Integration continues to be a dirty word for financial advisors—whether they’re associated with a registered investment advisor (RIA), a broker-dealer, or both. Part of advisors’ frustration is that there’s no go-to integration hub—that portion of an advisor’s technology stack used as the central pillar of their technology stack, around which peripheral technologies must operate.
Even after years of technological innovation, much of it bespoke for the wealth management industry, advisors are unsatisfied with the integrations available to them.
Most vendors are quick to stake their claim as an “integration hub,” the central location that all other applications should connect to, but there’s still confusion—and plenty of competing viewpoints—about what qualifies as the de facto single source of advisor truth.
Major custodians have been building and improving integration platforms for years, and still no firm can solidly claim ownership as the hub. Meanwhile, providers of financial planning, document management, portfolio management and customer relationship management (CRM) systems are equally as vocal about their status as integration hubs. But there’s still no objective confirmation of such.
A decade ago, a third of advisors were not satisfied with their technology integrations, according to an InvestmentNews survey. Improvements have been agonizingly difficult to come by. As advisors witnessed the level of integration that was possible and available in other facets of life, namely in their own app-enabled personal lives, it raised expectations for harmonious integrations within the wealth management industry.
Nevertheless, “little progress is being made” with integrations in the wealth management industry, according to a recent InvestmentNews survey: A “lack of integration among core software applications is the biggest pain point” in technology, with 57% of advisors surveyed describing integration flubs as the “top hurdle in their tech process.” Less than half of respondents (48%) said they were “fully satisfied with the foundation of their tech stack.”
Anatomy of an integration hub
With so much criticism still aimed at integration hubs, it’s worth considering what makes an integration hub and how important it is to an advisory firm.
Several years ago, CRM systems, financial planning software providers, and custodians led the pack in establishing themselves as integration hubs. Today, at least one investment risk assessment provider is also gunning to be an integration hub.
CRMs have the right stuff
Even as it was years ago, an advisor’s CRM system continues to be one of the top integration hub candidates. That’s because a CRM is a necessary, but relatively lightweight, piece of software. CRMs don’t have to execute the complicated calculations and field mapping required of financial planning software, portfolio management systems, or even risk metric tools. But in their day-to-day workflow, advisors often use their CRM, whether as a preparation step before a client meeting or as a depository for the day’s notes.
Furthermore, almost all advisors have some kind of CRM software—even if it’s just Microsoft Outlook—and actually use it, according to a recent InvestmentNews survey.
“CRM systems are advisory firms’ most integrated solution,” according to the survey results. “For a majority, CRM serves as the foundational block of the tech stack, and among most CRM users it is integrated with other applications. No other solution has emerged as a competing tech stack foundation.”
From a software development point of view, a CRM has the characteristics needed for “hub” status. Because it is used as the software to identify individual clients, it’s easy to link to financial planning and portfolio accounting systems, both of which also contain those same identifiers. Key data points such as account value, performance and goals will appear and be updated within the context of the client contact profile.
Redtail Technology and Salesforce are well-known serial integrators in the CRM universe. Redtail was recently acquired by Orion, a move it had been trying to accomplish for years.
Wealthbox has a stellar reputation for integrations and recently landed $31 million in new capital to strengthen its offering.
Meanwhile, Junxure is still the CRM of choice for some firms, even after its brand was retired by AdvisorEngine earlier this year.
Financial planning providers as early hub candidates
Financial planning software is also widely used among advisors, making it another potential integration hub; however, its usefulness is limited by advisor behavior.
For advisors who don’t lead with planning, utilizing financial planning software as a hub can be awkward, if not outright frustrating. Even most planning-focused advisors use their financial planning tool for one aspect—financial planning—of their practice.
CRM systems, on the other hand, are used by advisors whether they focus on planning or not.
Many financial planning software providers that launched in the late 1990s and early 2000s have been swallowed by larger firms. eMoney Advisor is now owned by Fidelity. MoneyGuidePro was purchased and rebranded by Envestnet as Envestnet | MoneyGuide.
Today, there are a number of niche financial planning providers focused on topics like estate planning and student loan repayments, but their specializations make them unlikely to be viable integration hubs.
Risk assessment providers as a hub
Risk assessment software provider Riskalyze is also vying to be an integration hub. Last year, it launched an online tool that listed the custodians, CRMs, financial planning, document management, portfolio management and research and data vendors with which it maintained links.
Many of its integrations, however, involve adding its risk metric to the displays of other tools in advisors’ technology stacks. In that sense, it’s not visibly a hub, even if it’s the software around which other technologies must interact.
Riskalyze is building on its strategy of establishing itself at the center of advisors’ practices. Its marketing material encourages advisors using its software to make risk scoring a central pillar of advice conversations. The firm has also changed the way certain advisors do lead generation by leading with risk tolerance, as opposed to investments, financial planning, or cash flow.
Riskalyze has found success with its model, reaching number one market share as a risk tolerance provider. The firm is working hard to leverage its position and expand into other spaces such as investment analytics and portfolio management.
Custodians and broker-dealers playing catch-up
Custodians should be considered a valid integration hub, even though their usefulness is limited by their lack of support for other custodians and relatively late adoption of an open-architecture approach.
Among CRM systems, financial planning software providers and custodians, custodians are far more likely to have legacy technology that requires extensive rebuilding—if not outright replacement—to accommodate third-party integrations.
TD Ameritrade was an early leader in recognizing an integrated future. Its Veo One integration hub and analyzer were used by advisors to evaluate how well third-party technology would integrate with the custodian. The creation of Veo One also signaled to advisors that TD Ameritrade was betting on a future of integration. Today, it’s in the midst of an acquisition by Charles Schwab, which will inevitably change the nature of TD Ameritrade’s approach.
In the meantime, other custodians have hurried to catch up.
In 2018, Charles Schwab named Andrew Salesky to oversee a push for more integrations at the firm, building upon the Schwab Advisor Center hub. In 2019, Fidelity launched Wealthscape Integration Xchange to help firms tailor their technology platforms to advisors’ needs.
Broker-dealers have also built integration hubs. LPL Financial uses its ClientWorks platform as a de facto integration hub, for example.
NY Mellon’s Pershing NetX360 was always an integration leader in the custody space, but it wasn’t an open ecosystem. Pershing announced an integration platform, called NetXServices, last year to try and catch up. In June 2022, the firm revealed an overhauled NetX360 platform with more integration capabilities.
In fact, Pershing’s situation encapsulates the conundrum encountered by legacy vendors wishing to become integration hubs. A firm can’t shut down an old system until a new one is in place, which requires redundancy in a firm’s backend technology, even after a new system is established.
As an additional complication, firms are reluctant to fully sunset old technology, fearing it will alienate its customer base. Instead, legacy firms build multiple systems, which require more maintenance and complicate firms’ backend systems.
In summary
Vendors are still in fierce competition to claim the title of “Integration Hub,” and advisor frustration with the slow pace of innovation is growing.
“Every tech company says their product is perfectly integrated, but actual advisers say otherwise,” noted Ryan Neal, InvestmentNews technology editor. “If it was [the case], why is it STILL a topic of conversation at literally every industry conference? Why is it still named a top pain point in adviser surveys?”
“This is the second year in a row that respondents to the [InvestmentNews] Technology Study cited integration as their top technology obstacle,” he wrote in a follow-up article. 2022 marked “the third consecutive year it was cited as a top challenge by a majority of respondents.”
Advisors continue to pick and choose their technology providers, forming a landscape that is fractured by default. The survey cited by Neal found that 56% of advisers select individual technology vendors to build their technology suite, making an integration hub that can synthesize inputs from a variety of vendors all the more important.
But so far, no firm has emerged as the Microsoft 365 or Google Workspace of wealth management, despite seemingly more vehement advisor demand.
Technology vendors recognize the value in being the integration hub, of course, and are trying to expand their capabilities and integrations to all of the key applications used by advisors.
Their goal is to become the central connector that wealth management firms rely on. The race to be the advisor integration hub continues. From early hub candidates, like CRM and financial planning providers, to new hub candidates like risk metric software developers, vendors want to be the hub that centralizes the data that flows within the advisor ecosystem.
The stakes are high to be the definitive vendor that graduates from hub candidate to undeniable integration hub.
