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Technology is an integral part of our lives and a necessary cost for any financial advisory practice. It streamlines your processes and improves communication with your clients. However, it often comes with a hefty price tag. Between portfolio performance management and reporting, a customizable client portal, a CRM system, streamlined billing features, IT, a financial planning software subscription, etc., costs add up quickly.
Most advisory firms that specialize in wealth management use three technology platforms: financial planning software, portfolio accounting software, and a customer relationship management (CRM) software. Each of these platforms has its own benefits, but most firms find that a combination of all three provides the best results.
Let's take a closer look at the functionalities and costs of each.
Financial planning software
As the name suggests, financial planning software is used to build comprehensive financial plans for clients. It's a valuable tool that can be used to track income, expenses, investments, and debts, as well as create a budget and track progress towards meeting financial goals.
There are a lot of options on the market. However, most packages fall into one of two categories: those that are good for general financial planning and those that are more specialized. General financial planning software packages, like MoneyGuidePro and RightCapital, typically cost between $1,000 and $1,500 per advisor per year. These packages are designed to be comprehensive, offering features like budgeting, investment tracking, and goal setting. If you're looking for something more specific, like for retirement or estate planning, there are packages that specialize in those areas. However, those packages will likely be more expensive. Before deciding which software to use, sit down and assess your needs to ensure that you select a package that will help you meet your goals.
Portfolio accounting software
This tool is used to help individuals and organizations track investment portfolios. This software can provide detailed information about each investment, including prices, contributions, and distributions. Portfolio accounting software can also help to calculate returns, monitor performance, assess risks, and generate reports that can be helpful for both tax and investment purposes.
Portfolio accounting software is typically the costliest software expense for financial advisory firms, partially because advisors are often charged per account. Say the cost per account is $60. If you have 70 clients and each client has an average of three accounts, your annual expense would be $12,600. Even so, the benefits of this software solution often outweigh the costs. Portfolio accounting software can provide valuable insights into investment performance and risk, as well as help to streamline the investment decision-making process. In addition, many portfolio accounting solutions offer automated reporting features that can save advisory firms substantial amounts of time and money.
CRM
Financial advisors have a lot of responsibilities. Not only do they need to keep track of their clients' financial situations, but they also need to keep in touch with their clients and schedule regular meetings. This can quickly become overwhelming. Fortunately, CRM software takes some of the burden off. CRM software helps financial advisors keep tabs on their clients, organize contact information, and track meeting schedules, freeing up financial advisors' schedules so that they can focus on giving their clients the best possible advice without getting bogged down in the administrative details.
Pricing for a CRM system can vary widely. Some systems are priced per user, while others base their price on the number of databases or assets under management. The size and needs of your business will play a big role in determining which pricing model is right for you. If you have a large sales team, for example, you may need a system that can accommodate a high number of users. On the other hand, if you have a smaller asset base, you may be able to get by with a less expensive CRM.
While technology is a worthwhile (and critical) investment for financial advisory practices, the costs stack up quickly. Therefore, advisors would be wise to think critically about their technology needs before making any commitments.
Bridget Grimes and Katie Burke co-founded Equita Financial Network out of a need to fuel business success while empowering other women in the financial services industry. Equita became the first platform solely focused on women-led financial planning firms, designed to encourage women to make the leap into launching their own practice and provide solutions to support them every step of the way. Equita is a way for like-minded women to not only share resources and run their business at an affordable cost, but to also share ideas on everything from best practices to help with questions regarding client issues.
At Equita Financial Network, we understand the toll that technology expenses can take on female solo practitioners, which is why we set out to create a solution. Equita offers the software female-led financial planning firms need to streamline and grow their business on their terms. Get in touch to learn more.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
