Talking about tech bloat with Pat Spencer

Photo of a woman frustrated with technology.

Advisors are frustrated with their tech stack.

A recent Michael Kitces survey noted that, overall, advisors report a satisfaction rate for their entire tech stack at 7.3 on a 10-point scale. Not bad, perhaps. But what’s especially revealing is that they rate each individual component of their tech stack higher—at an average of 7.6. So, the tech stack as a whole rates lower than the sum of the parts.

What does this mean? It means that, oftentimes, advisors have too many applications, aren’t getting enough out of the ones they have, and are feeling overwhelmed with the upkeep of managing so many applications.

This is a common element of a larger problem that has reared its ugly head in the planning and advising world — tech bloat.

Moneytree Managing Director Pat Spencer took some time to talk about tech bloat and how Moneytree is uniquely positioned to address this trend. Check it out.

What is tech bloat?

Pat Spencer: Tech bloat is this excessive accumulation of software within an organization. Consumers, especially advisors and planners, are increasingly looking to technology to solve their problems. This is a great strategy if you do it well. But if you’re not careful, you end up buying expensive, redundant systems with overlapping functions. And when you rely on multiple systems, you end up with data silos, potential security risks, and inefficient operations.

We have a lot of companies in the financial technology world who are creating very specific, specialized tools that solve just one problem very well. So, before you know it, you have a tool for tax planning and a tool for college planning and a tool for retirement distribution and a tool for this and that.

If you look back at the Kitces advisory tech map in 2018, it looks a whole lot simpler than it does now. Now the map is so congested, and the company logos have gotten so small that you can barely read them.

What does this mean in the daily life of an advisor?

Pat Spencer: It can be a nightmare in terms of the number of pieces of technology they touch in a day. They’re bouncing back and forth all day long wasting time and wasting money. It can be overwhelming to the advisor because they are paying for these software programs, yet they still aren’t as efficient as they hoped they would be.  

How did we get here?

Pat Spencer: There are a lot of factors at play. One of the driving forces was that the planning and advising industry kind of swelled because the market just kept outperforming itself year after year. So, you had increased competition, and advisors and planners began to seek out certification and also shift toward specialized planning as a way to differentiate themselves. 

The number of certified financial planners in the U.S. has exploded from about 70,000 a few years ago to 92,000 or 95,0000 today. The CFP board is looking at having more than 200,000 in the next few years. People with these certifications must be able to provide specialized planning, and they need the tools to do it.

This created a lot of opportunity for new companies to pop up in the financial technology sector, most of them with a tool that only does one thing.

So, how do you prevent tech bloat?

Pat Spencer: Before you buy a new piece of software, audit your existing software, especially your core planning platform. It’s quite possible that you already own the tools you need, and you just don’t realize it, especially if you are a Moneytree client.

We know from available information that the typical consumer uses about 30 to 60 percent of their software capabilities. This means the best approach is to get more out of what you already have, as opposed to investing in another piece of software that you are also likely to underutilize.

For example, I took what Michael Kitces categorized as specialized planning, this included retirement distribution and estate planning and all those different concepts. I found vendors for all those categories — there’s like 8 of them — and then I added them up at their entry-level pricing. If you bought every one of those tools, you’d be spending an additional $6,000 a year. And Moneytree has components that address each of these categories.

An advisor would save money if they would invest time in getting to know their software to see how far these components go in helping them with their clients.

So, step one: Inventory your software; look at how much you are spending and what your current capabilities are. Start by reviewing your help guides and communicating with your vendor’s support team. Even if you’ve owned the solution for a while, you can still call and get a demo of the features that you haven’t used yet.

Some of you will realize that your solution was already in your tech stack, you just didn’t realize it.

For those of you who have identified a true gap, you have two options. The first is to layer on yet another piece of specialized software. The other option is to start from the ground up with a more comprehensive core platform.

The idea of a comprehensive software that offers specialized tools might sound like a bit of a paradox. What about folks that believe in the old jack-of-all-trades, master-of-none adage?

Pat Spencer: That adage just doesn’t apply to Moneytree. What we do, we do well. Don’t take my word for it. A 2023 Kitces Report identified Moneytree as the top vendor for College Planning, Retirement Savings, Retirement Distribution, Long-Term Care Insurance, Monte Carlo, Customization of Market Assumptions and Other Custom Assumptions.

In other words, we are a jack-of-all-trades and master of plenty.

Moneytree has been around for more than 40 years, and you have announced a next-generation solution coming out in 2024. How will it compare?

Pat Spencer: We’re still going to have the industry-leading technical accuracy, the tax planning, the in-depth reporting, the audit trail. You know, all those things that our clients love about us. Our core identity as a comprehensive provider won’t change.

But we also know that we need to update our visual appeal. Just like an automobile manufacturer, you can’t rely on the same design year after year. So, the user experience will improve with a new, modern look and feel. But we’ll also be improving some of the workflows to be more efficient.


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