Do you remember in 1998, when we got not one, but two movies about asteroids colliding with Earth?
Both "Armageddon" and "Deep Impact" featured computer-generated scenes of space rocks hitting the planet, causing varying degrees of destruction. "Deep Impact" was especially dramatic, with the comet
causing a shockwave that could be felt around the planet (though the movie really only shows New York City).
Thursday's news that
Envestnet is acquiring MoneyGuide reminded me of those movies. Both companies are so large and have such influence over the financial advice industry, especially among registered investment advisers, that the collision of two is going to be felt across the entire industry.
Envestnet counts 96,000 advisers across 3,500 firms as its customer base, including most of the largest banks, brokerages and RIAs. MoneyGuide says it's used by "tens of thousands of financial advisers" to create two million financial plans a year.
According to
survey data from Technology Tools for Today producer Joel Bruckenstein, MoneyGuide controls 26% of the financial planning market. The other big player, Fidelity's eMoney, has a 23% share.
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"The competitive landscape in the retail advisory tech space clearly just got much smaller, and more concentrated," said Rob Foregger, co-founder of fintech firm NextCapital. "The MoneyGuide Pro acquisition will certainly put pressure on the broader financial planning market, especially as Envestnet more tightly integrates MoneyGuide Pro."
The deal could make things even more difficult for smaller companies like Advicent, which has struggled to earn market share in recent years despite having once been one of the biggest names in financial planning. Mr. Bruckenstein put Advicent's share of the market at 2.36%. Advicent did not respond to a request for comment.
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Mr. Bruckenstein's data show a pretty big gap between the top two financial planning technologies and the rest of the market, although numbers may hide the number of white-label partnerships Advicent has with financial institutions.
But it's that race between the top two — MoneyGuide and eMoney — that will be particularly interesting. With connections across channels via Yodlee, Envestnet has access to far more data than eMoney's owner, Fidelity.
"The [Envestnet and MoneyGuide] deal wasn't for cross-selling or better integration — this was 100% a data play,"
tweeted Craig Iskowitz, CEO of consulting firm Ezra Group. "MGP is #1 in market share of financial advisers. [Envestnet] now has access to assets by custodian, by tech provider, positions and tons of customer demographics."
Part of eMoney's strategy recently has been to target the institutional firms, but Envestnet's data could make MoneyGuide a more attractive product. It helps that Envestnet already works with banks, broker-dealers and insurance companies.
Adding to the drama is the fact that eMoney's founder, Edmond Walters, is now
developing an new, extremely sophisticated financial planning tool for ultra-wealthy investors in partnership with Envestnet MoneyGuide. There's also the fact that Fidelity and Envestnet have long been partners: For example, Fidelity's Managed Account Solutions platform
is powered by Envestnet.
Fidelity's official statement on the matter: "We have a long-standing, successful relationship with Envestnet, and that will continue."
Even still, advisers looking for a full-service technology platform based around financial planning will now likely be choosing between Fidelity or Envestnet. Even if Envestnet doesn't have any interest getting into the custody and clearing business, there is more overlap than before.
"On the software side of things, there will be times when they compete against each other for business," Mr. Bruckenstein said.
Things could also become more difficult for the other custodians.
"Some people are very supportive of the open-architecture system and worry about somebody controlling too many of these third-party providers," Mr. Bruckenstein said. "If you're of that mindset, you're going to be concerned about this."
