The 2023 T3/Inside Information Software Survey is now out and available, for free, to all interested parties in the profession (click here for your free copy) . As it does every year, the survey writeup includes market share statistics, market share rankings and user ratings in 36 different software categories. It’s the best guide to the 300+ fintech solutions in the marketplace, and a good buyer’s guide for advisory firms that are looking for additions or enhancements to their tech stack.
This year, 3,309 advisors completed the survey, which gives it a broad, statistically relevant sample of what advisory firms are using. At the front, readers can see the demographics of the survey participants: the annual revenue of their firms (a proxy for firm size); years in business (almost half of the participants have been in the business more than 20); and their business model (a somewhat higher number of fee-only than dually-registered advisors).
What did we find? We can get a window into the data with the ‘Market Penetration’ chart, which illustrates how some software categories are more prevalent than others in the fintech space, and how their adoption is growing. Once again (the statistics have been consistent year over year) CRM is used by very nearly 100% of the respondents, with Orion's Redtail solution owning about half the category market share, followed by up-and-coming Wealthbox and Salesforce. One of the Salesforce overlays, Concenter XLR8, earned the highest rating in the category, with a remarkable 8.85 user satisfaction score. But Redtail (8.10) and Wealthbox (8.07) have, in aggregate, very satisfied users. Any score over 7.0 should be considered excellent; above 8.0 is rare.
CRM is followed by financial planning software. Just 84%? Some advisory firms must still be using spreadsheets. The planning fintech market is a three-horse race currently, with Envestnet’s MoneyGuidePro (31.52% market share), Fidelity’s eMoney Pro (28.47%) and RightCapital (15.65%) the only programs with double-digit market share numbers. And once again, the leaders also have excellent user ratings: 8.04, 8.27 and 8.42 respectively. Down the list, the FP Alpha machine-learning solution, which provides planning insights in 16 different planning categories from what it 'sees' in scanned client documents, earned a sparkling 8.13 rating, and a deeper analysis showed that it was used as a second planning solution by advisors who are also using one of the top three.
Portfolio management and reporting tools represent the obvious third-most-popular category, and here we found four programs with market share numbers above 8.5% and many others that have attracted between 1% and 5% of the advisor audience. It was the most competitive of the most popular categories, with Orion Advisor Solutions (15.38% market share) moving ahead of Pershing’s Albridge Wealth Reporting Solution (13.03%), followed by Envestnet’s Tamarac program (10.43%).
By now you see the trend; market share leaders got there by earning high satisfaction scores, and the leaders (7.71 for Orion, 7.41 for Albridge, 7.75 for Tamarac) are keeping their users happy. But the other trend is interesting; you look down the list, as we did in the CRM and planning categories, and find programs that earn even higher user satisfaction scores – in this case Advyzon (8.52) and Altruist (8.41).
You can see the aggregate market share numbers down the list to (at the bottom) retirement distribution planning solutions. In each case, we measured the total number of survey participants that reported using one or more program/solution in the category. Look at right-hand column and you can see that, in general, more advisory firms are using more software this year over last, continuing a trend that goes back at least three years.
I and co-author Joel Bruckenstein believe that aggregate software utilization in any one category is a proxy for how many advisory firms are offering the services that category’s software addresses. Assuming that’s the case, retirees and pre-retirees are woefully underserved by the profession, since only about 13% of advisory firms are offering the kind of tax-aware decumulation advice that could potentially add thousands to their clients’ after-tax retirement distributions.
Similarly, estate planning, at just 16%, seems to be underutilized – and the category isn’t confined to solutions for clients who exceed the estate tax exclusions (FP Alpha and MoneyGuidePro's Wealth Studios); some of the solutions in the survey (EncorEstate and Estate Plan Navigator provide advisor clients with convenient, cost-effective access to basic wills, trusts and powers of attorney.
Whenever we see these bare patches in the survey, we also tend to see new entrants who come in and, over time, re-energize the category, either by providing a better interface or a more comprehensive solution. This dynamic is in the early stages in both retirement-distribution planning and estate planning, and well underway in tax planning. Income Lab, which features a more sophisticated sufficiency analysis engine than Monte Carlo, and models more than a dozen different after-tax outcomes using different distribution strategies, has made retirement distribution planning both easier and more sophisticated. Similarly, FP Alpha’s Estate Planning Lab and MoneyGuidePro’s Wealth Studios are in the early stages of driving up market penetration in the estate planning sector.
Next year, we'll include some new categories that are already being colonized by fintech providers. One that jumped out to us, from the write-in responses we collected, was healthcare planning; that is, software that helps advisors help their clients navigate all the myriad health insurance, Medicare and medigap policies, and annually evaluate their medications against the drug coverage they currently have. A solution called Caribou HealthPlanner was the leading write-in software solution of the survey, joining i65 to allow advisors to expand their advice and services into new realms of client need.
Just 41% of advisors are offering tax planning. This market share number was alarmingly lower in last year’s survey (29.77%). We hypothesize that this was due to the clunkiness of the legacy solutions in the category, which required the user to keystroke key numbers from a client’s previous tax return into the software, and which were designed for preparing taxes, not preparing for them.
The reason more advisors are using tax planning software this year over last is almost entirely due to the entrance of Holistiplan, which was used by roughly 0% of advisors in 2021, 18% in 2022 and almost 31% in the current survey. Holistiplan directly addressed the keystroking pain point, by introducing OCR features which scan a client’s tax return and populate the relevant fields. And like FP Alpha, it includes machine learning capabilities that will offer observations on the scanned data: This client might consider a partial Roth conversion this year to offset some of the loss carryforwards. This client contributed $4,000 to a SEP IRA last year, but his Schedule C indicates that he could have contributed another $6,000. This year Holistiplan posted an average user satisfaction rating of 9.04 – one of the very few times we’ve seen a score above 9.0.
There were a few other interesting things to observe. In several of the categories, advisors preferred to use a module of their planning software rather than buy the more comprehensive capabilities of software that specializes in that area. For instance, the top three market share leaders in the Social Security analysis category were, respectively, Social Security modules of MoneyGuide Pro, eMoney and RightCapital. SSAnalyzer, which provides a more detailed look at the various client options, tied for third, but its user rating (8.14) was higher than any of the modules.
Similarly, the college planning tool rankings listed MoneyGuidePro, eMoney and RightCapital modules as the market share leaders, in that order, and College Aid Pro, a more specialized and comprehensive solution, finished a distant fourth, with 2.66% market share. But once again, the specialized program led the category in user ratings, with an 8.36 satisfaction score.
The report covers a lot of territory, from the incremental market share rise of all-in-one software platforms (Orion, Morningstar Office, Advyzon, Envestnet, AdvisorEngine, etc.) to relatively new categories like client communication power tools (Pulse360 and Knudge), automated workflow creation/management tools like Hubly and Benjamin, and customized billing for advisors who are billing flat quarterly fees or hourly (AdvicePay is the runaway market share leader). It’s a snapshot of the state of the fintech universe, a buyer’s guide for the profession, and a chance to see what new fintech opportunities might be worth considering.
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.
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The 2023 T3/Inside Information Software Survey is now out and available, for free, to all interested parties in the profession (click here for your free copy) . As it does every year, the survey writeup includes market share statistics, market share rankings and user ratings in 36 different software categories. It’s the best guide to the 300+ fintech solutions in the marketplace, and a good buyer’s guide for advisory firms that are looking for additions or enhancements to their tech stack.
