Financial planning software providers are proving irresistible to traditional investment firms, who are now buying them at a regular clip to help shore up the digital side of their business.

However, the flurry of deals could be a source of concern among advisors using these digital platforms and software, as they are left unsure of what changes will come as a result of a large firm swallowing up a provider.

John Hancock, parent of independent broker-dealer Signator Investors, joined the growing list of tech firm buyers on Tuesday, picking up San Francisco-based Guide Financial, which counted Esther Stearns, former head of Nestwise -- a now-shuttered LPL venture aimed at middle-class clients -- among its advisors.

This month, financial advisor platform and service provider Envestnet spent an estimated $32 million on financial technology companies Finance Logix and Upside. That proceeded Fidelity scooping up eMoney Advisor and Northwestern Mutual landing LearnVest earlier this year.

Meanwhile, Schwab and Vanguard have been ramping up their own robo advisory platforms, in both cases building them in-house.

John Hancock's acquisition of Guide (for an undisclosed sum) suggests a pattern of bigger companies on the asset management and insurance sides acquiring smaller tech companies, says Joel Bruckenstein, a Financial Planning columnist and founder of the Technology Tools for Today (T3) Conferences.

"Some of these new technologies are different from what the big firms are traditionally used to doing," Bruckenstein says. "They are not sure if they have the in-house talent frankly, so they’d have to go out and hire it, and building in-house takes longer than an acquisition, so speed to market is another factor."


Sheryl Garrett, founder of the Garrett Planning Network, congratulated Guide on its acquisition. "I definitely think this does a lot of great things for them," she says. "It gives them the capital and the human resources to develop and grow more."

Just over a year ago, Guide and Garrett's advisor network struck an agreement partly to provide feedback on its web-based platform and tools. "When we rolled out the Guide Financial relationship, I don’t know if there was a whole lot of traction," Garrett says, estimating that 10 advisors from her network had adopted its tools.

Stearns, who says she will not have a role with John Hancock as a result of the acquisition, says Guide is still currently testing its tools with a small number of advisors. "There continue to be many [Garrett Planning Network] advisors that continue to happily use Guide," she says.

"I am excited about the future for Guide and appreciate the time that I worked with the two very talented leaders [Guide Financial CEO Uri Pomerantz and Scott Burns, president and co-founder]," adds Stearns. 

While a good move for Guide, Garrett says a concern raised by the deal is how advisors who use the tool would now need to undertake additional due diligence and disclosure efforts.

"When we have to contact clients because of a system change, it's not something we really love to do," she says. "We don’t like our systems to change without our decision to do so."

Another concern, Garrett says, is the perception among advisors as to how these acquisitions will affect the software tools and their service pricing in particular.

"There has been so much conversation about the acquisition of eMoney by Fidelity," she says. "It sounds like it's going to work just the same as before -- we'll wait and see. Learnvest is going to be something different, that's going to happen. There are some similarities here. A foreign entity other than the company you grew accustomed to now owns and can potentially influence the product provider."

Some of those concerns are not unfounded, Bruckenstein says.

"If I’m an advisor, then I would have some concerns about a culture clash and whether Guide can retain its culture of innovation under the umbrella of a larger company," Bruckenstein says. "Will management take a hands-off approach or try to impose their own will and frustrate innovation? Sometimes acquisitions like this work out and sometimes they don’t."

Burns deferred comment to John Hancock. The firm had no comment about its acquisition beyond its statement, said spokeswoman Melissa Berczuk.


The underlying technology for Guide could be used by John Hancock in a number of ways, says Larry Petrone, director of product consulting and research at kasina.

"Its software analytics can help advisors to analyze clients’ cash flows, how much they should be saving based on retirement goals and other objectives, and it incorporates behavioral analytics as well," Petrone says.

"It’s a recent trend and a long-tail phenomenon that we’ll see automated investment help to both advisors and retail clients, whether it’s a robo advisor or analytics platform that helps both advisors and investors to make better financial decisions. For John Hancock could see this geared toward retirement planning, digital tools for saving and investing for retirement.

"They have an institutional business as well, and very few [competitors’ platforms] offer behavioral analytics baked into the underlying software," Petrone adds. "Certain demographics may prefer not to utilize an advisor, so something like Guide may give advisors more options in terms of what types of services they offer to clients. Over time more advisors’ clients will take advantage of software offered through platforms like Schwab, Fidelity and TD Ameritrade.

"Another potential angle of this acquisition is the whole defined contribution side of the market -- DCIO platforms that serve as plan sponsor. John Hancock could take this whole suite of technology and services and offer that to DC plan participants."

The deals done by Envestnet, Fidelity and Northwestern in their tech acquisitions are estimated in total to be worth in the hundreds of millions (Fidelity acquired eMoney for a reported $250 million, while Northwestern's purchase price of Learnvest was more than its $250 million valuation, according to Bloomberg.)

In a statement, John Hancock did not disclose terms of the deal but said Guide will continue as an independent group in San Francisco and report to Tim Ramza, John Hancock's senior vice president of wealth business development and strategy.

The investment firm, which is owned by Canadian financial giant Manulife Financial, called the acquisition "part of [a] companywide long-term innovation plan."

Bruckenstein says that the figures quoted for other financial software providers were a good guide for understanding the motivation behind such acquisitions.

"As a manager, this is a business you want to be in, so you can either pay up or build your own. What’s the cost of waiting and what’s the cost of building it from scratch? That’s the impetus for acquisitions like this, they need to be in it sooner rather than later. There are a limited number of attractive acquisition targets, and they think time is of the essence." -- With reporting from Dan Butcher and Ann Marsh.

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