The Challenges Of Building Technology For Financial Advisors - Pocket Risk


Helping Financial Advisors Know Their Clients – Risk Profiling, Client Psychology, Behavioral Finance, Compliance

The Challenges Of Building Technology For Financial Advisors

Headlines like Michael Kitces’ “The Sorry State Of Risk Tolerance Questionnaires” disappoint me but they also motivate. Criticism is how we improve and a new version of Pocket Risk is launching soon. Advisor technology has its challenges. Yet I rarely hear voices from the other side. The founders, CEOs and CTOs of advisor tech companies giving their perspective. This is an honest post about building technology for financial advisors from an advisor tech CEO.
1. Advisors vs Clients – Most advisor tech is designed to benefit the client, but occasionally, the interests of the advisor and the client conflict.
A simple example is disclosures. Should technology providers put them at the top of the page with a large font or bury them at the bottom, just meeting the minimally regulated font size? Technology providers walk a tightrope between what is best for the client and what the advisor requests.
I’ve had to make dozens of these decisions over the years and since advisors “pay the salaries” there is no pretending they have a loud voice. But first we have ethics and refuse to work with advisors who seek to maximally manipulate features to their advantage.
99.9% of the time advisors just want to be efficient and regulations have them contorted in the most uncomfortable ways.
As a technology provider, having to constantly think about advisors AND clients, makes for slower technology development. Just imagine trying to build a product that simultaneously satisfies an advanced practitioner and a complete novice.
2. Data Security and Integrations – After the defense industry, financial services firms host the most private data. This makes companies reluctant to share and integrate. Most integrations happen because a relationship has developed between CEOs of two companies (usually beginning at Technology Tools For Today). But that relationship can take years, while advisors sit and wait. Very few companies have open APIs. Redtail is one of the exceptions.
3. Fractured Industry – The term “financial advisor” is too broad. We routinely find that broker-dealers want something different from independent RIAs. Not to mention the issues involved serving advisors internationally. 
Creating advisor tech to satisfy all advisors is impossible, because the constituents want many different things. Using Pocket Risk as example, we have demands to turn our product into a sales tool, a compliance check, a client behavioral management tool and sundry other services.
So looking forward, I see a few things have to happen for advisors to get better tech. Firstly, tech firms will have to specialize and only serve certain parts of the market (e.g. broker-dealers vs independent RIAs). Whether this can be done profitably remains to be seen. Secondly, advisor tech firms need to establish a security standard so they can easily share data. Orion has done some work in this area. Lastly, ultimately all advisors will be working in a client’s best interest and that will make technology development simpler.