says. “It will also list all expenses and does CGT [capital gains tax] calculations of the portfolio at the press of a button.

“At the end of the year, the adviser can look for CGT gains and losses in the portfolio for tax planning.” Rowley says the system is also good for compliance of self-managed superannuation funds, although it is suitable for other types of clients.

Online capabilities

As with most back office systems today, APA is online providing a live administration service. “We built the system to send a report to the client, and it includes market commentary,” he says. “The report includes investment transactions along with the reasons why, and all supporting documentation from the fund managers.”

APA is linked to a Macquarie Cash Trust and accesses wholesale funds through Ausmaq. Direct shares are bought through a broker. “The adviser deals with the client and the investment team at APA handles the money,” he says. “APA charges the client for the processing, which is deducted from the linked Macquarie Cash Management account.” The adviser’s fee is also deducted from the Macquarie account.

“We do license the system to other advisers, but it has been kept a secret,” Rowley says.

While some dealer groups have created their own systems, there are plenty of proprietary solutions on offer to planners. The common factor among all of these systems is that they are web-based. Today, any back office system that doesn’t have Internet access for transactions and data feeds will not last long in a very competitive market.

Electronic hubs

With increasing functionality from front-end software such as Coin and Xplan, a number of financial services technology companies are providing electronic hubs to link together all the functions of an adviser’s practice.

Online Business Technologies (OBT) managing director Shane Muller says his company doesn’t develop software, but a hub to link together the software. “Most of the adviser market focuses on the software,” he says. “We take that software and run it from a central data centre.”

For many advisers, the high cost of their business is the software and the licence fees combined with the purchase of many individual systems to achieve a complete front and back office. “We work with a host system that consolidates the back-end, unlike many companies that have a server sitting in the office,” Muller says.

“Because our system is off-site, we can upgrade software centrally, while also providing a secure back-up system to meet the dealer disaster compliance.”

Most advisers are now looking for one software system to do all the functions of running a financial planning practice, he says. “We enable planners to do that, and they can have multiple pieces of software that can be accessed centrally,” he says. “It enables people to have a choice as to what software and systems they use.”

OBT is also now linking in other business applications, such as MYOB and Windows, through a web browser. The data centre service is available on subscription, which is based on the amount of software and additions used by the planner. “The adviser pays for what they need and use,” Muller says. “This means when an adviser is selling their business, all they are selling is a password, not lots of individual software licences.”

Links between front and back office

IDT managing director Danny Rodgers says his company’s system merges back and front office. Again, it is a system that takes the technology operation away from the adviser’s desktop and operates from a central data hub.

“We transmit data such as unit prices and research to the adviser and then we suck out the transaction information from the adviser’s desktop,” he says. “We have integrated a commission bureau that covers risk, mortgages, managed funds, recording the fees and trails.”

While the IDT system can run on the web, Rodgers says 70 per cent of users prefer to run it from their desktops. He says this is partly due to some large institutional clients not allowing their advisers to run web-based systems.

InvestmentLink chief executive officer Peter Philip says the company is offering an interface system between the various platforms and software that a dealer group might use. “We are a strange beast, not a platform or a bit of software,” he says.

“The issue now is consolidated reporting with the many relationships the dealer group has and the many back office systems its advisers use.”

Philip cites one client, Financial Wisdom, that deals with 120 back offices. “Larger dealer groups will use many back offices, such as funds management or risk,” he says.

“We find the number of platforms the dealer group is using results normally in four or five significant back office systems.

“InvestmentLink is the technology interface between the front and back offices.”

Philip says data entry is the front office, but industry doesn’t see front-end and back-end converging. “There are about 20 front office systems and hundreds of back office systems. If you try and connect them all, you will have 2000 connections,” he says.

“InvestmentLink actually hooks up 20 front-end and 100 back-end systems so there are about 120 interfaces.

“We physically cannot connect every front- end with every back-end.” For systems that cannot be connected, and for data that cannot be transferred electronically, the company will produce a paper pdf file that the adviser can fill in.

Straight through processing

The goal for many back office system providers is straight-through processing (STP). “Advisers want to click a button and get it signed by the client electronically,” Philip says. “We are bringing in paperless processing to the adviser in the next few months.”

Aviva has already introduced STP with n-link, says chief operating officer Grant Salmon. “N-link adviser desktop software does straight-through processing,” he says. “Advisers log into n-link for real-time information, with no delay. If they are doing a transaction, it will go straight through processing in the back office.”

Salmon says the driver for providing a live system was part of a plan to remove the clutter that cloggeding the adviser’s desktop system. “We looked at the adviser’s desktop and found it was getting cluttered,” he says. “What originally saved time was the platform, which collected the information and consolidated the reporting.

“But the desktop cluttered this, so we looked at ways n-link would save the adviser time.”

The result means an adviser logs into the system and keys in the offer, which is automatically sent to the central processor at Aviva. The advantage is Aviva staff do not have to key the data in again, and the adviser can change it online.

But not everybody is using STP, Salmon admits. “We are not quite getting to the paperless office as some advisers still want paper,” he says. “Some clients are happy with electronic transactions, but we still send a confirmation letter to the investor.”

Adviser benefits

Salmon says a number of advisers are going down the STP path and achieving real efficiencies by going electronic. “It is a benefit to the adviser’s processes that will save time in the office,” he says. “For a switch between products in the past, you had to write a piece of paper and process it.

“All the time that paper took to get to our office and be processed is now replaced with the option of doing it electronically.

“The adviser can see the transactions performed. In the past it took three to four days.”

Aviva has seen more than 50 per cent of switch transaction processed electronically in the last month, although new clients being processed electronically are still sub-10 per cent.

“We are now doing 10,000s of reports electronically, and it is real-time information,” Salmon says. “Clients and advisers want immediate, daily information. They want to look at their portfolio on a regular basis, and they have that expectation of their service or fund manager.”

Funds management

However, despite there being great leaps in software design for planners, some things seem never to change. Fund managers continue to operate on different systems, which creates problems with switching clients’ investments between managers or platforms.

Philip says fund managers have legacy systems and they are never going to change their back-end. “That is what we are solving for dealer groups dealing with coding and formats from the fund managers,” he says. “This industry will always be in a state of flux, and that is the argument against locking into one strategy.”

Philip argues against an adviser using one system or platform for a couple of reasons. “If the adviser uses a platform and that technology, that means they are sticking with that one system,” he says. “But can you use that technology to access another platform? No you can’t.

“The danger is you get locked into a platform and the technology won’t work with any other system.”

Also, an adviser using just one system does not have much bargaining power with their technology supplier. Philip cites Count’s strategy of using four different wraps, as opposed to just the BT Wrap used in the past, as this has enabled them to negotiate better. “The trouble is most platforms are worried about the funds under management and can’t handle any other platforms,” he says.

“But back office systems are now starting to work with everything, and that is frightening the institutions which own platforms.”