The findings in this blog post come from our annual survey of over 1,600 registered investment advisor (“RIA”) firms that was conducted in the first quarter of 2020. This proprietary RIA in a Box study is paired with publicly accessible data provided by the Securities and Exchange Commission (“SEC”). The goal of our annual study is to understand different options that comprise each firm characteristic, and to determine whether specific characteristics impact the growth, size, or operational efficiency of an RIA firm. In this blog post, we will explore our survey results in response to financial planning software systems used by RIA firms.
RIA Adoption Rate of Financial Planning Systems
For this year’s survey, we focused on the overall industry adoption rates regardless of whether an RIA firm discloses on its Form ADV that it offers financial planning services or not. According to our recent annual technology survey conducted in the first quarter of 2020, 43% of RIA firms utilize financial planning software. As the chart below reflects, the industry’s financial planning software adoption rate has remained relatively consistent over the past five years. However, we have observed a slight uptick in adoption rate from 41% of firms surveyed in 2015 to 43% of firms surveyed this year:
Financial Planning Software Adoption Rate Year Over Year
RIA Financial Planning Software Adoption Rate by Firm AUM Size
Similar to RIA customer relationship management (“CRM”) software adoption rates, we do generally observe an increase in financial planning software adoption rate as the size of an investment advisory firm increases as measured by regulatory assets under management (“AUM”). Compared to prior year surveys, financial planning software adoption rate by AUM segment seems to have not changed significantly. As firms scale from just starting out with less than $5 million in AUM to reaching up to $100 million in AUM, we do see a sharp increase in financial planning software adoption rates. However, as the chart below depicts, we do see a slight drop in financial planning software adoption rate for firms with $100 million or more in AUM compared to firms with between $25 to $100 million in AUM. This may be due to some larger RIA firms adopting more customized “homegrown” financial planning solutions to cater to an ultra high net worth (“UHNW”) client base.
Top Financial Planning Software Systems Adopted by RIA Firms
Since we first discussed the five key components of RIA financial planning software tools in 2015, eMoney and MoneyGuidePro have continued to be the distant financial planning software industry leaders as measured by market share. Two years ago, MoneyGuidePro and eMoney had a combined financial planning software market share of 77%. Our most recent survey results show they have a similar 75% combined market share today. While both MoneyGuidePro (acquired by Envestnet in March 2019) and eMoney (acquired by Fidelity in February 2015) are now part of larger investment adviser industry conglomerates, neither seems to show any signs of relinquishing their long term dominance in the financial planning software category.
Compared to our 2017 RIA financial planning software survey results, we have seen a small relative uptick in eMoney adoption compared to MoneyGuidePro. In 2017, MoneyGuidePro led the category with 41% market share while eMoney trailed with 36% market share. As the table below shows, our most recent survey results now show EMoney slightly edging out MoneyGuidePro as the category leader with 38% market share (+2% vs 2017) and MoneyGuidePro now in second place with 37% market share (-4% vs. 2017).
We should also note that since its founding in 2014, Right Capital has also continued to see success in the financial planning software category and now stands at third place with 10% market share. This is quite the rise over the past two years for Right Capital which sat at less than 5% market share in the 2017 survey.
This post is the second of five blog posts that will focus on the core technology solutions available to investment advisory firms with last week’s post centered on RIA CRM software adoption. In the coming weeks, we will look at continue our series of blog post with a detailed look at document storage, portfolio management / reporting solutions, document storage, and portfolio risk management software.