When the XY Planning Network made available a new reporting and billing tool by young fintech firm Capitect to its advisors earlier this year, over 150 firms started using it within a few months — a relatively high growth ratio for new tech among independent advisors.

“We are really excited about the adoption of Capitect by XYPN members,” says Alan Moore, co-founder of XYPN. “I think the technology speaks for itself, and is why advisors will ultimately use the system.”

It’s a common assumption that financial planners are resistant to adopting new technology. In the case of Capitect, the fast adoption by advisors provides lessons to other fintech companies who want to sell new tools to advisors, and how advisors can melt resistance to new technology at their firm or within an advisor network.

Edwin Choi, co-founder and CEO, says they tried to make it as simple and painless as possible to start using Capitect tools for XYPN members. As part of the launch, Capitect offered many webinars, both live and recorded, to advisors in order for them to get familiar with the offerings and the best use of them. The company also had an informational website advisors could access. The company also inputted existing data from the firms themselves so that the onboarding process for advisors was quick and relatively easy. Capitect and XYPN entered this partnership in February.

It doesn’t hurt that the Capitect tools are basically free as part of the XYPN technology stack. Upgrades are available for up to $250 a month per advisor. And the cloud-based platform seems to line up with the expectations of XYPN members, whose average age is 38 years old.

Edwin Choi, co-founder and CEO of Capitect
Edwin Choi, co-founder and CEO of Capitect


“It’s a more modern approach,” says Choi. “It’s mobile friendly and everything is automated. You don’t have to file custodian files every morning. It resonated well with XYPN members who expect things to be online and not on its own server. They are used to doing everything online.”

Choi, currently the managing member of Mariposa Capital Management and previously a Merrill Lynch institutional portfolio manager, says he drew on his experience as an advisor to inform the Capitect user experience.

Capitect seems to have followed parts of the suggested playbook of Marguerita M. Cheng, CEO at Blue Ocean Global Wealth in Gaithersburg, Maryland. She says that fintech companies looking to offer products to financial advisors should give a free trial, provide robust training or support, present best practice use cases, and give information on how this new tool may improve an advisor’s current workflow.

“Finally, staff or HR issues. You have to have a tech champion or a champion of that project. I think advisors should include their staff because people are more likely to buy in when they have the chance to weigh in,” she says.

For firms resistant to change, much of that reluctance lies in the process and the concern over whether there are additional gains to be made from making the switch, according to Matthew Gaffey, senior wealth manager at Corbett Road Wealth Management in McLean, Virginia.

“Many advisors are concerned that they may just be 'trading in the pan for a skillet.' If the end result is not much of a differentiation, the transition to the new technology very well could provide more headaches than benefits.”

And wealth managers at big firms are often big revenue engines, says Toby Henry, managing principal, digital wealth lead at CAPCO. So it’s a fine balance to strike between not disrupting that role and adding value added services that hopefully pan out.

“There are so many changes going on from a digital perspective. It can be quite overwhelming. Some (advisors) of them are still working on Rolodexes and using the phone,” says Henry.

Choi says Capitect, which was started three-and-a-half years ago in Los Angeles, is largely self-funded with some small investments from practicing advisors and early users.

Will there be a campaign to get venture capital money? Choi says it’s possible, but “most advisors we speak to are relieved to find out that we are primarily self-funded (by a practicing advisor) and the moderate outside capital we've received is also from the industry. Because we are not VC-backed, we are under no pressure to sell to the first potential buyer. Instead, we have a pretty long roadmap that we intend to fulfill — we're probably 10% of the way there.”

Capitect rolled out its client facing portal and reporting portfolio solutions two years ago. Late last year, the tech company introduced its portfolio rebalancing tool, which allows firms to customize portfolios per each clients instead of them slotting them into one of 10 model portfolios, while also providing scalability.

Sharon Adarlo

Sharon Adarlo is a Financial Planning contributing writer in Newark, New Jersey. She has also written for The Wall Street Journal and about science and engineering for Princeton University. Follow her on Twitter at @sharonadarlo1.