The future of financial planning software

The top tier of the financial planning software market today is something of a duopoly, with Fidelity’s eMoney and Envestnet’s MoneyGuidePro hoarding the vast majority of the industry’s market share.

Into this environment comes the next generation of planning software, many of which aim to support advisors serving more specific client needs. After all, since many advisors are reasonably happy with their current providers, the need for a major new competitor is dubious, some experts say. 

‘We don’t need another MoneyGuidePro or eMoney,’ fintech consultant Gavin Spitzner told Citywire.

Take College Aid Pro, for example, which specializes in preparing clients for the decumulation event of sending children to college. Or InterGen Data, which uses demographic data such as a family history of certain diseases to calculate the probability a client will undergo a certain life event, then helps them incorporate that possibility into their financial plan. Holistiplan has enjoyed growth alongside its development as a leader in the tax planning niche. Some providers, like FP Alpha, even tout AI and machine-learning capabilities that give their software an ability to learn over time, refining the proactive planning recommendations that it provides based on each decision made by the client or advisor.

Still, some software developers are taking aim at the Goliaths of the space. Among them is attractively priced RightCapital, the third-biggest player with nearly 10% market share, according to the latest T3 and Inside Information advisor software survey. Orion, with around 6.5% market share, is looking to compete by offering its financial planning software, which it acquired from Advizr, to its advisors for free.

Whether any of these new players will be able to capture significant market share from the titans atop the charts remains to be seen.

The major players

According to the T3 survey, eMoney and MoneyGuidePro together account for a whopping 73% of the planning software market’s share.

Spitzner said he believes the two incumbents have done an excellent job in creating a baseline standard for planning software but might be too broad and focused on retirement for the modern client, who generally wants a more customized, personalized service.

‘Their basic functions of financial planning are fine and the math works, but it’s all very left-brain-oriented,’ Spitzner said. ‘I’m not sure they’re doing enough to drive ongoing engagement from clients.’

In a Citywire interview earlier this year, eMoney’s outspoken founder Edmond Walters put it more bluntly. ‘They’re a Betamax,’ he lamented about his creation, owned by Fidelity since 2015. ‘The product hasn’t gotten anywhere.’

Walters has gone so far as to work with Envestnet to build an estate planning tool for MoneyGuidePro.

Meanwhile, T3 president Joel Bruckenstein said that Fidelity and Envestnet ‘both have their ear to the ground as far as what the market wants.’

‘As long as the current leadership remains in place, they’ll continue to innovate,’ he said.

Watch and learn

In this context, innovation often means following the examples set by younger, hungrier, more specialized, and more nimble firms.

‘Most of the innovation eMoney and Envestnet are doing is around things customers are demanding. A lot of it is filling in the gaps,’ Bruckenstein said. Both firms, for example, added insurance services, while eMoney added marketing.

‘What tends to happen is a young startup comes in that identifies a niche – for a number of years, a common one was Social Security. Once there was a demand for it, both of the major firms integrated it into their system, not to the full extent that the specialists do, but it’s there and it’s enough for most people.’

‘Once you hit a certain size, you cannot keep up technologically,’ observed fintech consultant Craig Iskowitz. ‘You focus on your existing clients more and more and less and less on new clients. At some point, you’re going to plateau. That’s the price of success.’

Like restoring a house, upgrades to such massive and widely used software platforms have to come piecemeal.

So which room will eMoney and MoneyGuidePro renovate next? Bruckenstein pointed to tax planning, especially with potential estate tax changes percolating in Washington.

‘That’s going to take a year or two of programming right there. A lot of them are sitting ready to pounce on what’s coming out of Congress,’ he said.

Innovation opportunities

One place for improvement could be offering clients easy access to the planning portal.

‘There hasn’t been a great deal of client portal adoption,’ Spitzner said. ‘To me, they’re all part and parcel of the same opportunity to get the client engaged.’

Bruckenstein pointed to a noticeable dearth of direct-to-consumer planning software as an opportunity for a new market entrant to make waves with a younger crowd that wants to take more control of their finances.

Another way to cater to younger clients, Iskowitz said, is through support for cryptocurrency investments.

‘If there’s a financial planning software that comes out that’s fully crypto-supported where you can build it right into the plan, that might start taking market share in small amounts away from these larger firms,’ he said.

Traction troubles

Bruckenstein believes that, for even the most popular new market entrants, truly taking a bite out of eMoney or MoneyGuidePro’s market share will be logistically difficult simply because of the roots the established firms have cultivated within the advisor community.

‘You do see specialized programs, but it’s difficult for them to get a lot of traction,’ Bruckenstein said. ‘If you do financial planning, and you don’t integrate with eMoney and MoneyGuidePro, that’s a problem. You don’t want to have two separate reports. With a lot of these very specialized firms, you need to do double or triple data entry, so unless there’s a really pressing need, it’s hard to justify the time, especially if clients aren’t willing to pay for it.’

According to Iskowitz, RIAs that want to try something new typically wind up bifurcating between existing and new clients or by asset level, and at least some of its clients will remain with the legacy players.

Specialized startups may enjoy an advantage in terms of product development because they can be more nimble – ‘they don’t have the legacy problems,’ Iskowitz said – but if they want to maintain that success in the long term, there’s only one way: expand by adding more features and functions. Otherwise, the business is destined to fall out of style once deep-pocketed eMoney and MoneyGuidePro catch up. 

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