30% of advisors cite managing technology as their firm’s primary challenge.
- Cerulli Associates, U.S. Advisor Metrics 2021: Client Acquisition in the Digital Age
Managing technology is hard.
Every wealth management firm employs multiple software applications to run their business and the better they work together, the better the business runs. But this is not often the case with 70% of RIAs reporting that applications integrations were their biggest technology pain point.
At Ezra Group, we have been trying to help our clients make sense of integrations for the entire 17 years we’ve been in business. While the number of cross-application integrations has grown significantly, so has the difficulty in researching, implementing and managing them.
One of our favorite lines with clients is, “If every vendor’s integrations worked half as well as they say they do, we’d be out of business.”
It’s an exaggeration, but it always gets a laugh because of the shared pain that we all experience when dealing with integrations.
Most advisory firms struggle, at some point, with compatibility issues while building their tech stacks. Those with less willpower give up and settle for a less seamless user experience or they switch to all-in-one platforms that reduce the need for integrations. This doesn’t come without consequences, of course – efficiency and productivity are always at risk.
A recent study by Cerulli Associates found that 30% of advisors cite managing technology as their firm’s primary challenge. They don’t have the time to fully evaluate applications for compatibility with their current stack and often don’t have the expertise.
With this in mind, Ezra Group Research developed a scoring methodology to help the financial services industry evaluate integrations of the most common applications used by independent financial advisors (IARs and RIAs). The name of our new tool is the WealthTech Integration Score.
The average financial advisor firm’s tech stack typically includes a minimum of three and possibly more than a dozen applications. In a perfect world, all of them would integrate seamlessly, improving efficiency and reducing error rates as advisors don’t have to enter the same information over and over.
But we don’t live in a perfect world.
The Ezra Group WealthTech Integration Score helps to simplify tech stack planning by offering a methodology that evaluates applications based on their interoperability with other applications. Selecting a piece of software with a higher score means that there will, generally, be fewer issues integrating it into the average advisory ecosystem than applications with lower scores.
What is the WealthTech Integration Score?
Our scoring methodology rates applications’ integration support using three criteria:
- Breadth: How many integrations does the application support? This criteria is evaluated relative to the application with the most integrations in each category.
- Depth: Looking at each integration, what is offered? SSO? Single or bi-directional data? This criteria is evaluated on an absolute basis, meaning each product is reviewed individually against our criteria rather than relative to the best application in its category.
- Technical Capabilities: Broadly, this criteria evaluates several areas that are important for development or security, including:
- Authentication: Does the application provide adequate and modern methods of security?
- APIs: Applications are judged on the number, quality, and performance of APIs.
- Developer Support: Does the vendor offer adequate support for developers, such as documentation, sample code, a sandbox for testing, and a developer portal?
Each portion of the score is weighted based on its importance to our definition of a robust integration. For more details on our scoring methodology, the key applications we look for, and the individual weighting, see our blog on How the WealthTech Integration Score is calculated.
Why is the WealthTech Integration Score Necessary?
Most applications offer some level of integration. However, the amount of detail given varies from vendor to vendor. The most transparent vendors, like Fidelity’s e-Money, Envestnet MoneyGuide, or Orion Advisor, list the applications with which they integrate right on their website – as well as the extent of each integration. They also offer clear developer documentation and support.
But the same cannot be said for many other applications, which often provide a simple page of logos that includes little to no information. There are some vendors that consider their integrations to be trade secrets and refuse to divulge them, except to clients.
Some applications boast several dozen integrations, each of which has different levels of data transfer, but little to no documentation, which makes it challenging to figure out precisely what integrates with what. This is especially true for breakaway advisors who are just beginning to build their tech stack; it can take considerable time to figure out what to do – and that is just another distraction from caring for clients, running a good business, and making money. That’s why many financial advisory firms wind up with suboptimal technology.
The WealthTech Integration Score provides an objective tool to help clarify how well an application communicates with other popular applications. But we aren’t only aiming to educate new financial advisory firms but also to help established firms have more confidence when adding new applications to their crowded environments.
An application with a high Integration Score should integrate into a tech stack with fewer issues. A lower-scoring application could require more work, might be missing connections to critical applications, or offer limited API functionality.
Why the Type of Integration Matters
During the course of the six months we spent developing the methodology and scoring applications, we evaluated over 3,600 separate integrations between different applications. Part of the WealthTech Integration Score process assigns a value to each integration as part of the Depth criteria. This awards higher scores to applications that have deeper integrations as opposed to those that have lightweight connections or merely single sign-ons (SSO).
We also understand that some applications don’t need to integrate with each other and this missing connection should not negatively impact their scores.
For example, Customer Relationship Management (CRM) software should closely integrate with scheduling and marketing tools, but a rebalancing tool would not. Also, competitors should not be required to integrate with each other. These factors are excluded from our scoring.
As a result, our researchers look for similar yet slightly different functionality in each category. For example, what’s important in marketing software isn’t the same as what’s important in financial planning. And when it comes time for firms to upgrade their tech stacks, with these scores in hand, it becomes a much easier process.
Think of it this way. Instead of the old trial and error method, the WealthTech Integration Score allows firms to choose the best applications from the start. As a result, a complete tech stack requires far less tweaking to get everything working right and less ongoing maintenance.
Wrapping Up
The Ezra Group WealthTech Integration Score is the result of months of intensive research on hundreds of applications coupled with many 1:1 interviews on what the financial services industry needs as it relates to technology and integrations.
While we are releasing our initial research now, our methodology is very much a work in process. We’ll continue to research not only applications but broader technology trends. For example, “passwordless authentication” and “Zero Trust” are buzzwords in tech right now, but these features could soon be critical to keeping company and client data secure in the long term. Technology isn’t static, so our researchers’ expectations will change over time.
We also hope that the WealthTech Integration Score spurs a more serious discussion in the industry on integrations and provides an impetus for vendors to build deeper integrations and offer more publicly available documentation. Integrations are becoming ever more critical to advisors.Well-performing, easy-to-use, and secure interoperability is something the industry desperately needs.
