Spreadsheets have been used for years to capture, track, and reconcile data — so it stands to reason that they would be the perfect starting point for wealth management. Almost everyone already has Microsoft Office installed, so there’s no additional capital investment. And there’s no learning curve for power users: all you have to do is plug in the numbers and figure out how you want to slice and dice the information. So why would you need a dedicated wealth management platform?
The answer is simple: complexity. The more investments you have, the more complex it is to manage your money. Keeping a master spreadsheet updated becomes more and more time-consuming, and just like any other manual-entry recordkeeping, the more data input needed, the greater the risk of error. And that doesn’t even take market volatility into account, which throws an additional curve ball into keeping your spreadsheet up to date.
Pros of Wealth Management Platforms
- Data accuracy: Wealth management platforms eliminate the worries of overwriting data or data corruption. Data is managed securely, bank and market data is automatically populated, and formulas are calculated by the system.
- Real-time data: Wealth management platforms provide real-time data on your investments, so you can always see how your portfolio is performing. This can be a major advantage for cash forecasting and liquidity management, especially in volatile markets.
- Dynamic visualizations: Wealth management platforms offer dynamic visualizations of your portfolio, which can make it easier to understand your investments and make informed decisions. Simply tick a box to see comparison charts.
- Goal tracking: Wealth management platforms can help you visually track your financial goals and your progress towards achieving them. This can be a valuable tool for staying motivated and on track.
- Integration with other tools: Wealth management platforms can be integrated with banks and other financial tools. These automated feeds can streamline your workflows and make it easier to manage your finances.
Cons of Wealth Management Platforms
Not sure if a wealth management platform is right for you? Here are the most common objections:
- Cost: Wealth management platforms require a higher financial investment than simply using Excel. However, when time is balanced against money, the efficiency gains stemming from platform usage may well outweigh the cost — and in some cases, garner financial savings through the ability to analyze more complex data sets.
- Complexity: Wealth management platforms can seem complex to individuals who are not familiar with financial planning software. In reality, they ultimately reduce complexity.
- Security concerns: Some investors may be concerned about the security of their data on a wealth management platform. However, the data is likely more secure in a platform which is fed by bank data than a single Excel spreadsheet that could easily be thrown off by a bad formula or mistyped figure, not to mention overwritten, deleted, or corrupted.
Wealth Management Platforms vs. Excel
Excel may be a household name, but it does not offer the same features for wealth management as a purpose-built platform. A dynamic, real-time wealth management platform can offer a number of advantages over spreadsheets.
Typically, wealth management platforms are specially designed to offer features and functionalities needed by private individuals, wealth managers, family offices, financial institutions, and financial advisors.
Such features and functionalities can include:
- Historical Data: By saving and tracking historical data, you can easily look back two or three years to spot any patterns or simply see past actions.
- Controlled Access: Different types of data can be shared with specific users. Think of role-based access controls: maybe you want your spouse to have access to your entire portfolio, your daughter to have access to one portion of your portfolio, and your son to have access to another set of investment accounts. No problem — each individual only sees what you want them to see. You can almost always set up two-factor authentication (2FA) or sometimes even three-factor authentication for an added layer of security.
- Logging: As time goes by, it can be more challenging to remember exactly why you made that specific investment decision. With an advanced wealth management platform you can attach documents, notes, and emails to your file as justification reminders.
- Dividend Forecasts: Automated forecasting features are often available for better visibility of upcoming dividend payments on security holdings. Dividend payments are automatically predicted for all holdings, and automated tracking makes it easy for investors to ensure all planned cash flows are included in their forecasts.
If you are finding yourself spending an undue amount of time manually tracking your financial portfolio performance, it’s time to seriously consider a wealth management platform. The longer you wait, the more the complexity will grow — and the harder it will be to transition quickly when you need the extra flexibility and functionality.
