Andy Gluck responds to to a growing sentiment among industry pundits that the dream of all-in-one software is dead. He buys into the dogma but holds out hope that we’ll see a new version of all-in-one software via Web 2.0:

Instead of one company developing a workstation that includes all three applications crucial to running an advisory firm, Web-based PMS, CRM and financial planning vendors are exchanging data through Web services. … Keep in mind, a Web service is far superior to imports and exports of data from one application to another. Imports and exports require manual processes. Web services can happen automatically. Without much difficulty, Web services can provide live, real-time integration. When data changes in your data-provider’s application, it could automatically be updated in real-time in other applications without any manual intervention.

A Web service typically performs a specific set of functions. For instance, a Web service from a portfolio management software program could provide data to a financial planning program. The financial planning program could then use that data in all of its functions, such as calculating a net worth statement or creating an estate plan. The PMS application could write another Web service program to be used by an analytics application, and the analytics application could then use that data to show you what asset classes a client’s portfolio is comprised of, where the portfolio falls on the Efficient Frontier and give you the portfolio’s R2 and other Modern Portfolio Theory statistics. The beauty of Web services is that these three applications—the PMS, financial planning and analytics applications—are working in concert despite the fact that they are being run on different Web servers by different companies over the Internet.

I’d like to believe it but I’m skeptical. For web services to work, the software companies involved have to be committed to opening up their applications. We’re really talking about the portfolio management companies since that’s where the data originates (they’re the ones that have to do most of the work but don’t see any of the benefit). That doesn’t mesh with my perception of Advent and Centerpiece’s strategy. Maybe Albridge, but definitely not the other two.

It was possible to write APIs and open your applications before the web and nobody did it. I don’t see why moving to the web is suddenly going to make companies embrace an open data philosophy. I don’t see something like this working until there is a central independent standards body with all the portfolio management vendors as committed members.

There’s actually something like that in the works but it doesn’t have momentum yet. From Andy’s article:

…a new organization has been formed, affiliating about 20 technology vendors to formalize communication about Silver Bullet issues. The group is called Your Silver Bullet and it was founded by Greg Friedman, a Novato, Calif., financial advisor who some years back teamed up with a programmer, Ken Golding, to create a CRM application for his own firm. Their program, Junxure, is now used by 700 advisory firms, including many of the most successful independent wealth managers in the nation.

While the idea behind Your Silver Bullet is admirable, it remains to be seen whether it can have a serious impact. Neither Schwab Performance Technologies nor Advent Software is among the membership. Yet these two tech vendors are central to such a group’s success. The portfolio management software applications sold by these two vendors provide the data warehouse for about 7,400 wealth management firms, probably about 70% or 75% of the independent financial planners and wealth managers operating through an RIA. Without these two key vendors supporting the Silver Bullet concept, the most important factors in creating a Silver Bullet cannot be meaningfully addressed.

So none of the key portfolio management vendors are members and there’s no actual file spec or method of sharing data. But yet, this is probably the most important thing to happen in our industry in the last five years. If the Silver Bullet guys come out with an intelligent way to share data (on-demand XML), then eventually one of the big portfolio management companies will cave and support the spec. Think of that company as the first domino.

We’re on our way to having our professional finance applications talk to each other. From there, it’s a short step to having all the custodians transmit data in “silver bullet” format, and we can be done with interfaces altogether. Well… that last one was a stretch, but if we can get all the technology vendors working together, then its a logical next step.