There was a time when William Steding was like many investors, his eyes glued to CNBC as he made day trades facilitated by newly developed software. Over the last decade, though, Steding gradually came to realize that financial planning and wealth management firms were becoming much more sophisticated technologically, and he had an epiphany.
“Clients like me said, ‘I don’t want to do it anymore. You guys handle it,’ ” says Steding, a former broadcasting mogul who’s now a senior fellow at the Center for Presidential History at SMU. Thanks to online planning and performance-reporting tools offered through firms such as Dallas-based True North Advisors, he doesn’t have to spend so much time tuned to CNBC. “I don’t have to worry about watching the market,” Steding says. “And I really only talk with True North about my stuff quarterly, or every five or six months. It gives me peace of mind, more than anything else.”
Steding is not alone. Just as it has revolutionized many industries, from healthcare and media to transportation, technology has upended the financial planning and wealth management worlds, as software firms aim to make things better for clients like Steding and their advisors. Where clients used to be confronted with stacks of paper reports—and encouraged to attend time-consuming meetings with their advisors—today such business increasingly is handled online. “It used to take two hours to make a decision; now we can make it in a couple of minutes,” says Mark Griege, a founding partner and managing director at financial advisor firm Robertson, Griege & Thoele in Dallas.
The biggest technology changes have come in the last five or six years, with the use of more advanced reporting, financial planning, and rebalancing software (the latter adjusts accounts in real time, according to the client’s goals, risk tolerance, and investment objectives). Today firms are able to consolidate information for each client—even accounts with other investment custodians, for example, as well as estate-planning documents, insurance declarations, and the like—in a secure, one-stop shop on the web. They’re also able to run thousands of scenarios for clients instantaneously with so-called Monte Carlo simulations, or algorithms that calculate risk and the odds of different probable investment outcomes.
Inside a plush conference room at the Robertson Griege offices on Sherry Lane, Griege explains the Monte Carlo method by projecting account information for a hypothetical client on an oversize screen. “How much money do they have now? How much will they need for retirement? Now let’s figure in a higher rate of inflation,” Griege says. Suddenly, the numbers on the screen change. “What if I add in a $20,000 annual expense for vacations?” he continues. “What if they want to work part time instead of full time, beginning at age 60? What if they want to buy a second home costing $1.5 million? How about knocking the home price down to $500,000? What if their son goes to Harvard instead of UT?” The numbers on the screen change with each new scenario, enabling a client to easily grasp the likely results of their decisions.
Griege recalls the case of one client in Denver who’s begun conferring with him remotely via WebEx videoconferencing technology. Previously, Griege says, he and other advisors had to fly to Colorado for meetings, carrying hard copies of the client’s financial reports. After making a big score in business and retiring at a young age, this client had been living in a remote area a few years ago and wondering whether he and his family would have enough money to live on. “We started talking and ran the Monte Carlo projections for him, and it became clear that he was going to run out of money at age 60 or 70,” Griege says. “That was shocking to him. We said, ‘Spending at your level, you’re not going to be able to stay retired forever. You can either reduce your spending—or cut back on your expectations.’ Today, they’ve reduced their spending by 50 percent,” Griege says. “And they’re now on track with their financial plan.”
Because they’ve traditionally been more nimble than some Wall Street giants like UBS and Goldman Sachs, independent, regional planning firms such as True North and Robertson, Griege & Thoele have stressed, and helped to pioneer, this use of technology. And recently a few of the giants seem to have taken notice. In 2012, for example, Morgan Stanley rolled out several new tech tools to track investment trends and to benchmark individual returns. Among them is something called OneView, which the firm says aggregates all of a client’s account data in one location, enabling a more holistic view of his or her financial situation.
In contrast to some of its Wall Street counterparts, Bank of America Merrill Lynch has had a similar online product for more than a decade. But in May the firm launched a new offering called Merrill Lynch Clear. It’s a series of retirement-oriented iPad apps that are intended to encourage “deeper conversations” between advisors and clients about the client’s health, family, homes, and giving priorities.
Jeff Markham, head of Merrill Lynch Wealth Management’s greater Texas market, says that one of the firm’s clients had related to his advisor strictly on a transaction-oriented basis—“Here’s a good idea; let’s invest in it”—before talking with the advisor about issues raised by Merrill Lynch Clear. Says Markham: “The client said, ‘This is the best conversation I’ve ever had with a financial professional, because it helped me articulate what I’ve been thinking about.’ ”
Steding, the True North client, could probably relate. Thanks to comprehensive, real-time online tools offered by True North, money for routine things like unforeseen home repairs shows up in one of his several accounts quickly, without much hassle, he says. As a result, he’s able to focus with his advisor on more meaningful topics such as his life objectives and his overall well-being. The arrangement “allows a client to sleep on a soft pillow at night,” Steding says. “That’s cool.”