What Envestnet’s deal for MoneyGuide means for advisors and competitors

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Envestnet’s $500 million acquisition of MoneyGuide creator PIEtech has advisors and industry executives wondering how the deal might affect digital tools, and in turn, the bottom lines of their firms.

“As an early adopter, I’m looking for new capabilities we can possibly gain from the deal,” says Doug Boneparth, president of the New York-based Bone Fide Wealth, who uses MoneyGuidePro through Commonwealth Financial Network.

The deal, which closes sometime in mid-2019, will combine the largest financial planning tool provider by market share with the leading TAMP by client assets and has the potential to mark the birth of a new giant in the advisor tech marketplace, says Joel Bruckenstein, co-creator of the Technology Tools for Today conference series.

“It creates the potential to do great things,” Bruckenstein says. “What happened with the [Schwab] PortfolioCenter deal, this now really vaults Envestnet to the top of the rankings.”

Envestnet will own the popular MoneyGuide software suite, including MoneyGuideOne, MoneyGuidePro and MoneyGuideElite. The firm will have access to more than 150 wealth management data and technology providers and tens of thousands of financial advisors already using the tools, according Envestnet. Nearly two million financial plans have been created using MoneyGuide solutions in the past 12 months, according to the company.

Keeping with the marketing of past acquisitions like Yodlee and Tamarac, the new business unit will be called Envestnet MoneyGuide.

“Our industry is undergoing an evolution from a product sales mindset to one that centers on customer financial wellness,” says Anton Honikman, CEO of MyVest. “The key ingredients are customer data and goal-based financial planning, so Envestnet's acquisitions of Yodlee and PIEtech places them firmly at the forefront of this new wave."

For its part, Envestnet believes the acquisition will create a broader set of tools for an advisor to expand beyond traditional wealth management. “That means generating more income and potentially optimizing those relationships over time,” says Bill Crager, CEO of Envestnet Wealth Solutions.

Some of MoneyGuide’s competitors applauded the deal as vindication for financial planning.

“First of all, the transaction provides great validation of the demand for financial planning technology,” says Shuang Chen, co-founder and CEO of RightCapital, in an email. “Second, some financial advisors and organizations prefer to work with an independent technology solution. RightCapital will now become that much more appealing to those customer segments.”

Chen says the firm has received multiple inquiries from advisors interested in leaving MoneyGuide after the acquisition.

Advicent CEO Angela Pecoraro sees a natural progression of M&A deals. “The move is not all that surprising when seen in the context of Envestnet’s acquisition of PortfolioCenter from Schwab, and the Apprise news from T3 [conference]. It’s probably good for those already using Envestnet’s platform.”

Another competitor welcomed the acquisition as a benefit to retail investors. "They are two excellent organizations dedicated to improving financial security for millions of Americans," says Money Tree Software president Mark Snodgrass in an email. "That’s what this industry does, and we wish them well."

However, some advisors worry about the mechanics of such a large deal. While Boneparth hopes the transaction is a success, acquisitions by definition are “friction-inducing endeavors,” he says. “They can pledge less friction and more integration, but you kind of take that with a grain of salt.”

Other MoneyGuide users were more optimistic.

“We’ve seen these go badly before,” says Robert DeHollander of DeHollander & Janse Financial, citing a portfolio construction tool called AllocationMaster, which the firm abandoned after the provider underwent an acquisition. “I’m assuming MoneyGuide, being a huge platform, will have the resources coming in to invest in the technology. Envestnet wouldn’t buy something to mess it up. They’re probably going to enhance the technology and use the economies of scale to potentially do even more.”

DeHollander pays $2,000 a year for two subscriptions to MoneyGuidePro, although his firm, managing roughly $225 million in client assets, gets a discount for purchasing the product through the Commonwealth Financial Network. Even a jump in the subscription price wouldn’t deter DeHollander from using the product.

“Frankly, at this point, if you are an RIA, you’re doing decent revenue,” DeHollander says. “Twenty years ago, I couldn’t have paid anymore for planning tools, but as advisors we’re at a point where we need to have the very best.”

Financial planning tools are used by 82% of all advisors, according to Financial Planning’s 2019 Tech Survey. MoneyGuidePro has the most market share of any product on the market, with 31.3% of advisors using the tool. Envestnet ranked third in portfolio management tools in the survey, with more than 10% of the total market.

Envestnet competitor eMoney did not return multiple requests for comment.

Envestnet has experience integrating new tools and products via M&A deals. In 2015, the firm purchased Finance Logix, a financial planning tool, which has been deeply integrated into the Envestnet platform.

MoneyGuide told advisors the software will remain “platform agnostic,” according to PIEtech co-founder and CEO Bob Curtis in a memo sent to advisors shortly after the announcement and reviewed by Financial Planning.

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“We have been working with Envestnet more closely this last year and have found goals for our industry. We both believe in the importance of financial wellness for all individuals and getting financial planning into the hands of more individuals.”

MoneyGuide will look to expand integrations with other platforms, according to President Tony Leal, who will take over as chief executive of MoneyGuide after the transition. “Integration is everything to us,” Leal says. “[Envestnet] has committed to us that they are going to allow us to continue that and encourage more integration in the future.”

Other technology platforms, like Orion Advisor Services, are hopeful MoneyGuide can continue to foster open relationships with other providers. "MoneyGuidePro has a business built on the success of integrations," says Orion CEO Eric Clarke, who spoke with Leal after the announcement. "We both fully intend to continue to integrate our offerings to the mutual benefit of the advisors we serve."

For Hussain Zaidi, co-founder and CEO of the financial planning software Advizr, the outcome of the deal ultimately depends on execution. “Do they maintain the product vision or will they get caught up in the big machinery?”

If the original mission of the company is allowed to live on, the MoneyGuide software will continue to innovate and evolve, Zaidi says. “That’s why Bob Curtis has had a ton of success, he has great vision. Will that continue on? That’s the question."

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Investment technology M&A Strategic buyers RIAs Financial planning Holistic financial planning Envestnet