Let's take an example outside our world of financial advice to illustrate the point we are making. Almost all of us are familiar with and use the Microsoft Office suite of applications. There's Word, Excel, PowerPoint and Outlook which are the four most prominent components of the MS Office suite. Then you have a host of others, which appeal to specific user groups, including One Note, Visio, Publisher, Project and so on. MS Office is a collection of applications that collectively help you manage your business efficiently. Let's say you just bought a laptop and you are now considering options for applications that can help you manage your business. You spend all your time and energy on a comparison between Microsoft Word and Google Docs. One is paid for, the other is free. One has more editing features, the other has less. And so on. The point is, while the debate on MS Word vs Google Docs may be a valid one indeed, have you thought about which applications you are going to use to create spreadsheets, for your email and digital calendar, for making client presentations and so on? A sensible evaluation process would be one where you first identify what you are going to use your laptop for - what kind of business applications you need, and then find individual solutions or a suite of solutions for all your needs.
Coming back to our world of financial advice, the debate over MFU vs NSE vs BSE is a bit like a debate over MS Word vs Google Docs. There is clearly much more to what you as an IFA do, than only processing mutual fund transactions. A good way for you therefore to consider platforms and narrow down your search on which platform is right for you, will be to first list down all the areas where you think you can do with some support from some applications. Once this is done, you can either look at picking up different components from different vendors and then take on the task of integrating them for your office, or look for a platform that offers you all of what you need to run your practice.
Welcome to Platform Point!
Our endeavor at Platform Point is to help you understand why platforms are vital for IFAs to be future ready, how to go about selecting a platform that is right for you and insights on how successful advisors are leveraging platforms to scale higher and serve clients better.
Given below is what we call "Platform Evaluation Matrix". It shows the various elements / components across different functions of your business - advice, transactions, reporting and business development - that are offered by platforms. Each platform would typically offer only some of these components. Few would perhaps offer all. But then again, you don't have to go for one that offers all - if you think you are never going to use some of these components.
What's important is for you to first understand the entire spectrum of what can be available in a platform. Then you need to work through which of these components make sense for you. Once you have done that bit, you are now in a much better position to evaluate which platform is really right for you.
Platform Evaluation Matrix
Most of these components are self-explanatory, and we are therefore not going to describe them in any detail. Let's focus on a few that perhaps need some explanation:
Advice - Model portfolios: While many platforms offer fund research data and some research analytics, there are a few platforms that go a step ahead and also create/allow you to create model portfolios. One version is where the platform providers themselves create model portfolios for different risk profiles based on their own research. The other version is where they do this, but allow you to override their model portfolio choices with your own fund selection. Model portfolios can also be valued on a daily basis to give you a snapshot of how each model portfolio is performing vs benchmarks you set for them. Model portfolios help in demonstrating research capabilities as well as in standardizing advice for retail clients based on risk profiles.
Advice - asset allocation algorithms: There are funds that perform asset allocation based on algorithms, but then they are single fund house solutions. Some platforms take the concept of algo based asset allocation and apply it to your recommended fund list within each asset class to create an open architecture solution that you can offer to your clients.
Advice - robo advice: Based on a discretionary PMS mandate, client money can be invested into an appropriate model portfolio based on risk appetite, without getting client instructions for each transaction. Regular rebalancing / change of funds etc is also automated without seeking client sign off. For retail investors, a discretionary PMS threshold is obviously too high - here, robo advisors do everything except that the execution of transactions needs an online client confirmation and the payment too will need to be authorized by the client. For advisors who want to put retail clients into a fill it-shut it- forget it mode but still want to ensure good advice, these kind of robo solutions could be an option. The "jugalbandi" solution in this case is where the IFA gets involved in the initial education and hand-holding to get clients comfortable with mutual funds and a goal based approach, then hands them over for advice and execution to his robo-advisor platform, and remains accessible to them for any guidance that they need - especially reassurance during turbulent times, where the human touch is so important.
Reporting - one view aggregation: We are moving from single account view of all investments (demat, mutual funds etc) to a truly one view aggregation where a client can see in a single statement, everything that concerns his personal finances including bank accounts, credit cards, loans, mutual funds, stocks, insurance policies and so on. This space is nascent as yet, but there is a lot of action happening here, as the proposition of a one view aggregation is quite compelling from an investor's point of view.
Business development - brand building: This is a fairly evolved proposition, where the platform provider promotes their brand among investors as a trusted brand for financial advice/financial services and the IFA positions himself as a partner of this trusted brand, to leverage some of the brand equity that the platform provider has created. In the US, one of the oldest and as yet strongest examples is Merrill Lynch, which offers a comprehensive plug-and-play platform for financial advisors who work with them on a commission sharing model, but who also leverage the significant brand equity that ML enjoys in the wealth management space.
Business development - growth capital: Some platforms are now moving beyond business support services to enter into business partnership arrangements, where they provide growth capital to promising financial advisors who can then use the capital to fuel their growth aspirations.
UI & UX
In today's digital world, another very important dimension for you to evaluate any application - whether a platform for your financial advisory practice or for that matter, a portal which you may use for booking your travel and vacations, is UI and UX. UI stands for user interface and UX decoded means user experience. User interface refers to how easy and pleasing it is for you to navigate through the site or the app. An uncluttered, intuitive design with pleasing aesthetics prompts you to get more interested in browsing and using the site/app, while a confusing and cluttered "look and feel" puts you off, irrespective of the quality of content. User experience is a conglomeration of tasks that are focused on optimizing the site/app for a better overall experience when you get down to using it. Its not enough to simply have great features in a platform - if the UI and UX are a put-off, you might not finally opt for the platform or even if you do, you might find yourself using it sub-optimally and not leveraging its full potential.
Take a look at all the components of Platform Point's "Platform Evaluation Matrix", and ascertain for yourself which ones you think you really need for your own practice. You may discover that you need just a handful of them or almost all of them. There is no single right answer - each IFA must carefully evaluate what he needs. Once this is done, you will find yourself in a far better position to evaluate the various options that are now available in the market and choose one that is right for you. If you are very clear that all that you need is a platform to execute MF transactions, then the debate on MFU vs NSE vs BSE makes sense. But if there are more aspects of your business where you think you can do with some support, widen your horizons beyond just transaction platforms.
In the forthcoming articles of this series, we will share with you details of some popular platforms, using the same Platform Evaluation Matrix, for ease of analysis.
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