There is a fundamental problem in wealth management. There is too much operational friction in the current wealth tech stack.

Why? Three reasons:

  1. There are too many single-use products solving for specific use cases. The wealth tech stack is .. stacked!
  2. Products are closed-end and don’t integrate, creating data silos.
  3. Products are built for the wrong end user – the client, not the advisor.

Tools are built with the advisor’s client as the end user when in reality the power user, the advisor (or planner, the operator) is the end user. Products have been built with UI geared for the wrong person. Clients are wooed by simplicity and visuals, yet the work planning focused advisors do is complex and analytical. We’ve focused on the curb appeal and forgot about the fundamentals.

Products have singled out problems advisors have and solved for them—great. Need a financial planning software? eMoney. Need a CRM? Wealthbox. Need performance reporting? Orion. Need estate planning? Wealth.com. Need tax planning? Holistiplan. The list goes on…. forever. The wealth tech stack is overwhelming. Kitces did a great job of capturing it in the image below, but let me visualize it for you.

Imagine a construction worker on a project. He comes to the job site prepared—or so he thinks—bringing his toolbox ready for the day. Every time he needs a different tool he has to go back to his toolbox. A toolbelt would be mind-blowing, but it just hasn’t registered with the construction industry yet. When he needs a different tool he has to walk over to the tool box.

Now what am I trying to get at? I’ve been trying to put this into words for months. Maybe an illustration will help. I color coded it to make it somewhat consumable. Let me walk you through what the meeting prep process looks like for advisors preparing for a client meeting.

The yellow boxes illustrate the different tools in the tech stack used while preparing for a meeting. I kept it simple and excluded all the products that are layered on top of the core tools shown below. The blue boxes illustrate the many shapes and sizes data is bundled in. From PDFs to data from financial planning scenarios, it’s scattered all over the place. The red boxes illustrate when data is accessed. Each of these data points is siloed and typically has to be opened individually.

Let’s walk through a simple example: You shared with your advisor that you’d like to have $100,000 in cash at all times. When managing cash levels, advisors would need to use three systems to maintain your cash. The previous meeting notes in the CRM, let’s say Wealthbox or Salesforce, are used to store qualitative data: Your goal is to always have $100,000 cash on hand. The financial planning software, let’s say eMoney (which aggregates data across all your accounts by using Yodlee) is used to see how much cash is on hand within all your accounts: Your current cash levels are at $57,000. To come up with the most tax efficient way to generate the cash needs of $43,000 ($100k – $57k), advisors would use performance reporting software, let’s say Orion (which aggregates data from custodians: Fidelity, Schwab, etc.) to see the cost basis within your managed assets. The advisor would then screen based on minimal tax effects, and place a trade to generate the cash needs.

In this simple example, the friction may seem negligible—’it’s part of the job’. Companies like Uptiq and Vega Minds are actively building AI solutions. Beemo Automation provides a consultative approach to advisors. The low hanging fruit is being taken. But the wealth planning piece is being left out of the equation. Eventually, we’ll reach a point where complex wealth planning examples will have integrated AI.

A more complex example: In a previous meeting you shared with your advisor that your goal is to 10x your business in 5 years, and exit for $50MM. Great! Your advisor would like to walk you through some estate planning techniques that may optimize your estate tax liability down the road. As the client, there’s nothing you need to do. As an advisor, the work is just getting started.

Those previous meeting notes were logged in the CRM. Your client manager created a task for your planner to review the estate tax liability in the planning software in two weeks. Another task was created for your client manager to schedule a follow up meeting in a month once the review has been completed. And that’s that. Until two weeks later when the wealth planner is notified of the upcoming task; time to roll up your sleeves and get to work.

The planner would then start by reviewing the previous meeting notes to brief on what was discussed and what to model out. Maybe they need to loop in an estate attorney to get their perspective on certain irrevocable estate planning techniques. They would extract the pertinent information from one software (say CRM), re-enter it into the appropriate software needed to model scenarios (say eMoney), create new scenarios to illustrate the recommendations that were discussed with the estate attorney, and then distill it down to conversation points (say PowerPoint). Throughout this process new data and documents were created.

When it comes time to meet with the client, the conversation brings new qualitative data into the conversation – the most important, yet untapped data source in wealth management (lost in the CRM abyss). That conversation leads to decision points and new tasks. It’s stored in the CRM and stays idle until it’s time to act again. The friction comes from systems that don’t communicate, data that is validated in certain tools but not others, and old data lost in a black can’t be taken into consideration because it’s not easily accessible (unless you have Mike Ross’ memory).

What tool contains the most up to date data? Is there a single source of truth? What about that one time, 3 meetings ago, when the client mentioned that they’d rather wait and see if the business scales before doing estate planning because revenue didn’t meet expectations last year so they may push the business exit timeline back? All great information that’s usually in a advisor’s head. To account for this information, team operators would either have to ask the advisor or sift through the previous meeting notes for answers.

Let’s go back to my example with the construction worker. Each tool serves a different purpose and he can’t carry them all at once. So he gets a tool belt that removes the friction of going back and forth to his toolbox every time. The wealth management industry is missing that.

When it’s time to get stuff done, advisors have to walk over to the tool box, every single time. Jump between tabs to use different products, pull up that one PDF in that one folder, and search for that one email from a couple weeks ago. The wealth tech stack has the tools, but no toolbelt. Data is dispersed, closed, and unstructured, making it hard to integrate your data. Tools are siloed. Preparing for meetings is theoretically easier than ever before, yet the operational friction prevents advisors from spending more time with clients.

The current solution? Adding knowledgeable operators to continue maintaining the relationship and their data. Firms are built by scaling staff as the client base grows, say one hundred households per one advisor. Practice management has focused on optimizing processes using a broken system. That’s not scalable. Especially considering the shortage of knowledge workers in the industry and that the average advisor age is 56 years old. Talk about a senior industry!

What if we focused on scaling technology, not processes or staff? With the right tools we could blow the roof off of efficiency and focus on the fun parts of the job – if you’re analytical, the planning, or if you’re sociable, the client experience. Younger advisors understand the power of technology but don’t have the voting power to begin using it. Tech-forward firms are building their own solutions (cue Farther and others). Smaller independent players (firms under $50B) are in limbo—they’re limited to off-the-shelf products that create new problems or require more complex processes to be implemented. How many products do they need in their tech stack? Does adding more tools even help? There needs to be a way to integrate the growing wealth tech stack. And structuring the unstructured data.

I’d love to understand your perspective as an advisor—are you open to taking a brief survey to help develop our research? (5 minutes max). The goal is to identify the areas where your current tech stack is creating friction and reducing efficiency in your workflows.

-Erik

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P.S. Here’s a list of all the different products an advisor may use daily.