Advice Software in 2020 - Part II

In Part I of this discussion, we looked at some of the macro-trends that created the current landscape for advice technology.

In this post, we will consider some of the key structural issues of software design that will dictate the next five years for advice technology and their impacts on licensees and practices.

 Yes, this is the boring but important stuff.

CRM or Application

Often advice software is compared in several key areas of varying importance. The incumbent advice software solutions have primarily operated with end-end applications tightly integrated with their core CRM. The benefit of this has been, tighter workflow, easier exchange of data and only one vendor to manage.

The drawback of this approach has been that software has only been as strong as it's weakest link. Many of these CRMs are operating on dated technology which leaves them less functional than some of the more modern SaaS CRMs. Equally, newer entrants who have built more user-friendly (but proprietary) CRMs have struggled to integrate high-quality advice tools. Particular areas of weakness are product comparison tools, comprehensive financial modelling and client portals.

In recent times we have seen a new range of disparate or loosely integrated tools which have solved some deficiencies of the leading advice software solutions. These tools have typically focused on client engagement, data collection or education/presentation of advice. 

For the practice or licensee, this has resulted in yet another application where data needs to be managed. It has added extra layers of cost and complexity in delivering advice. 

Data Security

Banks and institutions have typically required strong governance of data managed by their software vendors. The large enterprise software solutions have met these requirements due to their significant scale and resource. Barriers to entry have been lowered significantly in recent years with cloud-based storage services provided by AWS and Microsoft. This has allowed emerging fintech's to offer similar levels of security as the enterprise software. 

However, when data starts moving between loosely connect systems or worse is stored locally by advice firms/licensees in the vast array of manual spreadsheets, a business is exposing itself to data security risks.

Worse still, we still see the majority of advice firms communicating with clients via email. Email is now becoming one of the least secure methods of communication. Highly sensitive documents are transferred via email and often sit on user desktops before eventually finding home in a secure software system.

The EU/UK implemented GDPR (General Data Protection Regulation) in 2018. GDPR has placed a significant burden on financial services businesses (of all sizes) to have stringent data policies. Penalties for breaches of these standards can be the greater of $20million Euros or 4% of global revenue. 

 Current indications are that Australia will be moving to a similar regime in the near future. In fact, it already applies to companies dealing with EU/UK citizens.

It is our view; this will provide a whole new set of criteria when advice firms/licensees are making technology decisions. It will also have significant implications for outsourced administration/paraplanning services. 

Bottom line

We maintain that core CRM technology will be the key decision that advice firms need to make in the next three years. With greater choice, will also come greater responsibility to look beyond price or user interface and to have a deeper understanding of how robust the underlying technology is. 

An essential requirement moving forward will be high levels of encryption when communicating sensitive information with advice clients. Email will be redundant for these purposes.  

We also believe firms/AFSLs need to exercise extreme caution when adopting disparate systems and applications. The most misused term in financial planning technology right now is 'tech stack'. A tech stack does not refer to what apps you use. A tech stack is how a data ecosystem used in combination with coding languages to build front-end applications.

Part III - we will look at the differences between some of the CRMs currently on offer and what we are expecting to see in the very near future.