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One Size Doesn't Fit All

Rather than purchase wholesale wealth-management platforms, financial institutions are investing in key modules and looking to integrate best-of-breed components.

As they try to service a large user base with diverse needs, wealth-management-platform vendors are having trouble being all things to all firms.

Despite the marketing hype surrounding all-encompassing wealth-management platforms, financial-services firms are proceeding cautiously, replacing one module at a time, rather than changing their entire technical infrastructure.

Though consultants and analysts admit that adoption is slow due to a host of factors; such as stagnant IT spending, the prevalence of in-house development, and a fear of giving up control, they say the "platform approach is catching on," as evidenced by the news that Merrill Lynch is working with Thomson Financial on building an adviser workstation.

But some financial-services firms are skeptical that a complete platform exists. "You may never be able to meld it into one system because there are different needs out there. It may be nice, but it may be too difficult," comments Hugh Tarbutton, director of products and services for Alexander Key Investments, a one-year-old brokerage subsidiary of SunTrust Capital Markets.

The firm recently selected Thomson Financial's Thomson Advisor for its asset-allocation-proposal and portfolio-review system. Focusing on the high-net-worth segment with $1 million to $40 million to invest.

Tarbutton says his clients need powerful estate-planning and asset-allocation models that address investing in hedge funds, exchange-traded funds and private-equity funds, which he maintains are too complex for one platform to address.

A wealth-management platform is a technical framework for linking a broad spectrum of front-office and back-office applications necessary in delivering wealth-management services. Consultants are touting these platforms to boost the productivity of financial advisers targeting the mass affluent with $100,000 to $1 million in investable assets.

But according to research by Celent Communications, financial-services firms are wary of a commitment to one soup-to-nuts vendor. "I would say there is some reluctance to go with a complete platform solution. Even the platform providers acknowledge this," says Pamela Brewster, senior communications analyst with the Boston-based research and consultancy firm.

With the exception of RBC Financial Group selecting x.eye wealth manager from Toronto-based x.eye, Brewster says: "We won't see many deals where they buy the whole platform at one time," adding that firms are prioritizing what part of a wealth-management platform is going to be important to them.

"They're taking that strategy because it's more conservative and it's not as high risk," she adds, noting that estimates for complete implementation range anywhere from six months to three years.

"They'll start with financial planning or contact management to test out how the system works and to make sure the vendor is responsive and is going to deliver what they say they will deliver," adds Brewster.

When ProEquities, a registered broker/dealer based in Birmingham, Ala., which works with 1,000 independent financial advisers, selected Morningstar Advisor Workstation nearly a year ago, "CRM was low on the totem poll," says Jeff Ball, assistant vice president of technology at the firm. "We had a plan to put together a platform for our advisers, that would provide everything they need to do on a daily basis (with) the least amount of software packages possible," explains Ball.

His top priority was reducing the amount of paperwork it took to review and prepare an investment proposal. Upon visiting field offices and surveying advisers, Ball discovered that it took four hours to prepare for a client, as advisers bounce back and fourth between pulling out paper files and computer files.

"By implementing a system like Morningstar that's integrated and that allows you to do the portfolio mode (and) the hypothetical planning question, you can reduce your time to prepare for a client from four hours to 45 minutes," says Ball.

Even if the pendulum does shift toward a so-called "platform approach," there are doubts as to whether or not leading vendors have complete wealth-management offerings.

According to Celent Communications' ranking of wealth-management platforms, the top 10 players - including Sungard, Thomson Financial, x.eye, Advisor Software Inc. and Monitaire - are still adding functionality through partnerships with third-parties and integrators.

Vendor x.eye, notes the report, is still working on extending its functionality, such as adding financial-planning capability, as well as enhancing order management and compliance.

Thomson, another behemoth in financial software, has yet to develop all the bells and whistles of a true platform, the report notes. Many analysts say that is why users are not buying full-blown platforms, instead weighing the pros and cons of integrating best-of-breed components.

"At the end of the day, you really can't move forward with an effective wealth-management or advisory solution without taking a platform-like approach," says Alex Sion, a director at Sapient, a software-consulting firm that has a partnership with x.eye. "You can certainly do it with point-to-point solutions and integrate them yourself ... but it's a very tough way to go."

Sion cautions that, "Many firms fail because they don't do the integration or they don't do it the right way. The process is terrible today," he says, claiming that 20 to 50 applications are on an adviser's desktop, but they are not using them.

A key application for serving the mass affluent is x.eye's integration of CRM with portfolio management, he points out. A financial adviser can find out all the clients that have positions in AOL stock and then create a mini-campaign to inform them about the stock and the impact on their portfolio.

Without proper integration, "You're probably talking about four to five different point solutions in the firm, and you're talking about an effort that will require about half a day of work from a couple of people just to do something as simple and intuitive as that," he says.

However, by using technologies such as eXtensible Markup Language (XML), and picking systems with an open architecture, financial institutions are counting on the ability to connect systems to additional modules over time.

ProEquities is a case in point. The broker/dealer was able to integrate Morningstar Advisor workstation with an in-house portfolio-accounting system. "Morningstar has XML in place. We had to do a minimal amount of programming to make it work," says Ball. "They can click a button, it transfers all their information to Morningstar," he adds. (Interestingly, Morningstar was not one of the systems ranked by the Celent report. According to Brewster, "Morningstar was contacted to participate in our study but did not respond to our invitation, as such we could not include them.")

However, while such platforms may suffice for addressing the mass-affluent client who has simpler needs, brokerage firms serving the high-net-worth market are skeptical.

"There's nobody that is a one-solution shop that addresses the ultra-high-net-worth and the institutional and corporate-type clients," says Tarbutton. "If we went downscale and we were dealing with people that had $100,000 to invest, the answer may be yes," he concedes.

Having said that, Tarbutton believes that the development of all-in-one platforms will transpire because the market demands it. "End-users in the financial-services industry would prefer to go to one provider for everything. It's much simpler and you get better pricing," he says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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