By Joel Bruckenstein, CFP
Disclosure: I originated the Financial Planning Technology Survey over a decade ago. I ceased writing for Financial Planning some time ago, in a large part because of editorial differences over the survey. I have since published a competing survey with Bob Veres. Some will conclude that this article is self-serving, but I believe that providing accurate data to the community is important, and the data cited in the article entitled “Advisors Losing Faith in Planning Software” is a farce, and a disservice to the profession. I will leave it to you to draw your own conclusions.
After a number of years of frustration with the annual survey published by Financial Planning Magazine, I decided to finally speak out, primarily because newer entrants into the profession, or interested third parties might read what they believe to be an accurate assessment of what is going on in the profession and act upon the inaccurate data. As someone who spends virtually all of their time immersed in technology for advisors, I feel quite confident in saying that the data contained in the above referenced article is useless at best, and quite possibly harmful. The headline is particularly egregious; here is why:
Over the last several years there has been a renewed interest in financial planning and financial wellness. This is a positive for the industry and for the clients we serve. Finally, more and more advisors are focusing their meetings with clients not on quarterly market performance but instead on helping clients achieve their life goals. If this article, based upon misleading data causes anyone to question their commitment to planning software and to financial planning, that would be a real shame. I’ve already seen a number of cases where the headline has appeared on social media. How many folks just read the headline and are left with a false impression? I suspect too many.
I want to be very clear that my criticisms are not targeting the author of this article. Writers do not generate the headlines. They also have no say in the scope of the survey. They must work with the hand they are dealt.
I was prompted to speak out after Bob Veres, in his weekly media reviews, had the courage to write the following:
“Advisors Losing Faith in Planning Software”
by Ryan Neal
Financial Planning, June 2020
The magazine’s annual tech survey offers a startling headline, suggesting that 20% of advisory firms don’t use financial planning software today, up from 4% last year. Is it really possible that 16% of advisory firms have suddenly, in the space of one year, dropped their software licenses?
Obviously not. This is the result of the magazine’s survey sampling only a small number of advisory firms, thus creating a high tracking error. You can see vividly the high tracking error when you see a graph showing that only 7% of advisory firms use MoneyGuidePro, and 12% use eMoney—when the actual figures from the T3/Inside Information survey are (counting all iterations of each software) 28% and 22% respectively. A footnote tells us that the survey this year consisted of 225 financial advisors, down from 350 last year. That is simply not enough to get meaningful numbers.
And yet the magazine dives into explanations of this rather strange artifact in their numbers, as if the editors really believe that more than a sixth of all advisory firms have decided, over the last 12 months, to stop offering financial planning to their clients. The explanation doesn’t, frankly, make a lot of sense: the author says that the existing planning tools are too slow to update to new tax initiatives, that advisors are watching their budgets, and advisors are not onboarding new clients (and therefore not doing the initial planning work). Nonsense!
A second article looks at “tools with the biggest jump in adoption,” (https://www.financial-planning.com/list/financial-planning-2020-tech-survey-results-chatbots-robo-advisors-and-more), telling us that the use of chatbots has risen (remember, this is in one year’s time) from 4% to 44% in a single year, while use of a “robo advisor” has jumped from 11% to 60%. More nonsense.
I have argued for several years that editors of Financial Planning Magazine instruct writers to create copy based on inadequate data. They have heard this directly from me in the past, and they have heard it from others, yet they seem oblivious to the facts. Part of the issue is too small a sample size. 225 responses are just too small for an undertaking of this nature. The mix of respondents is also questionable. 20% of respondents were bank or credit union employees. 10% were insurance folks. 15% were “other”. It is quite possible that roughly half the paltry number of respondents were not even primarily engaged in the financial advisory business, so it is not surprising that they do not use financial planning software.
As Bob points out, do you really believe that 16% of advisory firms have dropped their financial planning licenses in the past year. Our latest survey based upon approximately 25 times the number of respondents to this survey showed a 0.5% increase in usage over last year. Which sounds more believable to you?
Another case in point: Last year’s Financial Planning survey showed that MoneyGuidePro had a 65% market share. This year, it is down to 7%. If true, I am sure it would have prompted some personnel changes at MoneyGuidePro. One would think that shareholders of Envestnet, which purchased MoneyGuide would not be happy with management if usage declined drastically; but of course it did not. According to Kevin Hughes, Chief Growth Officer at Envestnet/MoneyGuid, plan PDF generation, a measure of final plan presentations to clients increased 13% in Q1 of 2020 vs 2019. Client portal usage, a measure of client engagement among existing clients increased 44% in Q1 of 2020 vs. the same period in 2019. While Envestnet/MoneyGuide did not provide exact sales figures, Hughes says “We’ve seen a good increase in sales across all product lines vs. the same period last year”.
The premise that advisors are losing faith in financial planning software flies in the face of common sense. Major independent broker/dealers are rolling out initiatives that encourage their advisors to do more planning. Over the last several years, Fidelity has purchased eMoney, Envestnet has purchased FinanceLogix and MoneyGuidePro, Orion has purchased Advisor and Goldman Sachs purchased United Capital, which developed FinLife planning software. Morningstar has invested heavily recently in financial planning tools. These are some of the smartest and most successful firms in the industry. Would this investment be taking place if financial planning software usage was dropping dramatically? I think not!
I take no pleasure in calling out an industry publication, particularly one that I had the privilege of writing for in the past. It is particularly unfortunate that I like and respect the author of this piece, who I am sure was just doing the best, at a company he just joined, using the data he was presented with.
Poor data and a poor headline obscure the fact that Ryan raises a valid issue: the nature of financial planning is changing and the software, in some cases, is adapting to those changes. Planning years ago was a point in time; you created a comprehensive plan at the outset and monitored it periodically. Now, increasingly, an engagement begins with a client that has a specific issue they are motivated to address, for example budgeting or paying down debt. As progress is made towards the goal, other goals are addressed. The approach is to build a financial plan one step at a time. MoneyGuide Blocks is just one example of a software product that supports this approach.
The financial planning software firms mentioned in this article understand the data cited by Financial Planning is faulty, but they are hesitant to say so because they fear it will negatively impact their relationship with the media. Contrary to what some may think there is nothing to be gained by anyone, including me, for speaking out, but here is the problem: This needs to be called out. No survey is perfect, but this is blatant. This is wrong. This is irresponsible. This needs to stop. Based upon the data I cited above, it does not take a financial planning technology expert to know that this data is flawed. The editors of the magazine clearly knew this, but they approved this headline. That is a problem.