[KITCES.com] The Latest In Financial #AdvisorTech (March 2024)

Salesforce Financial Services Cloud highlights a new pre-built multi-custodial data feeds solution in its AppExchange, dubbed Attune and powered by BridgeFT, as the CRM provider seems to come ‘downmarket’ into mid-sized independent advisory firms that want Salesforce’s depth but don’t have the internal resources to fully customize it from scratch.

Salesforce Financial Services Cloud Aims To Come ‘Downmarket’ To Mid-Sized RIAs With Pre-Built Multi-Custodial Data Feeds Powered By BridgeFT

In their early days of computers, Customer Relationship Management (CRM) systems were little more than a digitized version of a rolodex, capturing the contact information of people the firm had done business with in the past (or perhaps prospects the firm hoped to do business with in the future). More sophisticated CRM systems might have a wider range of fields to capture more data points about the contact (e.g., their hobbies and interests) or where they are in the sales process (e.g., sales pipeline reporting), or more of the communication history with them (e.g., a series of call or meeting notes), but in the end each customer record was simply a flat file of data about that individual.

Then came Salesforce. Nominally it was ‘just another CRM system’, but Salesforce took a particular focus from its earliest days in solving CRM problems at enterprise levels of scale… where ultimately, it’s about far more than ‘just’ the customer contact data. It’s also about business workflows, integrating with other enterprise data sources, and being able to support the increasingly specialized needs of each individual enterprise. Which Salesforce brilliantly facilitated with a combination of a platform chassis that could support its own ecosystem of developers, and the rollout of its AppExchange that made it even easier for developers to build their own custom applications to support specialized needs of certain segments of Salesforce enterprise customers.

The caveat, though, is that Salesforce’s ability to support the complex needs of large enterprises also made it a system that was very expensive and cumbersome to support for any company that was not a sizable enterprise with significant resources to allocate to its CRM systems. Which helps to explain why, in the independent financial advisor world, Salesforce has a >50% market share amongst advisory firms with 10+ advisors, but barely 12% of advisory firms with no more than 3 advisors (according to the latest Kitces AdvisorTech Research). And while this is arguably a great success for Salesforce in penetrating its core enterprise market, it’s also problematic in the financial advisor industry, where the overwhelming majority of advisory firms are on the smaller end of this spectrum. Such that in the aggregate, Salesforce only has a market share of about 17% of independent advisors, and most smaller advisory firms don’t even use Salesforce “out of the box” and instead purchase a pre-built advisor-specific overlay like XLR8PractiFi, or Skience.

In an effort to further bridge this gap, back in 2016 Salesforce launched its own pre-built overlay, “Financial Services Cloud” offering, in an effort to deliver a more viable out-of-the-box solution directly from Salesforce, while still allowing advisory firms the flexibility to further customize to their specifications with their own Salesforce instance (which can be more challenging with third-party overlays that provide but tend to require that advisors use their own pre-built framework).

And now, the news is out that Salesforce Financial Services Cloud (FSC) has helped to develop a new Salesforce AppExchange solution called Attune, providing pre-built multi-custodial data feeds that can plug directly into FSC (powered by BridgeFT’s custodial data feed APIs).

From the advisor perspective, BridgeFT’s Attune plug-in for Salesforce FSC should make FSC a more appealing consideration for the upper end of mid-sized RIAs in particular (e.g., from $500M up to $2B of AUM, which might have 10 – 50 advisor professionals), which are both more likely to need multi-custodial data feeds (as advisory firms often add a second custodian as they grow), and may prefer the greater flexibility of FSC to customize more specifically to their needs as the firm grows.

From the industry perspective, Salesforce’s efforts to move into mid-sized independent firms is a ‘downmarket’ shift from their traditional large-enterprise base, but arguably moves into what is still a potential sweet spot for Salesforce, with firms that need more depth of customizations and enterprise-level workflow and integration capabilities than Wealthbox or Redtail (which dominate amongst smaller firms), but aren’t large enough to go the ‘traditional’ Salesforce buy-and-customize route.

In the long term, though, Salesforce’s roots are still in solving the needs and complexity of enterprises… at a price point that enterprises can afford (but the long tail of smaller firms cannot). Which means even as Salesforce comes incrementally downmarket into the larger end of mid-sized firms, they do not likely present a substantial threat to the existing CRM providers that serve small-to-mid-market advisors. Instead, arguably, the real question is whether existing CRM providers for advisors can continue to expand their capabilities to move ‘upmarket’ and compete more directly with Salesforce… or if the ongoing progession of advisory firms as they grow will continue to ‘force’ them to make a CRM change when they reach the “enterprise” stage?