Last year’s post on stochastic forecasting tools generated quite a bit of commentary both online and off and, as conversation, not content, is now king (thank you, cluetrain), I’m going to attempt to start another round of debate by writing about the current state of the adviser financial planning tools market!

DISCLAIMER: Fincision is actively involved in evaluating suppliers of planning tools for clients, and in some instances, designing award-winning user interfaces and functionality for these tools. So there.

There have been a few tremors in the adviser financial planning tools market over last 12 months, although much of the seismic activity has appeared below the waterline. For me, the demise of decisionsdecisions, the Barrie & Hibbert subsidiary that provides the model powering offerings from Scottish Widows, Prudential and Winterthur amongst others, was disappointing, whilst the rapid rise of Prestwood’s Truth was both unexpected and refreshing. And, of course, there’s been plenty of interesting activity from the other players, too!

So, let’s start with decisionsdecisions, who are now languishing in the deadpool. I’ve enjoyed a great personal relationship with the decdec team; we’ve had a lot of fun along the way (a trip to Edinburgh’s ‘Pubic Triangle’ on a dank and dismal Tuesday night in February excepted!), and got some well-received products out of the door. So what went wrong? First off, I think that decisionsdecisions never quite got to grips with the conflicts that can occur when you are part actuarial consultancy and part software development house. However, it’s likely that the arrival of a new shareholder at Barrie & Hibbert was the deciding factor; perhaps there was a need for a corporate tidy-up in order to attract the new housemate, and decisionsdecisions was too much of a distraction as B&H expanded into North America and Asia? Whatever the reason, one less provider in an already small market isn’t great news for anyone, but even moreso for Scottish Widows who, having sunk a tidy pile of cash into developing tools with decisionsdecisions, may find it hard going to continue to keep P2 near to the top of the pile (perhaps they already are).

Having said that, I’m sure that Scottish Widow’s marketing team is just as adept as their peers at filling out FTRC’s legendary ‘research’ spreadsheets in order to get the coveted ‘eee’ rating. I’m surprised that product providers continue to support this nonsense, particularly as I hear of more and more advisers who don’t have any faith in FTRC’s ratings, so what’s the point?

If anyone is going to benefit directly from the closure of decisionsdecisions, it will be Tillinghast. Having pioneered the use of stochastic forecasting tools for UK advisers by building Portfolio Planner for Standard Life, and then hooking up with 1^st Software’s Adviser Office, Tillinghast have always been able to reach more of the market than their competition. That said, the perception has been that they aren’t the easiest bunch to work with, and have tended to hide their light under a bushel. Some long-term unfixed bugs within the Adviser Office integration don’t help, even if it’s not their fault. They don’t currently play directly into the adviser market as they lack the infrastructure for that type of distribution (despite advisers pleading with them to do so), but they’ve been clever enough to concentrate on where their strengths lie and now have a clear strategy and roadmap, and their software is also rock-solid and future-proofed. Expect to see some serious innovation appearing within the planning tools offered by Tillinghast’s clients over the next few months! Bruce Moss has been spotted smiling lately; be very afraid (if you’re a competitor)!

But if Tillinghast doesn’t pick up the decisionsdecisions slack, then the only other real contender at the stochastic end of the market is Distribution Technology (sorry PlanLab, that MSC module isn’t going to cut it in the face of this competition). There’s a clear difference between these two players: one is a global actuarial consultancy, with established in-house software development capability, that is happy to help you out if you ask nicely; the other is a lean ‘n’ mean software house with a polished sales pitch and charismatic leadership, which happens to employ actuarial resource to maintain a stochastic model. That’s not meant to be unkind to Distribution Technology (or indeed Tillinghast); it’s just the way it is, and who’s to say there is anything wrong with that?! I have a variable relationship with Distribution Technology (online and offline! LOL), but I seriously liked their DPOS product and how they’d listened to their customers to adapt their core offering in such a positive way. I just have a problem with the stochastic model, and I’m part of a crowd. That’s a hard one to shake, unless of course you do something bold like license a well-regarded, alternative stochastic model, used institutionally by over 70% of European insurers, from someone who isn’t your competitor any more; food for thought…

Apart from those highlighted above, one other key area of differentiation in favour of Distribution Technology can be found here, where since October 2007 advisers have been able to sign up direct to use Dynamic Planner rather than via a sponsoring provider (but it will cost you £120 per month plus VAT, unless you’re lucky enough to qualify for a a special deal via a network membership!). This is a well-executed resource centre which also links through to a customer support portal powered by salesforce.com. I did, however, experience problems logging in to my free trial (I still can’t get in), and sign-up isn’t a straight-through process (you need to complete paperwork and send payment), so it’s not perfect, or indeed as good as PlanLab (more on that later)!

Over the coming months, the battle between Tillinghast and Distribution Technology will continue as they compete for share of the bancassurer market. Distribution Technology already supply Lloyds and NAB and have recently partnered with Atos Consulting to provide enterprise implementation support for future deals, whilst Tillinghast have integrated with Focus Solutions’ Point of Sale software, and have already managed to sign deals with four of the other large banks. I don’t think we’ll ever see a clear winner emerge, and there may well be instances where the two co-exist within the same bancassurer but for different propositions and styles of distribution.

Whilst Tillinghast and Distribution Technology fight over the stochastic end of the market, Prestwood (Truth) and BMC Profiles (PlanLab) compete with their deterministic cashflow-based planning tools.

I’ve written previously about Truth, and I’m not surprised by its rapid rise to prominence over the past 12 months, especially given the level of marketing activity Prestwood and Paul Armson have undertaken. The ‘How to become a successful financial planner’ one-day seminar has proven enormously popular, particularly with the IFP crowd, although I’m not so sure that the consumer-focussed ‘Truth about money‘ campaign has been anywhere near as effective. There are also mutterings of discontent over the quality of the integration with 1^st Software’s Adviser Office, but I’m not sure that is entirely Prestwood’s fault!

Truth’s major competitor is PlanLab, marketed in the UK by BMC Profiles (Impact Technologies Group is the US-based supplier). PlanLab is a stand-alone web-based offering (Truth is offline) with an impressive selection of colourful, configurable, concept-oriented reports at its core. Some subscribing advisers are having success charging north of £1k per report, which makes the monthly cost for full access to all 4 modules of £185 easily tolerable, I imagine! The fact that you can sign up and pay online, and only choose to pay for the modules you want to use, is also a clever innovation for our market, but there again, it’s the bare minimum you’d expect of a web-based offering in any other industry (shows how low we set our own bar). I’ve been threatening to review PlanLab for months now, but the day job keeps getting in the way. However, I’m going to stick my neck out and commit to finally publishing by the end of June! If I fail, I’ll post a cheque for £100 to NSPCC.

Both Truth and PlanLab suffer from the same deficiencies: lack of interactivity opportunities (tweaking the numbers, playing with scenarios) in between data capture and report production stages, and support for investment solution design. However, there is no denying that both offerings continue to gain in popularity, particularly with those advisers who see stochastic forecasting as the work of the devil! As far as lack of investment solution design capability is concerned, some advisers see this as a positive, as it allows them to continue to use tools such as Financial Express’ Analytics (which is rapidly expanding it’s customer base); a recent-ish post to the Finserv community suggested a combination of Truth and Analytics was the best overall planning solution currently available.

Even with the progress that all four of the aforementioned planning tools providers have made in the last year, advisers are still divided over the benefits of using a packaged solution to deliver financial planning advice. Apart from the obvious polarisation between the stochastic and deterministic supporters, there is an equal divide between those who find these tools essential to their advice proposition, and those who would rather go hunting with Dick Cheney than use a packaged solution!

Indeed, a handful of prominent firms are either in the process of, or have already developed their own spreadsheet-based planning tools; Hargreaves Lansdown, Bloomsbury and Evolve are just three firms I know of to go the bespoke route, and more will follow. Richard Allum of Adviser Assist tells me that he has received a number of requests to develop a bespoke cashflow-based planning spreadsheet, but the disparate requirements of the enquiring firms make it a difficult task to come up with something that will keep everyone happy; there’s a surprise…

I’m discounting lack of back office integration as an argument against home-brewed solutions as none of the packaged solutions have cracked it either, but I am concerned at how robust and fit-for-purpose these solutions might prove to be in anything less than diligent hands (as I would expect of the three named firms, by the way). Building a cashflow planning tool using a spreadsheet can get seriously complex very quickly, and I wonder how easy it really is to document, test, control, maintain and audit such a beast to a standard that will keep the FSA happy should they drop by for tea and biscuits.

It may also be that a lack of choice in the market is another reason that some firms choose to develop their own financial planning solutions, particularly if you’ve spent the last 3-4 years trying out various combinations of back offices and planning tools and found that none have worked for you; as if! There is certainly room for further entrants to the market, and we could reasonably expect to see one or two antipodean solutions follow their wrap cousins into the UK, once they’ve got to grips with localising their kit (a task never to be underestimated in its complexity). There are also the relatively unknown quantities (at least to me!) that are Financial Objects and Finantix; I’ll try and catch up with them over the coming months to see what’s in the box…

So, in summary, we have Tillinghast and Distribution Technology fighting over the stochastic planning tools space, and trying to land the big banks and product providers as customers, and Truth and PlanLab going head-to-head in the supply of deterministic cashflow planning tools to the adviser community. There are no emerging winners yet, and there may never be, but one thing is clear: not one supplier or co-operative has yet managed to offer the ‘killer app’ that allows advisers to seamlessly move from relationship management into financial planning, through solution design and end with transactional capability. Until that happens, advisers will have to continue with the inefficiencies of the ‘swivel chair interface‘, whether that be using a packaged solution or their own spreadsheets.

I doubt if I’m the only one who thinks its way past time for the back office and planning tools suppliers to get their act together and present a proper integrated solution with bi-directional data flows, and not just talk about it at roadshows…

Maybe by this time next year it will be a different story?

Related posts:

1. Getting to grips with PlanLab
2. The much-delayed PlanLab review…
3. Stochastic forecasts: What advisers should know…