First Look: PFM Defies Definition

When I was about 13 years old, my librarian mother made an executive decision to jumpstart a family book club, choosing Waiting for Godot as the first pick. The absurdist play, though short in terms of page count, took hours and hours for me, then a voracious reader, to complete. While the characters waited for Godot, I lingered on every page, feeling time slowly drain away.

My journey then reminds me of my journey now in testing personal financial management tools. For weeks, I've been on a personal finance bar-chart-hopping-mission to determine what qualities qualify an offering as a PFM tool. After touring plenty of vendors' pitches, sitting through demos and PowerPoint presentations, creating my own accounts, etc., I expected to get my answers quickly.

But I didn't. Instead, I encountered too many dead ends (including some vendors unable or unwilling to let me try out my own data in their software). From my trials and many errors, I've come to a much different conviction: I have a better shot at defining love than PFM.

Since some of PFM's earliest days in Quicken — for the accountant nerd in some of us — PFM has come to mean establishing budgets and other aggressive personal accounting maneuvers through software. These days, post-recession and popping with new players, the typical PFM product includes many features, including the ability to aggregate accounts, receive bill reminders, establish goals, view and split transactions, visualize spending categories in bar charts and line graphs, receive how-to savings tips via colorful content, and to some extent, visualize a short-term cash flow. Such offerings are coming from vendors that sell to banks (think Yodlee, Fiserv, Strands Finance, Geezeo, Intuit, MoneyDesktop) and direct to consumer tools with startups like Pageonce, Personal Capital and Planwise.

Somewhat counter-intuitively, there are a handful of players that offer PFM, but downplay the term in marketing their services to banks because of the taint the term has come to have within the industry. That is to say: banking users don't use it — or at least not yet in the bar-chart-heavy iteration delivered through a tab in online banking, or what I might call the abyss.

Part of the poor usage performance has to do with its nebulous definition, which I believe is much broader than budgets.

I, for one, could care less about pie charts or categories showcasing the ways in which I spend. I refuse such intimacy with my transactions. All I want to know is: am I spending more than I'm saving? In other words, let me have my Jameson indulgences if I'm prudent with my overall credit card spend. Categorizing my spending choices hinders my lifestyle choice. And yet, I'll log into my digital banking a few times a week to ensure I haven't lost my credit card mind. To me, logging into online banking is PFM. And it's enough for now.

Others, though, need and want more tools. Establishing budgets tickles certain people's fancies, while exchanging personal finance data in for relevant offers works for others, while others crave better insights about their spending. The point is, digital banking — in all of its varied forms — is all part of the ever-evolving PFM landscape. To have a bank account is to have some iteration of PFM tools. What varies is the degree of sophistication.

In a recent call with Jacob Jegher of Celent, we dug into the question, "What is PFM?" "It's one of the more difficult questions because the nature of [the technology] is very vast and subjective," Jegher says.