Technology aiding firms in adopting financial planning offerings

Market forces — like shifting demographics, consumer demand and regulation — are making financial planning an imperative for firms across the wealth management industry. As a result, financial planning technology is quickly becoming the front line in the battle for client assets.

Planning technology has existed at firms for at least a decade, but adoption varies wildly from firm to firm, according to a new report from Aite Group. Firms now find themselves competing on the tools they deploy to both advisers and the clients they serve.

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“Firms are shifting from an investment-led mindset to a planning-led mindset, integrating the financial planning conversation into the wealth management process,” said Isabella Fonseca, senior analyst at Aite Group. In her report, nearly three-quarters of 344 financial advisers surveyed said financial planning was equal to or more important than investment management.

“The market is witnessing rapid changes in service models and adoption of new technology with powerful features for both advisers and end clients,” she said.

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In Ms. Fonseca’s interviews with executives from 14 large U.S. firms (spanning wirehouses, other broker-dealers, self-clearing firms and discount brokerages), most said they are turning to third-party vendors for help. Eleven are in the process of implementing or evaluating a customized version of third-party financial planning software. Five have a tool built in-house, but three of them also are using a second, vendor-provided tool.

Executives said advisers at their firms use multiple financial planning tools, saying the technology supports either light or comprehensive planning, but not both. Advisers also rely on modular tools to address specific aspects of the plan, such as StockOpter for executive compensation management or Riskalyze for risk-alignment.

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Aite said firms that add these specialized tools to be more specific and niche (such as addressing college planning or business-owners’ needs) can help provide differentiation in the market.

Executives named MoneyGuidePro, eMoney Advisor and NaviPlan as the tools most commonly used. But when Aite surveyed 344 financial advisers, Money Tree earned the top spot, being named by 22% of the advisers. Financeware (also called Wealthcare) and MoneyGuidePro tied for second.

One of the biggest challenges for advisers starting to offer financial planning has been figuring out how much to charge clients. Fees can range from zero up to $100,000, based on the assets involved, the type of services provided and the scope of the engagement, Aite found.

The typical price falls somewhere between $500 and $3,000. Six percent of advisers reported charging less than $500 for financial planning services, while 19% charge more than $10,000.

Fees are usually structured for assets under management, but advisers also have adopted flat fees, hourly fees and charges for using a client portal. There’s also a hybrid approach, where advisers provide a free introductory plan, then charge if the client wants more sophisticated services.

Aite’s report concluded that because firms will have to support multiple financial planning tools and adoption among advisers will vary, evaluation of technology needs to be an ongoing effort.

“A vendor-provided solution will be an efficient go-to-market strategy for wealth organizations,” wrote Ms. Fonseca. “It is important to create a distinct process in which financial planning solutions are integrated into the adviser dashboard.”

If done well, firms can provide a simplified planning service alongside complex, comprehensive planning to support a wide range of customer needs and asset levels.