I’ve seen the future of Advice, and we’re not ready.

So, for the last four years I’ve been yammering on about what the future of Wall Street should look like.

In my mind, the new Wall Street Investment Advisory firm of the future is a collection of content-rich superstars using technology more smartly than anyone else. It’s anchored in a thoughtful, thorough, and uniquely consistent world-class customer service experience. From start to finish. And, because it’s run like a collective (and still capitalistic) it’s client and talent friendly.

At my old firm we had boxes of notepads embossed with all of the lofty mission statement ideals you’d expect from a bank.

  • Clients first. (sigh…)
  • Be entrepreneurial. (while you fill out this requisite form to be issued a bathroom key)
  • Share your ideas. (so they can be ignored or stolen by your manager)

Looking back, I’m realizing more and more that I’m really lucky I didn’t have a nervous breakdown from living with such suck for as long as I did.

And so rather than just talk about it, I’ve spent the last 4 years, at great personal & financial cost, doing due diligence, meeting people, making friends — and enemies — and building stuff.

Some of it is still ugly. Like my news aggregator. I built it for $1000 dollars, so gimme a break. Someday I’ll add the last functions and make it pretty. But what you don’t see under the hood is something pretty powerful actually. Semantic Search and Aggregation. To be clear, it’s not anything someone else hasn’t developed, but it is mine. And owning technology, I’ve learned is pretty smart. Because he who owns the code, owns the experience — and the future. And that control is almost un-paralleled in its efficiency.

If you know how to code you are sooo golden. Howard Lindzon crystalized that notion for me: The smartest worriers are learning to code or marrying a developer. You code? You are a 21st century rockstar, especially if you have any imagination at all. I don’t have coding skills. But, you better believe my sons will.

I do speak geek though.

And that’s still pretty valuable, because I understand what’s possible. And after the last four years, and everything I’ve learned from this last year of failures — I’m here to share with you, unequivocally, that most of the current regime still has zero clue. None.

I mean, like, they’re still googling “the Facebook” to get there. Or worse Binging it. Their idea of cutting-edge is being on Twitter and Facebook — at the same time.  But, I’m also here to wake you up to an amazingly insane truth.

First, let’s play imagination — close your eyes; wait — that won’t work. Scratch that:

A person walks into a store. The salesperson says hi. The customer walks around. Picks up & puts down merchandise, and then walks out.

Yeah, the internet changed all that, didn’t it?

Customer goes to site. Every move, every eye-movement & mouse-twitch — is tracked. And maybe that’s hyberbolic... Along with your location, and most of your likely demographic data. Each item of interest, cataloged forever. And cross-referenced often. Alternative entrances & suggestions shown smartly, based on how you’re meandering through the store — to succinctly connect with you.

And, excuse me, sir / ma’am –– before you leave, we’d like to stay in touch — almost seamlessly and instantly. Just ‘like‘ anything you see, with that little Facebook button. At least until the robots take over.

Oh, and by the way — in about 3 days, we’re gonna start running ads based on everything we learned, everywhere you go. happy-shopping-have-a-nice-day-and-thanks-for-stopping-by, citizen.

Meanwhile, your friendly neighborhood Morgan Stanley advisor is still cold calling executives and anyone who hasn’t registered for the do-not-call list, locked to their desk waiting for someone to call them or to attend meetings about nothing real, or important. They’ll mix it up though. Maybe go to a Chamber of Commerce meeting once a month to shill their next story about the latest amazingly unnecessary & underwhelming structured product —  promising less risk and more return (for them). Again. Or give their best clients some golf balls.

What we’re seeing right now, that’s the disconnect. Where the physical world adapts and integrates more deeply into the new realities technology has made possible. Or doesn’t. And we are still really, really, really, early.

Did I mention really early?

Amazon lockers? That’s nothin’

Why do you rob a bank? Because that’s where the money is. And in the world of finance, after the last 4 years of studying these truths I’m here to tell you they’re not ready for what’s coming. Not even close. I’m not ready either; and neither are you — but we are a lot closer.

One area of focus for me throughout this whole process has been data mining. And the key to said mining is… drum roll… data. Now data for a long time was locked up, inside the firms of Wall Street. You want a copy of your statement, ok — let me just unlock that for you… see how valuable we are mr/mrs client? To share your data with you. I even sent it via fax or US mail within 24-48 hours of your 20 minute phone call to us. Unless it’s Saturday after 1pm CST, then you need to call back on Monday.

And then the OFX standard was introduced — on 16 January 1997 by MicrosoftIntuit and CheckFree. For those of you that don’t know, it stands for Open Finance Exchange, and it was designed as a unified specification to converge financial data between financial institutions, businesses and consumers via an electronic exchange.

Basically what it means is: all of the banks have to make their spreadsheets look the same and share nicely. And when you unlock that data, like this OFX standard does — the value of that data changes dramatically. Like, revolutionarily changes it.


It tears down the wall. When data is locked up the way it has been on Wall Street, it allows for monopolistic behavior. Or at least oligopolistic. Either way — people get lazy. And then people die. Ok, maybe not die — but certainly we whine a lot about how much our banking institutions suck. Why? Because they can. And what are you gonna do about it?

Yeah well, putting that valuable data into the hands of almost anyone who can code (basically for free), shifts the supply curve for that information just a bit, wouldn’t you say?

And unfortunately, as it is, everyone is either too clueless or lazy to figure that out over the last 16 years. Instead, what we have today is this reality:

Financial Plans — Almost every single financial plan being run by Wall Street firms today is powered by the same three technology providers. There’s MoneyTree — so ugly. So, unnecessarily detailed and anal. Omg. You should pay your advisor for your plan — it’s an awful data entry experience. Then there’s MoneyGuidePro. — Ya know vs. MoneyGuideAmateur. This program is only a little slightly better, like if you are going to plunge to your death by jumping from a burning building, but at least you still have on your pants. Oh… and they power most of the industry.

And then there’s FinanceWare. They’ve got a cool little feature that constantly tracks your portfolio on how likely you are to hit whatever goals you’ve laid out. It’s actually pretty cool, I’ve talked with them a few times. The problem is a ton of major firms already use it. And, its features haven’t improved or innovated much further from this cool feature for at least 5 years — at least not that I know of.

So, you’re at Merrill because Morgan sucks? Ha. Just switch out the logo, on whatever they’re handing you. And, the biggest problem with all of them?? I don’t control the code.

And, it doesn’t stop there either:

Performance Reporting — This, my friends, is where it all comes apart. I’m talking full retard. You cannot read their reports. You will not. I’m a professional and even I have a hard time. You know why? They don’t want you to understand. It’s either absolute horseshit OR absolutely confusing and overwhelming. That’s not an accident. That’s not because of their “shitty” IT department. Well actually it is — but they’re just following orders. Handed down and hired by the other cogs.

Oh… but your advisor gives you Morningstar reports…

Awesome — those are free — and they probably printed them off of the same internets you can; about 5 minutes before you walked in the office. Anyone else see the disconnect?

And so there are firms tackling this, but the problem is they’re not really thinking that differently. And they’re being lazy, still. Maybe that’s the saddest truth. Our saviours are just as blind.

I’m probably going to step on some toes right now. It’s what I do. I’m a born muckraker — the asshole you grow to love, or hate.

So, here’s the truth –> Almost every single financial data aggregator you’re witnessing today is using the services of just two firms. Just two firms are moving most of the bits and bytes about your money, and these same two firms are the engine running almost every single finance 2.0 effort you’re witnessing right now.

Are you seeing the disconnect, in this sea of possibility?

SigFig? Wikivest? Personal Capital? BlueLeaf? FutureAdvisor? Who else? Step forward. Don’t be shy.

Now, one of the data sources for some of these companies is great for banking transactions & credit card transactions. But investment data? Not so much. You get really really trashy reports as a result. You want an example? Almost all these companies (but not all) said I lost 35k in my portfolio last week as I used cash from my portfolio to pay down some of my house while refinancing it.

That’s not even close to the proper way to account for cash in true performance reporting.

That’s because they have a GIGO problem. Garbage In, Garbage Out. Data is the only differentiator in this phase of the new world — So you better consider your source, brothas and sistas. And these Venture Capitalists — who are throwing more money at the problem by funding these companies — are just as clueless as this guy.

And, having worked personally with the other data firm for the last two years — and seeing the product offerings from the other companies using their data — I am wholly unimpressed.

Over this last year I also learned something else, something that none of these other firms using the services of these data companies seems to understand… You will never ever have true pricing power using someone else’s tools. And you’ll never be master of your domain.

So, I’m back to the drawing board. And guess what… I actually found someone who did build an engine. And it’s amazing. Revolutionary. I shit you not. (and who does shit you?)

Buckle up kiddos. This could be fun. Or not…

Until then, none of us are even close to ready.

Read More: The Dumbest Fee Ever.

7 thoughts on “I’ve seen the future of Advice, and we’re not ready.

  1. Pingback: Sunday links: gold is a trade - Abnormal Returns | Abnormal Returns

  2. dws3

    “I actually found someone who did build an engine”

    Since you are withholding the name of the firm, are you talking about something ma & pa can use at home for personal finance or something RIAs can use to aggregate data?

  3. iheartWallStreet

    Yes. Or you can wait and see. Up to you. The message wasn’t about me really, it’s about how far behind this movement is.

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