Technology in Financial Planning

By Linda Leitz, CFP^®

Financial planning has a lot of number crunching and a lot of data to keep track of. Folks who have been in the profession for several decades may have started with paper files, a business card rolodex, a financial calculator, and some spreadsheets. Now, a tech stack is an essential part of financial planning. Two experts in financial planning tech and the future of our profession, Joel Bruckenstein, president of Technology Tools for Today (T3), and Bob Veres, editor of Inside Information, weighed in on the good, the bad, and the ugly of building, maintaining, and using your tech stack.

Picking Your Technology

No matter what you want from your technology, there are plenty of choices. In fact, says Bob, the current situation is “over choice.” There are so many solutions that it can be overwhelming. His view is that some of the older solutions are becoming both more expensive and less robust on features while some newer solutions may provide solutions that can transform your services. Bob cites Holistiplan as revolutionizing tax planning.

In terms of how to pick, Joel recommends you make a list of all the features you want and the solutions you’d like the tech to provide your firm. He says, “You don’t need to be on the bleeding edge but should be on the leading edge.” If you’re avoiding making changes because of how cumbersome change can be, you’re missing out. One of the criteria Joel suggests is finding out who owns the data and whether or not it can be moved if you change software. Bob suggests if you have a multigenerational team, the younger team members can take the lead in assessing your current and potential technology.

Joel also encourages planners to learn from their mistakes. If you start using a new tech tool and after a reasonable learning curve it doesn’t do what you want it to do, change to a different tool.

Using Technology Effectively

Joel and Bob agree one of the most important actions financial planners can take is understanding how their technology works. Joel says, “The biggest danger in technology is ignorance.” Bob agrees, saying, “Advisors need to know what goes on under the hood, and increasingly they don’t. As software becomes more complicated, it becomes more opaque.” This ties directly with the CFP Board Code and Standards, which includes that our duty to clients includes guidance on selecting, using, and recommending technology. The CFP Board has published a guide to its technology standards, as well as sample questions for evaluating tech. There is a danger in blindly accepting the output of software without knowing assumptions used or whether there’s been a garbage-in-garbage-out error. It’s also noteworthy that capstone courses for CFP^® coursework generally prohibit the use of financial planning software. While it’s cumbersome to develop spreadsheets for retirement projections, the ability to do that increases the chances a planner will understand how results are calculated, be able to convey outcomes to clients, and spot errors in output.

Joel stresses you should have a mechanism in place to monitor the upgrades and releases from all your software and share that information with all the team members who use that technology. He sees many planners are only using a fraction of the capabilities of even their CRM. He suggests if you’re not doing a proactive assessment of your tech stack every 12 months, you’re probably missing features or you might be using technology that no longer meets your clients’ planning needs. This is another area where a person who finds technology interesting can take the lead.

One decision to make is whether you want several specialized tech tools or you want to use the capabilities of a general financial planning software. There’s not a right or wrong blanket answer. If you have a lot of executives as clients, having robust solutions specifically addressing RSUs and stock options is prudent. The same applies to a client base that may be subject to sunsetting of current estate planning provisions. Even seemingly straightforward decisions on when to take Social Security and retirement distributions might need more functionality than your current financial planning software has.

Tracking processes at a high level and for each client is important. Louis Retif, CEO and cofounder of Hubly, a tech solution providing workflows for financial advisors, sees planners overwhelmed with “messaging, emails, and notifications we receive that we all go into analysis paralysis and ultimately become unproductive.” He’s also seen planners dealing with the “spreadsheet from hell” for tracking. The Hubly workflow solution makes creating workflows and scheduling non-recurring tasks easy for all team members, and it can interface with CRMs.

Artificial Intelligence

Joel and Bob both see AI having a bigger role in the future. Most financial planners have become comfortable that AI isn’t going to replace the personal relationship between financial planners and their clients. Currently, Bob and Joel see AI being a helpful interface with applications and enhancing the features available. They don’t see the vendors using AI to do your thinking for you. Joel sees more AI-enabled technology in the future to support advisors.

Beware Dangers

Bob and Joel both see cybersecurity as a danger many advisors aren’t paying enough attention to. Your in-house IT person or local IT vendor might not have the expertise to do what your firm needs to protect it from threats, as cybersecurity is a separate specialty. Bob expresses concern that, “What I hear from advisors is that they’re far more concerned about the SEC compliance than they are about actual security.” Joel finds no matter what state you’re in, if you comply with New York Department of Financial Services Department of Cybersecurity, you’re probably in pretty good shape.

Joel warns planners not to wait for a challenge—like COVID presented—to know what your technology can do, how it can protect you, and how it can allow you to better service your clients. Know your tech stack and be prepared to use as many of its capabilities as possible, if you aren’t already.

The Golden Age

Bob believes we are in a Golden Age of technology, with better technology than we’ve had in the past and potentially better than we’ll have in the future. “The Golden Age will not be easy to navigate,” he says, seeing the potential for brain fog from all the choices. Start with what you’re trying to do, where the pain points are in accomplishing it, and what your potential technology solutions are. And Joel reminds us the challenge to transitioning should be evaluated when you sign on with a firm. Understand when you adopt a technology what you get if you leave. Due diligence on the way in is more cost-effective then when you move. 

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Linda Leitz, CFP^®, is a NAPFA-Registered Advisor in Colorado Springs.

image credit: Adobe Stock Images