7 Reasons Personal Finance Management (PFM) Sucks

PFM (Personal Financial Management) refers to financial technology that helps users manage their money through visual charts and graphs. While this seems like great software on the surface, it mostly applies to people who are flush with assets and money to manage. This clearly does not apply to a great wealth of people, no pun intended. While it may be appealing to a subset of your members, here are 7 reasons your banking audience doesn’t really care about these tools, and why your investment and time into pushing PFM’s should be limited:

1. Pie Charts are pretty, but…. unless your mind is geared towards better understanding the graphical representation of your bank accounts, how necessary is it? Will you look at a pie chart before making any large purchase decisions? Probably not.

2. Time is money… and keeping your PFM software current and licensed can be time-consuming. While some of these tools automatically sync with account data, there can be hiccups with the application programming interface (API). You might end up spending a lot of time trying to establish or re-establish connections to your accounts and working with 3rd parties to resolve issues. 

3. They are only as good as the amount of time you invest… if you do not spend the time to properly map the data a PFM requires, the output will be meaningless. If you only connect some accounts, then the hope of getting accurate predictions and insights for the future is futile. 

4. PFM software is geared towards the wealthy… or is it? While it certainly is useful for members who have larger account balances, the wealthier the person, the more useful the software will be. However, the wealthier the person, the more diverse their assets, the more likely they are willing to outsource the task to a financial planner or manager. 

5. Finances aren’t just numbers… Financial data has more complexities than an application can decipher. If you’re middle-aged, then you have a slew of 401ks, 529s, mutual funds, bank accounts, and loans. You may be able to use these tools to see where your money is, but they are not at a point where programs can weight which of these investments are most critical based on your stage of life and future goals. 

6. They can’t automate sound advice… Every member has a unique set of assets, income, debts, and goals. Each of these needs to be taken into the greater picture when determining how to best invest money or pay down debt. This kind of advice can’t come from an algorithm, yet. Members may be leery of taking seemingly big financial advice, like whether to refinance your mortgage, from a mobile app.

7. Security is a real… In today’s world, cybersecurity is a critical concern and one that isn’t going away anytime soon. If you have your entire asset portfolio and accounts linked to a single source, and that source is hacked, the consequences could be invasive and detrimental to personal identity. There are certainly going to be providers with only best-in-class security measures, but cyber criminals are constantly working on the next back door, especially when it comes to financial data.

Despite these arguments, some PFM tools may be useful to members that are just starting out and have limited assets. It may help them see what their debt can look like if they don’t address it. However, as members move forward in their careers and in their years, trying to simplify their assets into a few charts and graphs is going to prove less and less useful.



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