Web services have been around six years, but they are just starting to offer what advisors need.

    Is the Silver Bullet dead? Longtime readers understand that this is an important question. Over the years, I've used this term to describe the perfect advisor suite, sometimes also referring to it as the Holy Grail. It's the integration of the three core applications integral to every serious independent advisor's business: portfolio management, customer relationship management and financial planning.
    According to folklore, the Silver Bullet was the only bullet effective against a witch, vampire or monster. The Holy Grail, according to Christian legend, was the dish, plate or cup used by Jesus at the Last Supper, said to possess miraculous powers. The mythic proportion of an integrated workstation for independent advisors is communicated accurately by these terms.
    For most independent advisors, the Silver Bullet remains an elusive goal. However, I believe we have entered a new era in which the Silver Bullet will now start being built using your favorite Web-based applications. Let's call this era Silver Bullet 2.0. Like Web 2.0, the term used to describe Web sites that empower individuals as never before to utilize the Web more effectively for their own personal needs, Silver Bullet 2.0 empowers independent advisory firms to use their blend of applications to build their own integrated advice platform. You'll be able to stitch together your own Silver Bullet using the Web-based applications. Over the next couple of years, Silver Bullet 2.0 will make integrated platforms less mythical and more real.

Silver Bullet 1.0
    In 1996, the notion of integrating portfolio management software (PMS), customer relationship management (CRM) and financial planning software into a single application was a mere a dream. While such technology had been developed by big Wall Street firms, none of the technology vendors serving independent advisors had attempted creating such an ambitious platform. That's the way it was until the introduction of Interactive Advisory Software (IAS) from Optima Technologies in 2002.
    IAS promised what advisors had hoped for: the all-in-one application. But Optima soon found that advisors were not beating a path to its door. Its effort became snarled in problems of converting users' data from other PMS applications.
    To its credit Optima eventually overcame those issues. It has not, however, overcome the biggest challenge: the idiosyncratic systems of advisor practices and the unbending nature of the entrepreneurs running advisory firms. Some advisors liked IAS's PMS software but did not like its CRM system. Some liked IAS's cash-flow-based financial planning system, while others found it cumbersome. While IAS had been touted as the integrated solution advisors had long been seeking, to date only about 150 firms have bought IAS and many are only using the program's financial planning or PMS components, but not all three.
    IAS demonstrated that there is no such thing as the perfect integrated application-not in this tiny, fragmented independent advisor world, where the owner of a successful firm could earn $300,000, $400,000 or $750,000 a year and is likely convinced that his or her way of serving clients is the right way. While IAS is lauded by some of the smartest advisors I know as being a great application, the vast majority of advisors  invariably have reservations about it because they don't like one little thing or another. IAS is to be commended as the best effort so far at creating the integrated platform that advisors long yearned for, and it may over the next couple of years attract a hard-core group of perhaps a few hundred devotees. However, the curmudgeonly independent wealth managers it seeks to serve are unlikely to embrace IAS or any other "silver bullet" application in large numbers. The nature of independent advisor practices makes it too difficult to adopt a single program to do almost everything in your business.
    After all, what firms would a Silver Bullet application be targeting? It must, of course, be targeted to established practices. Budget-minded startups and small firms can patch together inexpensive applications rather than pay a premium for a Silver Bullet.
    Which presents yet another challenge to Silver Bullets: If you have an established, successful advisory firm, is it prudent to base your operation on a platform offered by a single technology company? What if the company gets sold? What if it goes out of business? What if it doubles its prices 100%? You could probably make up a long list of your own scary questions about the risks you expose your business to when you entrust a single company's platform with your business.
    Moreover, dropping your current PMS, CRM and financial planning software requires totally reengineering your business, and changing the behavior and procedures familiar to your staff. If you have a successful firm, how likely are you to do that? If you think your PMS application is OK-not great but just OK-are you going to risk major disruption of your business because you like IAS's integrated financial planning and CRM? It's unlikely.
    As a result, after watching IAS make little traction over the past few years and not becoming the revolutionary new platform for hundreds of firms, I began to think that the search for the Silver Bullet had come to a dead end, that the Holy Grail would never be found. Until now.

Silver Bullet 2.0
    Emerging from the development of next-generation, Web-based applications, an effort coinciding with the development effort widely known as Web 2.0, is a new push for integration. But it's a different sort of integration this time.
    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. A Web service is not a bank that offers online banking or another company that let's you access its service over the Web. Rather, it is a way to request and transmit data across a network or across the Internet by using standard Internet protocols, typically HyperText Transfer Protocol (HTTP) and eXtensible Markup Language (XML) to present the data. 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.
    To be sure, Web services don't allow total integration of different applications. You are utilizing data in one application to operate another application and, therefore, are using different interfaces, which is not ideal. But Web services do allow applications to speak to each other more easily than ever before, creating almost seamless integration of different applications.

Understanding Web Services
    Web service is not new technology. It's been around for about six years. But it is now taking hold and it is beginning to be implemented by advisor technology vendors because more applications are Web-based.
    Web-based applications make integration with Web services easier. It removes a layer of programming that must otherwise be done to integrate applications. If you try to make a desktop PMS system talk to a desktop financial planning application, the programming is far more complicated than making two Web-based applications talk to each other. It may even be impossible if the data provider has a closed system, meaning no interfaces from which an export can be made to pull the data from the application and use it elsewhere. That's why there was never any serious effort to create the Silver Bullet using three different desktop applications. It was too daunting a task for small vendors serving independent advisors. The Web changed that.
    All Web applications swap data using a standard protocol called http, Hypertext Transfer Protocol, or https, the secure version of http with an encrypted data stream, allowing your computer to request information from Web servers using http. Desktop applications don't speak http, however. Making them do so requires an extra layer of programming, and that could often make it take much longer to write the code to allow a desktop portfolio management application to speak to a Web-based application.
    To pull the data from the PMS application, using our earlier example, the financial planning application would have to know the logic of the PMS system's database and understand all of the tables and what each piece of data in each database table means. As a result, developing the interface is likely to be far more complicated compared to using a Web service, where the financial planning application is simply requesting a data package made available by the PMS application. The financial planning application doesn't need to know the database schema of the PMS application. It just needs to call the Web service containing all the data it wants. It's kind of like the difference between going to a restaurant and ordering a la carte versus from a prix fixe menu.
    Which brings us to the other factor ushering in the Silver Bullet 2.0: the growing use of Application Programming Interfaces (API) in applications sold to advisors. APIs have been used for decades, but now we are seeing technology vendors serving independent financial advisors use APIs to market their products and show how easily they can be integrated with other applications you use. The reason the Web-based applications can order from a prix-fixe menu is that the menu has been prewritten into an API.
    An API is a predefined set of tasks that the Web service can perform, and each can return a specified bundle of data. For instance, Albridge Solutions, the big PMS system used by more than 100 B-Ds that is now starting to make a move toward serving registered investment advisors (RIAs) not affiliated with a B-D, has APIs for different advisor applications, including NaviPlan, Money Tree and about 20 other applications. Albridge could write an API for a financial planning program exporting all of the data any planning application needs, and then any financial planning applications can write an interface for using that data. In fact, it's possible that the same API-depending on what data has been made available by it-could be used by analytics applications or any other application that can utilize the data. The point is that Albridge does not have to write individual interfaces to each program.
    The other factor in easing the way toward Web 2.0 is that the APIs use better technology than ever to make it easier to use the data coming out of one application and going into another. That's where eXtensible Markup Language (XML) comes into play. In programmer terms, data coming from a feed using XML is "tagged." In layman's terms, each piece of data is defined or labeled. So a programmer trying to import data into a financial planning application from a PMS application can easily access the price information in the XML data bundle by using standardized modules to retrieve the number associated with the price "tag." Previously, mapping data fields was far more difficult. A programmer had to order a la carte by making individual calls on the PMS system's database, or understand the inner workings of its API-if there was one.

Silver Bullet Advocates
    With so much riding on Web services and APIs, 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.
    Even with the cooperation of these two vendors, the task would be daunting. Vendors would have to agree on common standards for data integration. Agreeing on the most basic items, like what is the definition of a security's price, a dividend, ex-dividend, would be challenging, never mind the long list of esoteric items, such as how to record limited partnerships, variable annuities, whole life insurance. The standards that need to be agreed upon by firms that compete with one another are complex. Friedman says the membership in the group costs $4,000 a year, but the sustained effort that standard-setting will take is likely to cost hundreds of thousands or millions of dollars to pay for staff, fund research and promulgate rules. Gathering that kind of momentum without the support and funding of the industry's largest firms and key players is unlikely, especially since it is not in their interest at this time.
    Advent Axys runs a closed proprietary database and says it has no plans to change that for the 4,000 firms using it. Schwab PortfolioCenter, while running on an SQL database, also is not truly open architecture. The PortfolioCenter database is actually encrypted. The database schema is password-protected by Schwab, and the licensees' user name and password won't give you access to the database. To access the data in PortfolioCenter, you must use an export manager. So although Schwab has made it easier for licensees to export and import data and convert to another PMS application, it has cleverly stopped short of totally open architecture. They don't make it easy for you or a third-party vendor to get access to that data. The point is, these firms know that they control your data and are not likely to support a consortium that undermines their competitive advantage.

Silver Bullet 3.0
    Yet Your Silver Bullet does offer a window into the future and could help speed up the movement toward Silver Bullet 3.0, a period they may take another three or five years to come about, when competitive pressures force all the PMS vendors and custodians to create open databases. What's going to force companies to accede to open architecture is competition, when their profitability is hurt by not offering what advisors demand. With more Web-based vendors cropping up and becoming a threat to desktop systems, competition will force change over the next two or three years. If Albridge becomes serious about serving RIAs, for example, that will be significant because the PMS company has more than 100 employees and already serves 100 B-Ds representing nearly $1 trillion in assets, 70,000 financial advisors and more than 10 million investors with 35 million accounts.
    In February, White Oaks Wealth Management of Minneapolis, a leading RIA firm with $200 million under management that was founded by Bob Klosterman, switched from Advent's AdvisorMart Web-based PMS system to Albridge. With Advent no longer investing in AdvisorMart, a relic of its 2002 purchase of Techfi Corp., White Oaks was compelled to find another solution. But the fact that this savvy entrepreneur, who has been around the block with PMS vendors, chose Albridge is significant. Klosterman was an early adopter of Techfi's system, and now he's an early adopter of a PMS system that holds the promise of spearheading the Silver Bullet 2.0 era because it has perhaps the most well-developed Web services programs of any tech vendor serving independent advisors. Albridge actually has personnel who work on nothing but Web services full time. Klosterman says he is pleased with his decision. For his firm's CRM application, Klosterman says he switched from GoldMine, an off-the-shelf mass-market retail application, to Redtail Technology, which offers a Web-based CRM application for advisors that has a Web service interface with Albridge. Klosterman, so far, says he is thrilled with Redtail.
    In addition to Albridge, other industrial-strength Web-based PMS applications are on the rise. Black Diamond Performance Reporting, a start-up, may offer scalability and has a business model that so far is gaining assets from large RIAs with impressive speed. Meanwhile, Investigo, which had a tough year in 2006 after releasing a version to its B-D enterprise-wide clients that had a few too many bugs, seems poised to get back on track and has declared its interest in targeting RIAs.
    These are not tiny start-ups like we've seen enter the PMS market in the past. These are well-funded, Web-based PMS applications. As more advisors follow Klosterman's lead, Schwab and Advent will feel the heat of competition. That could begin the era of Silver Bullet 3.0. If Schwab and Advent don't become part of the Silver Bullet solution, advisors will see them as part of the problem. My guess is that will take at least another couple of years, however.
    For now, start asking your data and software vendors if they have any APIs opening their data to other applications. If so, ask what other programs are integrated with its system. Increasingly, the market will force vendors to post pages boasting of how many APIs they have and which companies are integrated into their system. While we are still in the infancy of this technology shift, we are talking about Silver Bullet 2.0.

Andrew Gluck, a longtime writer and journalist, is CEO of Advisor Products Inc., a Westbury, N.Y., marketing company serving 1,500 advisory firms.