Understand the Future of Your Industry

Web 2.0 has allowed developers to create sophisticated online tools which offer effective solutions for investing and managing money and creating a financial plan. These sites target avid individual investors, younger investors who are comfortable with the technology and social networking opportunities and professional financial advisors.

While avid individual investors are likely managing their own money, younger investors try out these technologies, but unfortunately most do not understand the portfolio management strategies or risk-reward tradeoffs to utilize the tools to their potential. Finally, professional financial advisors can utilize these sites in order to build confidence in investment ideas, locate better options for their clients and for effectively compete with the large wire houses who have spent millions to develop proprietary software to accomplish the same objectives.

Here are a few of the most innovative in each category.

1. Investing and managing money

The contrarians are laughing all the way to the bank, but many investors follow and duplicate the investments of professional analysts and financial veterans like Warren Buffett.

Sites like Covestor.com allow you to share investment ideas, exchange market research and track peers’ investment performance. One major advantage to investors is that they believe that they are receiving objective advice, unbiased by commissions.

A similar site, CakeFinancial.com, offers a tool that looks at your current investments and finds similar potential investments with lower fees and expenses.

Finally, PortfolioMonkey.com offers a tool that helps calculate the correlation of positions in your portfolio based on historical performance. Additionally, you can add stocks to a sample portfolio to see how adding them might affect your overall performance.

2. Creating a Financial Plan

While there are budgeting sites like Geezeo.com and Mint.com, there are also now websites that help users create a complete and complex financial plan.

While some use these sites to complement their financial advisor, others use these sites as a substitution.

For example, SimpliFi.net uses a virtual financial advisor to help you lay out financial goals such as saving and budgeting or reducing debt. The site does not require you to import your various financial accounts, but you do have to give approximate balances. Also of note is that the Site is registered with the SEC and thereby must comply with SEC rule.

During times of disruption in an industry or economy, innovators enter in an attempt to add value and steal market share from the existing players. Major disruption exists in the financial markets and the financial services industry. My guess is that more and more of these technologically savvy competitors will enter your market.

You have no choice but to embrace these technologies into your practices and figure out complementary methods of adding value for your customers.

For additional resources, check out The Best Online Tools for Personal Finance in The Wall Street Journal.

Tags: CakeFinancial.com, Covestor.com, Investing, Mint.com, Money Management, PortfolioMonkey.com, SimpliFi.net, Wesabe.com