Coming out of the recent Credit Tsunami, and still recovering from the 2001 Internet Bubble, the Wealth Management marketplace in the United States is just starting to realize that market data, security analytics and research are secondary data needs in this ever so distrustful financial climate.
In the late 1990’s and into the very early 2000’s, wealth managers, financial advisors and retail brokers (herein defined as wealth management professionals) were trading stocks and bonds for their clients. Unfortunately with the substantial drop in market values that came out of the 2001 bubble and the most recent financial crisis, substantial pressure has been put on these professionals to do more. Rather than just trading stocks and bonds and losing 30-50% of a client’s value – which they can do by themselves – wealth management professionals have recognized that they need to spend more time with their client, understanding their needs and addressing their longer term plans. Many of the more successful wealth managers have recognized that they should offload or outsource parts of their supply chain, such as portfolio analysis and financial planning. By doing this, they have regained time, which they have put back into solidifying strong relationships with their existing clients and helping to win new clients. Dow Jones recently published a paper titled, “Best Practices of Elite Advisors” and in this paper they clearly show that this business is all about relationship management and communication with clients. When relationship management is central to a wealth managers tasks, they are substantially rewarded with incomes that far outshine those who are still picking stocks.
Although this change in the marketplace has happened over a 10+ year timeframe, it seems as though large, publicly traded financial information and technology providers have not adapted well to this changing marketplace. Companies like ThomsonReuters, IDC, SunGard and others are still building out and spending substantial capital in developing desktops with all of the security information that a wealth management professional may have needed in the 1990’s. Sure, wealth managers need to have this basic market data, basic news, some research, but for the most part Yahoo Finance, Google Finance and media solutions such as MarketWatch and WSJ.com offer enough of this. Perhaps rather than trying to sell pricey market data solutions into this sector, these large financial technology firms will realize that building relationship tools are probably a better way to go.
Look at some of the companies that are offering relationship tools: RedTail CRM, GaleForce Solutions, Forefield, AdviceAmerica (recently acquired by FiServ), Smarsh, Lightport and others. These companies have recognized quite competently that relationship tools, perhaps originating from CRM platforms are the next generation wealth management desktops. I would imagine that we will see many more deals such as AdviceAmerica on the horizon shortly. I would also imagine that companies that offer social media communication and compliance tools to also be a nice value for some of these large fintech companies. It seems as though FiServ has recognized this most recently with its purchase of AdviceAmerica.