How Advisors Rate the Technology They Use

Two other numbers jumped out at us. Only 24.26% of our respondents are using document management/processing tools – a category which includes Redtail Classic Imaging, DocuPace, Laserfiche, NetDocuments, Worlddox, Citrix Sharefile and box.com. Remember 10 years ago when everybody was talking about the “paperless office?” There’s no evidence that we are any closer to replacing those paper-stuffed filing cabinets in advisor offices than we were back then. By the way, the three asterisks note that we changed this category between 2018 and 2019; last year, the category also included document processing tools like DocuSign and LaserApp, which continue to enjoy high adoption. This accounts for the drop-off in adoption rates from last year to this one.

The other number that surprised us was the surprisingly low adoption percentage of financial planning software. How do we explain the year-over-year drop down to 63.57% of our respondents using planning software for their clients? Our best explanation is that our 2019 survey attracted roughly three times as many respondents as the 2018 version; in 2019, we heard from many more dually-registered advisors who are affiliated with independent broker-dealers, and modestly more wirehouse brokers. It appears that dually-registered advisors and brokers are much less likely to offer financial planning services to their clients than are fee-compensated advisory firms. We didn’t realize it, but our survey tapped into a sizable silent minority of professionals whose value proposition is still heavily weighted toward asset management.

Let’s dive into some of the categories and see what we learned. In CRM, the market share leader was Redtail, and it wasn’t close between Redtail’s 56.90% total share of respondents down to number two Salesforce, at 8.01%. But in each category, we asked respondents which program they were thinking about switching to or adding, and here we got a surprise: Salesforce was the leader by a wide margin in this ranking, ahead of number two Redtail.

Why? As advisory firms get larger, they start to look at more comprehensive, expensive CRM solutions, and Salesforce is where they start that evaluation. In that vein, the number one program in terms of user satisfaction rating – and one of the highest satisfaction ratings in the entire survey, at 8.51 – was achieved by a Salesforce overlay program/Salesforce reseller: Concenter’s XLR8 program.

Portfolio management software achieved nearly as high a total market share as CRM (84.19%), but the interesting thing there was how competitive this market has become. The market share leader in our survey was Albridge, with 20.41% of our respondents reporting that they use it. Behind it was Mornignstar Office (16.92%), Envestnet Tamarac (13.85%), Orion Advisor Services (9.40%), PortfolioCenter, now owned by Envestnet (9.39%) and Advent/Black Diamond (5.36%).

As we looked at the market share breakdowns based on business model, we discovered that Albridge is the overwhelming leader among dually-registered and wirehouse firms (40.96% and 48.99% respectively), but hardly a player in the fee-only community (5.37% market share). Among fee-only advisors, Morningstar Office and PortfolioCenter each enjoyed roughly a 20% market share, followed by Envestnet/Tamarac and Orion Advisor Services (17.46% and 16.36% respectively). Meanwhile, as firms got larger, they were more likely to use Tamarac and Orion, less likely to use Albridge, and Morningstar Office’s market share was remarkably consistent across the size spectrum.

Also interesting: in this category, we broke down overall adoption rates among different levels of experience, firm size and business model. We found that just 58.5% of advisors with 1-5 years of experience are using portfolio management software, as are only 45.39% of very small firms. Newer, younger advisors are moving away from asset management as their primary value proposition with their clients.

In the investment data/analytics tools category, the was a total adoption rate of 66.03% – a number that is interesting in that it would have been close to 100% 10-15 years ago. Today, with the widespread adoption of ETFs as the core components of client portfolios, advisory firms may have less need to use sophisticated screening tools to identify the best-managed mutual funds.

The most interesting trends here are the gradual market share encroachment on Morningstar (the runaway leader at 38.82%) by companies that offer very different analytical capabilities: FI360 (8.24%) and YCharts (5.54%). FI360 is used by advisory firms to analyze different investment options not just for return, but for their fiduciary ranking; that is, whether the advisor can defend recommending them while serving as a fiduciary. YCharts, meanwhile, adds customized graphing, charting and sorting features onto the underlying Morningstar data. All three of the market leaders earned high user satisfaction ratings above 7.5, and they were all among the top three programs that respondents are thinking about using – though YCharts nosed out Morningstar for the top spot on that ranking.

In our financial planning software metrics, market share was (unsurprisingly) a two-horse race between MoneyGuidePro (25.69%) and eMoney (22.93%), and their user rankings were very high (7.97 and 8.05 respectively), which indicates that these firms will be at the top of the rankings next year as well. Also interesting was the rise of Right Capital (4.8% market share and a 7.91 user ranking) to third place, and the program also captured a solid third place in programs that respondents are thinking about adding. Will the big two become a big three before long? Right Capital had its highest market share among younger advisors with 1-5 years of experience (16.27%) and with fee-only advisors (10.69%), which suggests that it’s well-positioned with the next generation of users.

As mentioned earlier, advisory firms who have not yet gone paperless are in good company, and the market share statistics suggest that there is still some sorting out to be done before a leader emerges in this category. Redtail Classic Imaging earned the highest market share at just 9.15% of our respondents. DocuPace finished second, with just 6.35%, followed by Laserfiche (3.76%), NetDocuments (2%), and Worldox (1.34%). A better measure here might be to look at the user satisfaction ratings, where Redtail Classic Imaging stood out (7.98), followed by Worldox (7.69) and Laserfiche (7.42).

Our biggest disappointment in the survey results was the small number of respondents who are using one of the cloud hosting/cybersecurity resources. As you can see from the chart, nobody had more than a 2.5% market share among the respondents, which suggests that there are a lot of advisory firms that think that having antivirus software on their personal computers is adequate cybersecurity.

But… the advisors who are using these tools like them a lot – as evidenced by the extraordinary user ratings earned by True North Networks (8.46), Itegria (8.12) and Entreda (8.02).

As I said, the full report offers insights into 20 different categories, including interesting ones like the custody and broker-dealer platforms, and a miscellaneous category that shows just how eclectic the financial services tech landscape has become. The Everplans client data portal, automated Medicare planning through the I65 Medicare Mapper, and Carolyn McClanahan’s WhealthCare tool to help clients prepare for the last stage of their life are all relatively new to the marketplace and allow advisors to deepen their value proposition without having to add a lot of labor to the relationship.

At the end of the survey, we asked the respondents to select their most valuable software category. More than half selected CRM, while financial planning software came in second, and portfolio management finished third.

No real surprise there, except that when we took a deeper dive into the numbers, we discovered that younger and fee-only advisors were more likely to select planning software as their most valuable tool than their older counterparts. Earlier I posed this question: Is it possible that the next generation of advisors are adopting financial planning services as their principal value proposition to clients? That is evidence that they are.

But there is an additional trend in this data. As advisors grow more experienced, they increasingly select CRM as their primary tool. Is it possible that they’re taking another migration. The first is from asset management to financial planning as the core of the value proposition. Now some advisory firms--the wealth management cohort--are migrating toward a client experience as their core value proposition.

Finally, we asked advisors how much they were spending, as a percentage of their top-line revenue, on software tools and services. This produced the most unsatisfying results of the survey process. Our goal was to identify a consensus among advisors as to how much of their revenues should be allocated to technology.

As you can see from the chart, there was no such consensus. There were firms spending more than 8%, but many of them were in the early startup stage. Looking at the other responses, the sweet spot could be anywhere from 1% to 5% of top-line revenues, with a significant number of “dissenting” firms spending less and spending more.

Next year, we will correlate this figure with firm growth, and see if the faster-growing firms are also spending more, or less, on technology. But for now, whether technology spending correlates with faster growth remains an unanswered question.

Bob Veres' Inside Information service is the best practice management, marketing, client service resource for financial services professionals. Check out his blog at: www.bobveres.com. Or check out his Insider's Forum Conference (for 2019 in Nashville, TN) at www.insidersforum.com.

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