Schwab's PortfolioCenter, on the other hand, led all competitors in the independent advisor niche, but it displayed weakness across most other categories. Advent AXYS, which had only a 3% share, also did relatively well with independent RIAs, posting a 7% share.
We find it noteworthy that many advisors do not use portfolio management software or services; 15% of independent RIAs said they did not use such a product, compared with 62% of CPAs.
CUSTODIANS AND B-DS
Custodians and broker-dealers can be great facilitators of technological improvement for their advisors, but they can also be an impediment if they fail to take a proactive role. Virtually every executive at custodian and B-D firms seems to think his or her firm does a good job on the technology front, so it is always interesting to see if their advisor clients agree.
When it comes to custodial technology, it came as no surprise that TD Ameritrade had the most "very satisfied" advisors this year. TD Ameritrade's success with VEO Open Access, the program that integrates the TDA platform with many leading third-party software providers, has been a huge success. Schwab and Fidelity also scored well in advisor technology satisfaction. Some firms in the middle of the pack did well within a specific category: For example, the custodial technology results for Trade PMR were average overall, but with dually registered reps they had the highest percentage of very satisfied advisors - and by a substantial margin.
On the broker-dealer side, a firm that is often mentioned on the street as a leader in technology, Commonwealth Financial, had the most "very satisfied" advisors. Cambridge Investment Research also had a solid showing. The good news overall is that there are relatively few advisors who are "very unsatisfied" with their custodial or B-D technology. Just two firms, LPL (14.8%), and Ameriprise (10.7%), had "very unsatisfied" rankings in the double digits.
Integration, or lack thereof, remains a problem. Overall, only 10% of advisors are "very satisfied" with the integration among their various applications. That number drops to 7% for independent RIAs, indicating there is still significant work that needs to be done on the integration front.
In the financial planning software category, MoneyGuidePro remains the top choice of respondents. It's strongest among independent RIAs, but also ranks or is tied for first across all categories except bank-affiliated advisors, where NaviPlan holds the top spot.
MoneyTree and NaviPlan were other popular financial planning software choices among independents. As has been true in the past, Zywave products (such as NaviPlan and Profiles) and SunGard show strength with dually registered advisors, advisors employed by a B-D and affiliated independents.
Overall, 69% of advisors said that they do not use rebalancing software. Although the use of rebalancing software has increased steadily over the last several years, adoption still seems far too low. We strongly suspected that ease of use, or lack thereof, was an impediment to growth. Yet only 19% of total respondents said rebalancing software presented above-average difficulty.
So what might be going on? We suspect that different groups are rebalancing differently, using different applications. When we looked more deeply, it turns out that independents and CPAs were using more sophisticated, location-aware, tax-sensitive rebalancing applications with much greater frequency than other groups. These more sophisticated programs have many benefits, and we believe the ROI of such programs is substantial and indisputable - but they are more difficult to learn and use.
AGING OPERATING SYSTEMS
Windows 7 usage was highest among independent RIAs at 66%, which indicates they are willing to invest in technology to stay competitive. Dually registered reps and CPAs were essentially tied at 65%. CPAs also log the highest Windows XP usage, at 46%.
From this we can conclude that our CPAs are frugal. They are buying new equipment, but they are not throwing out their old computers; they are repurposing them. Windows 7 usage was lowest, by a wide margin, among bank-affiliated reps, who still rely heavily on Windows XP. This suggests to us that they are not investing sufficiently in IT infrastructure. Windows XP was released in 2001 - an eternity in technology years. It also raises some security concerns, since OS security has changed significantly since then. We'd worry a little bit less about these bank-affiliated reps if they planned to upgrade to Windows 8 in the coming months, but they ranked dead last in that category as well, with only 4% saying they planned to upgrade to Windows 8 in the next year. (Of course, 71% of the group said they don't know or they are not sure, so there is still some hope.)