Data, its all about the data. For some firms, its the daily transaction data, for some its quote data and for others its real time transaction and pricing data. Larry Tabb at Wall Street & Technology writes about about real time pricing data feeds. To get a single feed from a single exchange costs in the six figures. In my opinion, that’s just ludicrous.

While most of the people in the advisory business don’t need this level of real-time data, it does point to a serious problem in our industry. Getting the data is very difficult. While there are firms like ByAllAccounts that specialize in getting the data from difficult sources, this is a workaround not a solution. There is an industry cropping up around our industry to try to solve the problem.

There is another industry where I have seen this, it’s the car industry. We dislike dealing with car salespeople so much that we will hire someone to do it for us (car brokers). I think that anytime an industry can pop up like this, it points to a serious problem.

I have been the developer and manager on several projects where all we were concerned about was getting the data from various providers. Every one of the providers has a different format and different quality (yes some custodial data is wrong). This is probably the most difficult part of our industry and the single biggest barrier to successful product entry.

I have worked in other industries like telephone, cable, and mining. In those industries, the data was the easy part. Of course they don’t distribute data to several thousand different users. But, my point is that you don’t spend over half your project just trying to figure out how to get the data from point A to point B in an usable format.

The obvious answer is for some coalition to create standards to deliver data. Our industry tried this and we ended up with OFX, FIX, FIXML, MDDL, IFX and FpML (there are many others). If you have 20 different standards then, you have no standards.

Advent tried to solve this problem with the Advent Trusted Network (ATN). I believe Advent pulled this product when Wealthline died, athough they may still use it internally or have re-branded it. They simply could not get buy-in from broker/dealers, advisors or money managers on how to use or price the product.

It seems to me that our industry is always ten years behind. I think it stems from our own stinginess and unwillingness to adopt new technologies. The only way it’s going to happen is for us as an industry to force it to happen.

On paper, a solution is very easy; create a consortium and fund it from a few large Broker Dealers who all agree to meet the specification when its complete. Then you have to get someone like Advent to say we only deal with data in this format, and it forces the change.

This was (is) the model for the internet, the W3C was created this way and look at the success of the Internet. How successful do you think the internet would be if you had to have a different web browser for every site you went to?

I don’t think it would be easy or pain-free, but the long term reward is that we get a real competitive environment. The problem obviously is it’s only in the Advisor’s best interest short-term. Why would Fidelity want it to be easy to switch to Schwab? Why would Advent want it to be easy to switch to Centerpiece?

Short-term, the answer is that its not in their best interest. Long-term its because it would make it easy to switch from Schwab to Fidelity and Centerpiece to Advent. It’s good for everyone. I think that if your only competitive advantage is its difficult to switch products then you are doomed in the long-run.