Software solutions for SOAs

Historically, the IT management systems of a financial planning practice have relied heavily on Excel spreadsheets and Word templates, as well as the obligatory paperwork and form filing.

Most advisers also tended to store client data on their hard-drive — so information was at risk of being lost altogether should that particular PC meet its maker. And if an adviser was unable to attend the office, it was impossible for colleagues to access client data on their behalf.

But advisers no longer have any excuse for using such outdated solutions. A plethora of financial planning software products is now available, which not only make the planning process more efficient, but may also keep ASIC at arm’s length by ensuring compliant procedures.

In addition, practices have access to a range of data storage facilities, including both outsourced solutions, web-hosting, and in-house servers maintained by third-party providers.

Electronic SOAs

Perhaps the most significant development in financial planning technology in recent times has been statement of advice (SOA) functionality.

You would be hard-pressed to find a solution that does not offer an SOA module as standard within the licence fee.

But while the ability to produce SOAs must be available if any provider wishes to remain in business, different approaches have been taken by IT developers.

For the most part, SOA creation is still largely up to the individual adviser — most functionality is flexible and allows a planner to decide exactly how much information to include, or exclude, in the final report.

Dietmar Baumgartner, leader, wealth management at IT consulting group Capgemini Australia, says: “We have found that most providers have the functionality to produce an SOA, but they are still reliant on the adviser making some adjustment to that afterwards in MS Word.

“The reason for that is the increasing complexity of the customer’s needs, which drives the permutations of the module — obviously, you have various components depending on what kind of need you have.”

While there is an argument for allowing functionality to remain as wieldy as possible, others argue that this ability to tailor an SOA could result in a compliance risk.

Jason Hoang, national sales and marketing for Xplan Technology, explains: “A lot of the problems that dealer groups have with SOA generation are due to the fact that once an advisers merges a document, there can be a lot of post-merge editing. Then it goes to Microsoft Word and the adviser can pretty much do what they want with it without the dealer knowing.

“With Xplan, we take the whole document from the dealer, it could be 200 pages long, and we put a whole lot of conditional logic in the document, depending on the data which is input. So you actually merge it and you don’t allow the adviser to put in any changes.”

Shorter SOAs

This type of process also results in shorter SOAs, as the filtering mechanism embedded in the technology ensures that irrelevant information is excluded from the client’s final SOA. Creating smaller SOAs, and being able to produce them quickly, is at the top of the wish list for advisers, and most providers have been quick to offer enhancements to meet this need.

Ross Johnston, executive general manager, financial advisory solutions at IWL, says: “We’ve delivered what we call strategy wizards, which make the process of developing an SOA a lot more efficient, because it basically automatically populates your modelling tools, which can then shave a lot of time off in developing an SOA.”

But Johnston agrees that advisers will ultimately decide on length.

“There’s demand all over the industry for small, simpler SOAs. We give them all the tools so they can have it as long or as short as they like.”

Planning group Financial Wisdom is currently in the process of implementing a solution from Coin Software.

According to general manager Paul Barrett, the organisation has managed to reduce SOAs to a mere 30 pages.

“The software is the enabler, but the key is the structure of the document. We’ve taken out probably 40 pages of text of the original SOA and replaced that with consumer-tested fact sheets,” he says.

Pre-SOA planning

While technology tends to focus on SOA production, many solutions provide little support to a planner during the information gathering process that takes place before an SOA can be written. There is also a trend for advisers to use technology only after a client has left the office, and not necessarily as a tool during consultations.

Baumgartner explains: “Most of the big providers have the ability to produce an SOA. But there are two sides to the coin. It is another thing to be able to audit the process that an adviser needs to take when producing an SOA — an audit trail. This helps you to make sure that you walk a client through all the necessary steps, like showing them the FSG [Financial Services Guide], making sure you’ve understood their needs — all the requirements up until actually producing an SOA.”

According to Matthew Lock, managing director of CARM, SOA compliance can be divided into two areas “counting bead compliance and real compliance”.

“Counting bead compliance is making sure that the SOA has the right disclosures, disclaimers, references to fees and changes and so on. And systems and technology are making that very slick these days,” he explains.

“Where the software fails miserably is in term of real compliance and that, in a nutshell, is ‘know your client’ compliance.”

Lock believes the majority of solutions available merely offer back-office plan production.

“Our system is designed to be used in the interview, with the client sitting next to you, and is designed to give the dealer control over that sale interaction, what’s done and said,” he adds.

Lifestyle functionality

As the concept of lifestyle planning has gained momentum among planners, so too has it had an impact on technology. Baumgartner says: “This has been a big trend over the last one-and-a-half years and most players offer this kind of functionality.”

CARM is a recognised expert in this field, basing its GPS system on a lifetime planning model. Lock says: “In terms of technology, Ipac is using a lifetime model which I wrote in 1996, and that has gone on to be replicated at places like CBA and AXA.”

But he adds that any adviser can offer lifestyle planning, without the need for a specific IT solution.

“You can do it with Excel, and be up and lifestyle planning with your customers within a week. The main providers haven’t really woken up to it yet.”

However, there is no doubt we will see more functionality based around this style of planning, as more planners see the benefits it offers in terms of attracting clients and retention. Lock says: “Advisers understand how it can rapidly engage a client’s interest and help them in the selling process — that’s the main power in a business process environment.”

According to Johnston, lifestyle planning is really just another term for “common sense planning”, a methodology he believes advisers have been following for years.

“Really what the software is trying to do is put more framework around that process. So we have created tools which will help planners define what the client’s objectives are, such as where they want to be in 10 or 20 years time,” he adds.

Software selection

Given the huge selection of solutions now available, how does a dealer group or practice decide on the right product for their business?

Barrett says Financial Wisdom looked at over 20 providers before creating a short-list of three. Those three providers were then invited to present set case studies to a roundtable of 20 Financial Wisdom planners, who unanimously decided on Coin Software.

While the industry debate on web-enabled versus desktop solutions continues, Johnston says: “I think they’ve got to look at the functionality. Sometimes people are too focused on the technology.”

Hoang comments: “What’s most important is to work out what you are expecting from the software itself. A lot of advisers and dealer groups don’t know what they are expecting, and someone will come in and say here are all the bells and whistles, and they’ll say that’s great and take it because it looks the best. But half the time, a lot of the bells and whistles don’t make any sense, or have no use, to a dealer group anyway.”

Baumgartner says Capgemini has concluded three major wealth management projects recently, and says they tend to distinguish between owned-adviser networks, and independent or aligned-adviser networks.

“For an owned network, they would look particularly at the sophistication in CRM [customer relationship management] technology. This is the biggest issue, because the major banks have huge customer bases which they haven’t been overly successful in leveraging in terms of wealth management, so they need to increase the leads and referral effectiveness,” he explains.

For the aligned and independent groups, Baumgartner says they are more interested in integrated planning tools, as they are unlikely to have legacy systems in place.

“It is more important to have functionality which helps them to better manage their business. It is more about business planning, workflow management, and performance tracking. Remuneration management is also a big issue,” he adds.

Future developments

IWL, Xplan and Coin Software currently hold the lion’s share of business in this sector, and are unlikely to be threatened by new entrants due to the massive research and development costs needed to ensure survival.

“The keys to success are having the capita behind you, the capital backing and the big end of town as your clients,” Johnston says.

And some warn that the platforms may have to take a backseat to the latest financial planning systems.

According to Johnston, the poor quality of financial planning systems in the early 1990s meant that platforms were able to fill a gap in terms of consolidated reporting.

“If you look at the way the average adviser runs their practice now, the reporting comes out of the software in most cases, and this means platforms are just becoming hubs. As portfolio systems become more advanced, there’s less reliance on platforms — they really only provide a gateway to the wholesale funds,” he adds.

Hoang agrees that the reporting functionality of financial planning systems is much improved in recent years.

“I think what we are leading towards is the reporting being done by a group like us, because it is a lot more in-depth than what a fund manager would provide. An adviser doesn’t just have funds in, say, Macquarie, but with multiple vendors. So what a group like Xplan or other software vendors offer is the ability to collate all that together and give consolidated reporting. A wrap provider can’t do that, or won’t, because they only have their own interests at heart.”

While both Hoang and Johnston say their organisations are unlikely to ever offer a wrap solution, the increasing functionality available in financial planning solutions could see the role of platforms diminish.

Still, this can only be good news for planners, who will have access to a broader range of information more efficiently than ever before.