September 09, 2009


The Street Strikes Back Small Advisory Firms Look to Clouds State of the Merrill/BofA Union The New Wealth Management Landscape The New Online Wealth Management Competitors
The biggest technology trend among small wealth management firms? A movement toward software-as-a-service (SaaS) delivered through cloud-like facilities, according to Miles Davis, senior manager at SMART Business Advisory. Davis says that for registered investment advisers (RIAs) and brokers just getting started, SaaS offers a low-cost brokerage in a box.

This is an emerging trend "born on the back of the recession and the downturn in the economy," Davis explains. "It's 100 percent driven by budget constraints as well as the need to reduce operational risk and focus on what these firms do well[, which is selling]."

Although Advent, SunGard, Northstar and other wealth management platform providers offer hosted delivery of their software, their offerings are not cheap. Davis says he is seeing a new crop of third parties that are hosting the software and providing cloud-like delivery. "For the brokers, it's a way of maintaining a degree of independence as well as cost arbitrage," he comments.

These small third parties are buying software from the wealth management independent software vendors and offering it out using Amazon's or Microsoft's clouds, according to Davis. "It's a cheaper service that often doesn't include all the bells and whistles," he says.

The large software makers don't mind, Davis says, because it is not a large enough market to be a threat. Plus, the third-party companies won't be able to maintain the software, he adds, suggesting that as these small wealth management firms grow, they'll go directly to the software companies to buy the software.

In a smaller trend, Davis says, firms are starting to use client account data aggregation services such as Correctnet and ByAllAccounts. Firms can use these to present comprehensive client reports or portals that provide information about all their accounts, inside and outside the firm, he relates.

"The client doesn't know it comes from someone else," Davis says. Typically these companies obtain the clients' user names and passwords for their online accounts (with the customers' permission), automatically log in to those firms' Web sites on the clients' behalf, and screen-scrape their account information. Then they feed that into a specific format for the investment adviser, he explains.

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