Once a niche offering with only a handful of practitioners, financial planning is now embraced by even the largest financial institutions. It's a profound change for the brokerage industry, and technology companies like eMoney Advisor are in the driver's seat.
eMoney, which began as an idea of Edmond Walters, a former financial adviser, is now one of the largest, most successful companies in adviser-facing fintech. Fidelity Investments acquired eMoney in 2015 for $250 million, a blockbuster purchase that shocked the industry — and not just because of its price tag. The deal was a sign for many that traditional institutions finally saw digital, planning-led financial advice as the wave of the future.
Since then, eMoney has produced 2.5 million financial plans and 2.1 million client portals. Its aggregation engine, a critical ingredient in the company's success, has pulled together 13.7 million accounts and $2.3 trillion in assets. eMoney is even prouder of how it has maintained the culture of a technology startup, despite the sudden departure of its charismatic founder, Mr. Walters, less than a year after inking the deal with Fidelity.
eMoney's headquarters in Radnor, Pa., is far more Silicon Valley than Boston, with free snacks, Segways, video games and Patagonia sweater vests instead of suits and ties. There's even a milkshake machine.
This is more than window dressing to Ed O'Brien, eMoney's CEO, a Fidelity veteran who succeeded Mr. Walters. He believes it's all necessary to foster the innovative spirit many feared would be crushed under the bureaucracy of a $2.4 trillion asset manager.
"It's all about engagement," Mr. O'Brien said. "You want employees who come to work, they feel engaged not only in the work itself … but having fun at work is one of our values."
But 2019 brings eMoney a new challenge in the form of its own founder. Mr. Walters is back on the scene after a noncompete agreement kept him away from the fintech world, and he's diving right back into financial planning.
"It's been hard being on the sidelines, not being in the game," he said. "There's a lot going on right now, things that I thought were going to happen over the last three years."
Mr. Walters has aligned with eMoney's archrival MoneyGuide, which was acquired in March by fintech giant Envestnet for $500 million.
Envestnet brings deep pockets to the table to help compete against the resources eMoney receives from Fidelity, in addition to a technology platform that MoneyGuide previously lacked. Mr. Walters sees an opportunity to address gaps in the market.
"We're the next generation, and we will go head-to-head with eMoney," Mr. Walters said of the alliance between his new company and Envestnet Money-Guide. "We're going to change the way advisers communicate and present to clients. It's digital versus Betamax."
MoneyGuide and eMoney are battling to capture technology budgets as companies across the financial services industry try to move away from product sales in favor of providing financial wellness, comprehensive wealth management or holistic financial advice.
"Banking, insurance and wealth management all intersect, and planning is the glue that ties them together. It's the software that can sit across all of those wings," said Dennis Gallant, senior analyst at Aite Group. "We've talked about moving towards planning, but this is the year there's really an effort to push the market."
Making financial planning more accessible creates opportunity beyond the traditional wealth management industry. Firms see planning as a way to build relationships with new, next-gen clients and increase the loyalty of current clients before the next crash.
"During these market changes, if you can prove that certain goals they have stay unaffected … you can stop them from making irrational decisions," said Ugur Hamaloglu, partner at Ernst & Young. "I can tell you with a fair degree of certainty that every consumer financial services sector is looking into financial planning, from banking all the way to insurance firms."
Planning goes mainstream
In the past, financial planning was often little more than a tactic that brokers employed to gain assets. Until recently, it was also labor-intensive, and only worth the trouble for the wealthiest investors.
The shift to AUM-based fees, along with aging client, new regulations and the commoditization of investment advice over the past 20 years have helped push planning into the mainstream.
"Planning has been an evolutionary trend in financial service, but the recent confluence of macro trends has really accelerated it to almost revolutionary," Mr. Gallant said.
New technology is making this possible. Before 2000, financial planning software stood alone rather than being int- egrated with the rest of an adviser's technology, making planning difficult to scale, Mr. Hamaloglu said. The plans produced were static, paper-bound reports.
Mr. Walters believed the technology should make financial planning an interactive, collaborative experience for advisers and clients. He envisioned a tech platform built around planning that would include things like a digital document vault, a client portal and account aggregation. His approach helped eMoney become the centerpiece of many advisers' technology ecosystems.
"How could I provide them with a view of all of their assets and their information, updating every day?" Mr. Walters remembered thinking as he came up with eMoney. "I looked for a solution and I couldn't find it. I decided I would build it."
eMoney initially focused on cash flow analysis for the high end of the market, and Mr. Walters admits that it wasn't good at goals-based planning. This opened the door for MoneyGuide, launched by PIEtech, also in 2000, to provide technology focused entirely on goals, making it more accessible to advisers targeting individuals who aren't ultra-wealthy.
MoneyGuide has produced more than 5.5 million financial plans and aggregated more than 3 million accounts. More than 110,000 advisers use the product and 1.5 million clients use MoneyGuide's integrated portal.
MoneyGuide's focus on being a standalone technology helped it find success with enterprise firms that already had their own client portals, said co-CEO and chief technology officer Tony Leal.
However, eMoney's client portal proved to be immensely popular with advisers. Frani Feit, managing director of Tradition Capital Management, said of the three technology platforms her firm offers clients, it's eMoney that clients use most.
"I believe it is because eMoney provides a daily snapshot of clients' aggregated wealth holdings, which is not just accounts under our management. Their 401(k) plans, cash value of life insurance and 529 assets are all reflected on one screen," Ms. Feit said. "And when advisers help their clients keep a long-term view of building wealth by allocating investments to the most tax-efficient types of accounts, seeing one's total portfolio grow over time helps reinforce that message."
Advisers' passion for eMoney was tested in 2015 when news broke that the scrappy startup would sell to Fidelity. Some independent RIAs worried they would be forced to custody client assets with Fidelity if they wanted to keep using their beloved client portals and planning software. Others feared a behemoth financial institution would slow down a tech startup's ability to innovate.
Four years later, Fidelity has stayed true to its promise of independence. Advisers can still use the software regardless of where they custody client assets. Mr. O'Brien said that while eMoney's total user base has grown, the portion of users who have Fidelity accounts is roughly the same as it was before the sale.
Mr. Walters' departure about nine months after the sale didn't help calm nerves about how Fidelity would foster technology development. Today, not everyone is content.
"Personally, I would love to see the innovation speed up," said Scott Frank, founder of Stone Steps Financial. Mr. Frank doesn't think Fidelity has impeded eMoney's development and said the service support and technology are as strong as ever. But he feels the software is designed to sell investments and services rather than planning-led financial advice.
"My assumption is eMoney doesn't care about a small RIA adviser like me," Mr. Frank said. "We're small for them compared to insurance companies and brokerages. At the end of the day, they're guys that still make money on selling products."
Mr. O'Brien said this isn't a concern he's heard before, and that the heart and soul of eMoney is to help people talk about money. But Mr. Walters agrees with the criticism. He said most fintech products on the market are designed to sell products, and that's not a successful, long-term approach.
The real value of advisers is building relationships with clients to help them get through difficult times. Mr. Walters is betting technology is the key to helping advisers demonstrate that value.
"That's all I focus on. I couldn't care less if anyone ever buys [an investment] product," Mr. Walters said.
He also believes there is more work to be done around adviser-client collaboration. His new firm, Apprise Labs, is using MoneyGuide's planning engine and Envestnet's technology to address the more complex estate and tax planning needs of the ultra-wealthy.
"I've started working toward this direction. I haven't seen anything in three years that's been enhanced other than lower-level goal planning," Mr. Walters said.
Integrating MoneyGuide with the rest of Envestnet's technology also gives the company the platform it never had, Mr. Leal said.
MoneyGuide can integrate with Envestnet Yodlee for aggregation, and PortfolioCenter and Tamarac will bring functions such as portfolio management and reporting. Envestnet's asset management platform will help create a seamless process from planning to investing.
Neither company will admit to being influenced by the other. Mr. Leal said the Envestnet deal wasn't a move to fend off slowing growth, and said he still believes there are benefits to being a small, independent company.
"Fewer developers who are truly committed and understand the space can do more than 300 developers," Mr. Leal said.
He also pointed out that MoneyGuide integrates with eMoney's client portal and will continue to do so.
"We're very good friends with Ed," Mr. Leal said. "They compete fairly and in the right way. We couldn't be any more excited to compete with them."
For Mr. O'Brien, the MoneyGuide-Envestnet transaction only reaffirms eMoney's existing strategy.
"We've been for a couple of years focused and committed to what we call the full spectrum of planning," he said. "We start with a simple foundation of budgeting, spending, net-worth statements, and move all the way to the high end of comprehensive estate planning."
It's clear eMoney and MoneyGuide — with Fidelity and Envestnet, respectively, behind them — are in an arms race to provide financial planning tools to as many advisers as possible. Both are working on simplifying their user experiences for advisers serving clients with less-sophisticated planning needs, and for brokers with an investment management background who are dipping their toes into planning for the first time.
eMoney calls it "foundational planning," while MoneyGuide executives describe "blocks," a sort of Netflix-style menu for clients to select parts of the financial plan that they can complete at their own pace.
Both companies talk about breaking down planning into "bite-sized pieces" to be easier for advisers and clients, with tools aimed at helping advisers fundamentally change their client conversations and relationships.
"The adviser is not necessarily talking about products or investments. It's what are the things that are most important to that household, that family," Mr. O'Brien said. "For the adviser, [financial planning means] deeper, stronger relationships that continue to thrive even while there's pressure on fees all around them."