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Advisor Insights

4 Takeaways From the 2018 Advisor Software Survey

Here's a look at some of the software advisors are using, what they think of these products, and which new tools they expect to add.

Created as a collaboration among Joel Bruckenstein's T3 brand, Bob Veres' Inside Information, and Advisor Perspectives, the 2018 Advisory Profession Software Survey is an independent look at what software tools advisors are using in their practices. Now in its second year and with 2018 results published in late March, the survey also provides insight into what advisors actually think of the tools they're using based on user ratings, as well what tools advisors are thinking about adding to their technology stack in the future. Here are a few takeaways from this year's survey.

Riskalyze Quickly Dominating Risk Tolerance Software Space
Of the various risk tolerance and profiling tools available, the two most widely used are currently Sacramento, CA-based Riskalyze and Australia's FinaMetrica, with Riskalyze leading by more than a 12-point margin. Though FinaMetrica's user satisfaction rating was slightly higher than that of Riskalyze (7.62 vs. 7.36 out of 10), more advisors surveyed are considering adding Riskalyze to their tech stack than FinaMetrica by a factor of over 2 to 1. These results are striking, given FinaMetrica lost significant market share compared to last year's survey, going from just under 20.72% in 2017 to under 14.74% in 2018, in spite of its user satisfaction rating.

Riskalyze and FinaMetrica offer very different approaches to assessing risk tolerance. Riskalyze uses a more streamlined approach, focused on pure risk tolerance, combined with compelling sales tools and new planning/account opening features, while FinaMetrica opts for a more traditional, robust questionnaire aimed at providing insight into multiple dimensions of an investor's risk profile. Having used both solutions, I have to say I prefer FinaMetrica's data and process, though Riskalyze has a lot of appeal for those who are primarily looking to grow AUM business using a well-designed platform that provides a simple risk assessment combined with clever sales tools. Be warned, however, that Riskalyze has a habit of not being fully transparent about their frequently enforced annual commitment, even though they advertise monthly pricing. 

EMoney and RightCapital Gaining on MoneyGuidePro
Last year's survey indicated MoneyGuidePro was by far the crowd favorite in the financial planning category, with a nearly 42% market share, leading the second most popular eMoney by more than 16 points. While MoneyGuidePro retained the top spot in market share this year, eMoney gained ground at 25.61% to MoneyGuidePro's 36.10%. Perhaps the most notable change in this category is the newer RightCapital, which surged over 6 points from last year to reach the third spot at just under 10% market share. RightCapital also retained its high user satisfaction rating, winning the category last year and coming in a close second this year at 7.97 out of 10. This isn't surprising given the significant value RightCapital has baked into its platform, offering users robust planning, account aggregation, and client portal features with numerous software integration partners. eMoney won the top user satisfaction rating at a solid 8 out of 10 in 2018, and with more advisors thinking about adding it to their tech stack than the next closest MoneyGuidePro in 2018 by a factor of 1.5 to 1, it seems poised to gain additional ground in the coming year.

Robo Solutions Not as Popular as Predicted?
While there are still plenty of business-to-business robo solutions for advisors to choose from, this year's survey indicates total market penetration of these platforms is less than 21%. This is striking, given that almost every other major software category in the 2018 survey saw total market penetration of 40% or higher. While these numbers may increase over the next few years as advisors become more comfortable with the technology and the platforms themselves become more accommodating, user adoption does seem lower than most experts anticipated, especially given the number of competitors and funding in this space. This is likely due to the still relatively limited amount of customization advisors can add to these platforms (both in terms of investment models and rebalancing logic), as well as the rise of alternative fee structures, such as retainer-based financial planning that may include investment advice and/or management.

For advisors who are making use of a robo offering, market share is mixed, with Schwab Intelligent Portfolios, Envestnet, Betterment, and Folio in the top four. Though there are plenty of relatively new companies to choose from for advisor automated investment solutions, Schwab takes the top spot, likely due to that being the logical choice for advisors already using their institutional platform.

Advisors' Most Valuable Software Tool: CRM vs. Financial Planning
This year's survey included a bonus question, asking advisors what software tool they found most valuable to manage their businesses and serve clients. For the 2018 respondents, CRM software was the definitive leader at 42.65%, with financial planning software a distant second at 26.37%. Interestingly, and as the survey's authors noted, the results varied significantly based on demographics, with more established advisors (six or more years in the business) preferring CRM software, and younger advisors (one to five years in the business) rating their financial planning software as most valuable. This makes sense, given the capabilities CRM software has to help more established advisors with many clients improve their businesses, automate workflows, and manage existing client relationships or internal advisor teams. Similarly, younger advisors or those new to the business are more likely to see financial planning software as critical to their client experience, particularly given the advent of newer client portal capabilities and the increasing demand for financial planning focused services from consumers.

Ben Brown is a certified financial planner and an IRS-enrolled agent. He is the founder of Entelechy, a fee-only financial planning and investment management firm based in Bethesda, Maryland, serving clients in the Washington, D.C., area and nationally.

The author is a freelance contributor to Morningstar.com. The views expressed in this article may or may not reflect the views of Morningstar.