Ian McKenna: Fund groups shaping the adviser tech space

Ian McKennaThe size of a tech firm’s development budget should be a big influence for
advisers when selecting systems

The past year or so has seen huge changes in the adviser technology space. News that the Enable system from Benchmark Capital’s Creative Technologies division, originally designed to meet the needs of regional chartered advice firms, is to form a key part of Lloyds’ new advice proposition is just one example.

This certainly makes Schroders’ acquisition of Benchmark Capital look like a very smart deal. It should also mean there will be a substantial development budget to enhance the proposition.

That said, a key question will be whether these enhancements are ones that only Lloyds wants, or will all users get a say?

While the software has a lot to offer, its treatment of platforms other than Benchmark’s Fusion Wealth is limited to say the least.

It will be important for Enable’s other adviser users to know what the priorities will be going forward.

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Looking at adviser software business acquisitions more broadly, it appears to be asset managers, not life offices or platforms, with the biggest appetite. Invesco’s acquisition of Intelliflo and Aberdeen Standard’s long-term ownership of Focus Solutions are further examples.

Will 2019 see more fund houses look to add adviser tech suppliers to their stables? If so, there are not that many of the really good ones left.

Both Intelliflo and Focus have benefited from the sizeable development budgets institutional ownership can bring. I have been very impressed recently by the new wealth management offering from Focus. Equally, Intelliflo has been able to build far more features.

Time4Advice is another player that has made significant progress in the past few years and its relationship with St James’s Place must be important in this. I am always hearing positive things about the Curo system.

Having a very large customer like an asset manager can be both a blessing and a curse for a tech firm. They do tend to get priority when development agendas are set, so it is important to be sure the needs of the smaller advice firm customers are not being overlooked. That said, as an adviser, the size of a firm’s development budget should be a big influence when selecting systems.

The practice management system market for investment advisers is increasingly dominated by seven or eight players, although our analysis of systems in this category includes around 20 different ones. Clearly, not all are going to survive.

Ian McKenna: Robo-advisers have no right to special treatment

But adviser software is no longer just about practice management systems. A wide range of other tools have a valuable role to play. Indeed, we are currently tracking 104 different technology suppliers for advisers and adding about one more each week.

Client portals, risk-profiling, portfolio analysis, portfolio rebalancing, performance reporting, illustration portals, cashflow modelling, personal financial management, product research, regtech and more are all areas where the right solutions can save hours of work.

Interestingly, there tend to be a handful of older systems still using desktop technology. Users of these systems should consider looking for a new supplier now.

Desktop software is uneconomical to maintain, so will probably receive fewer and fewer updates. Are your software suppliers investing in the future? If not, they almost certainly will not be able to enhance yours. In the US, Charles Schwab has recently sold its portfolio management and reporting software with 3,000 users to Envestnet Tamarac.

While the price has not been disclosed, it has been suggested it is for an “immaterial” sum, even though the deal will generate revenues in the region of $10m (£7.5m) per year. This gives a useful insight into the costs of developing and maintaining adviser technology in the cloud era.

If Schwab sees the cost of operation as uneconomical, what does this say for the sustainability of so many UK suppliers with far smaller user bases?

The quality of technology available to advice firms has improved massively in recent years.

If you are struggling with a system 10 to 15 years old that has not had a major refresh, perhaps now is the time to be looking around for better options.

Make sure you are with a firm that is clearly moving forward and investing in its products, rather than just treading water farming existing revenue.

Ian McKenna is director of the Finance & Technology Research Centre


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