When Gundeep Sidhu started as a financial planner at United Kingdom-headquartered accounting firm BDO more than a decade ago, he searched for an appropriate software package that would help him get on his feet quickly. His search led to disappointment, as he found the available software packages quite rudimentary.
He started to dream of creating a program that would revolutionise the financial planning industry or at least would ease planners through the more mundane aspects of their job.
But the technological development in the industry was quickly gaining momentum and it was not long before VisiPlan entered the market. The program quickly established itself as the prime package and BDO was among the first to adopt the software. Sidhu's aspirations to come up with his own system had to take a back seat.
Five years later he decided to leave the confines of the large firm and set up a practice under his own licence, Peppertree Financial. Yet again, he found himself confronted with a digital dilemma.
The existing packages targeted investors who had already 'arrived' - the so-called high net worth individuals - and the software's forte lay in cash-flow modelling. But Sidhu's client base had a different make up altogether.
"The clients we were attracting were younger clients," he says.
"They were still building wealth rather than being established retirees. These clients needed client relationship management."
"Because they were still building their wealth, you needed to make sure they were following their budgets and that the money allocated was actually going into these investments."
He was now master of his own destiny, and nothing stood in his way to have a go at developing a new system. He placed an advertisement seeking an IT programmer and development started in 2004.
Once on the path of software development, Sidhu became more and more immersed in the creation of the new system. He sold his planning business in March last year to fully devote his attention to his new business venture, AdviserLogic.
Impact of the crisis
AdviserLogic launched its program in July last year and currently has about 25 users. Considering the developments in the financial markets in the past six months, some might say this is not the ideal time to launch a new system. But Sidhu says the crisis has a limited impact on the potential demand for his product.
"We are mainly concerned with financial planners and making their practices efficient. We actually provide them with solutions that give them cost-cutting opportunities," he says.
However, the crisis does form a distraction for practice managers, he says, which could see decisions on software investment being pushed back. "The interest [in the product] has been according to expectations," he says.
"[But] the uptake, especially from the existing users, has been a slow process."
Sidhu is in negotiation with various dealer groups and expects to have about 60 users by June this year. He hopes to have between 100 and 120 users by the end of the calendar year. At about $300 a month for a licence, this number would make the venture profitable, he says.
Most financial planning software companies remain unrelentingly optimistic about their growth perspective. Iress, vendor of Xplan and VisiPlan, has experienced good growth, both through acquisitions and organic growth.
According to the results over the half year to 30 June 2008, the most recent figures available, Iress's Australia and New Zealand monthly wealth management subscription revenues, which include Xplan and VisiPlan revenues, received a significant boost from the purchase of VisiPlan in April 2007. Revenues further increased since then to more than $3 million a month by June last year.
And the company continues to see revenue growth. "We are very busy. The business is flowing through the door," Iress senior business development executive Michael Kinens says.
"Obviously the market has caused us to have some time to reflect on what is going on, [but] from an organic perspective we have continued to see numbers increase."
The woes at some financial planning practices might actually result in new business for Iress, Kinens says, because a greater emphasis is put on cost efficiencies. "There are those businesses that say, 'I don't think I can afford to take on more staff', and look at where they can make more cutbacks," he says.
"Where we fit in is to encourage them to look at how they can do things more smartly and use software to do that."
Iress is also benefiting from some planning practices taking the opportunity to look at how they can expand the business at a low cost. "There is a segment in the market that is looking at these times and says 'now I've got some breathing space to look ahead if my business is ready to grow in the next bull run'. We can assist with how businesses are refining their processes."
But Kinens does admit growth has been slower in the past couple of months. "Revenue has increased overall because numbers have increased overall. In terms of the strength of the inflow, that has probably decreased a bit," he says.
"Growth [of revenues] hasn't been as strong as it had been."
So far, the company has not resorted to any drastic measures, but Kinens says there is certainly more restraint in allocating budgets. "I wouldn't suggest there have been any cutbacks, but we have to be frugal with our money," he says.
"It's a case of being clever about how you do things. For example, if you're going off on trips you have to make sure you see not just one client, but multiple clients."
Iress has also been working closer with existing clients to look at further finetuning their systems. "Advisers are looking at ensuring their contact with clients is kept at a premium level. We are looking at doing the same thing with our clients; we make sure they know how they can leverage technology to make their business more efficient," Kinens says.
Coin, which has been owned by Macquarie Adviser Services since mid-2005, has also seen business continue to expand. "Coin revenues continue to grow despite the current conditions due to its diverse range of clients, ranging from small boutique planners and medium-size dealer groups to large financial institutions," Macquarie Adviser Services head of product and technology Tony Graham says.
"While some clients may be reducing the number of licences in response to changing market conditions, other clients are investing in software to make their practices more efficient to meet the challenges of the current market."
As a result of the continued growth, Graham says the company has not cut any staff. "Our current focus is continuing to invest in expanding the functionality offered by Coin, rather than cost cutting," he says.But Graham refrains from giving specific revenue figures and Macquarie Group does not provide any subscription data for Coin in its annual reports, so it difficult to judge how the current crisis has impacted on the business.
Time lag
A reason why software companies might not have experienced a strong jolt from the crisis as yet could lie in the time gap that is typical for the industry, HNW Planning principal and representative for planning software Syncrm Richard Cumming says.
"I don't' think you'd get very quick and immediate responses in the software market," Cumming says. Somebody needs to decide their software is not good enough and then it's a three to nine-month process to find and implement superior software."
It is unlikely firms will quickly change their minds once they have made the decision to go through the process.
Rmg financial services made the decision to change its software system in September last year - right in the middle of the financial crisis. The company was using VisiPlan, but is now switching to Coin, and started to implement the new system in November last year. It is still in the process of aligning its business processes to create the most efficient outcome.
The deepening of the financial crisis since the firm made its decision to switch systems provided some food for thought, rmg financial services general manager and partner Patrick Canion says, especially as the licence for the new Coin system is substantially more expensive than the old VisiPlan licence. But ultimately it did not alter the firm's decision.
"We made a strategic decision and we knew what we were doing," Canion says.
"Once we made our decision it was more a case of let's work out our workflows in terms of when it would be the best time to do it.
"[The crisis] certainly made us think twice about the extra expense, but in these situations our clients want to see us continue to grow. I think the best philosophy is to keep doing that rather than to become introspective as a business - clients are going to pick up on that. In a sense, it's a display of confidence."
Challenge the status quo
Coin and Xplan are dominating the financial planning software market, and although the systems are comprehensive they also come with a hefty price tag. As the financial crisis continues to unfold and the drought experienced in investment inflows carries on, planning practices might take a second look at cheaper options in the market.
A number of new planning systems are trying to break into the market, and they are priced well below the rates of the main players. But price is not the only difference, these newcomers say. They argue the dominating software programs offer little to facilitate practice management and communication between financial planners and clients, while these activities take up the majority of a planner's time.
The new systems, therefore, are created around client relationship management (CRM) systems. And with the financial crisis limiting the inflow of new capital, financial advisers have stepped up their communication with clients, making CRM-driven software systems more pertinent.
Syncrm is on the verge of launching its system and will start in February 2009 with the first five users. "We expect to just hold that and deliver on the client's expectations and then add another five in April. It's about a controlled rollout," Cumming says.
Cumming started the development of the program out of pure frustration. "The last thing I wanted to do is get involved in computer systems," he says.
"I've tried three separate systems, but nothing was able to cope with what I was trying to do. I've talked with many of my friends and they had the same problems.
"[Most products] don't integrate well with the Microsoft Office products and with Outlook in particular. They focus on calculators and scenario testing, which we use maybe half a per cent of our time.
"They are not focused on business efficiencies, workflows or office management, which is what we are doing 95 per cent of our time."
Many software programs are also too complex and require intensive training courses, he says.
"The senior person who runs the office is usually pretty competent with computer systems," he says. "It has all the features, but it's actually a very usable system," he says.
"Advisers, on the other hand, typically have grey hair, they come from the insurance industry or they have built up [their own practice] and they are usually not very competent."
Syncrm is built on the Microsoft CRM platform and integrates naturally with Microsoft Office products, he says.
AdviserLogic is also based on a CRM platform. An illustration of how this system revolves around the communication with clients is found in the ability to give clients remote access to the system so they can see their portfolios, investment reports and outstanding tasks. Clients can also leave messages for the adviser. "In Coin you can't do it and in Xplan it is very limited; you can't provide full access," Sidhu says.
Ease of use has also been a key element in the development of his system. He estimates the training required for his program is about 10 per cent of what is needed to work with the main systems in the market.
"It works how a planner works. It's clear where you go to next and more difficult functions are hidden."
Despite his enthusiasm, Sidhu admits the prospect of challenging the domination of Coin and Xplan is daunting, and he says AdviserLogic is mainly intended for new users of planning software and smaller practices that have fallen off the radar of the dominant players.
Competition
As new entrants to the market, Syncrm and AdviserLogic are keen to list what they see as shortcomings of the dominating systems. But Graham says client input is just as important in the development Coin.
"Coin's research and development activities are client driven, hence we are always speaking to our clients to understand their requirements and monitoring developments across the market, including regulation changes," he says.
"Regardless of size, clients are looking for high levels of service and support and Coin is continuing to focus on its client relationship management and call centre support efforts to ensure its high level of support and service is maintained."
Iress also has an extensive service that allows clients to make suggestions for improvements to the system. "We get an email every Monday morning of all the new issues being logged and all the items being resolved. If I look at that email there are at least 50 new items there and there are also at least 50 to 70 items being resolved as well," Kinens says.
The system has grown to such a size that sometimes people ask for functions that are already available, he says. "That is a challenge that we have: the product has grown in its functionality to the extent that there is so much in there . how do you know when you know it all?"
The offensive of small, CRM-based software systems to get into the market is still in an embryonic phase, but Kinens says he does keep an eye on them. "At the end of the day, the adviser with an Excel spreadsheet forms some form of competition to what we are trying to achieve," he says.
