MoneyGuide, Envestnet’s financial planning software widely used by wealth managers, has begun selling access to the proprietary algorithms that power its own tools. It was a difficult strategic decision, but the best one for the future of the business, an executive said.
“I think everyone is going to be doing this, ultimately,” Tony Leal, the president of MoneyGuide, told RIA Intel.
For eight years, the software company has used application programming interfaces, or APIs, to seamlessly share data from its financial plans with other service providers (today, it integrates with over 200 others). But the financial plans have always needed to exist within MoneyGuide programs before their details are effectively exported to portfolio management, CRM, reporting and other software.
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Now, a new service called MoneyGuideEngine allows wealth managers to access only MoneyGuide’s algorithms that analyze investor information. Wealth managers can then use the algorithms to build new financial planning software and products or power existing in-house offerings. The new service was in development for about a year and launched Monday.
Key MoneyGuide clients had long expressed interest in having more control over their financial planning process, Leal said. As financial planning becomes a core service offering of more wealth managers, the ability to customize the planning experience is now seen as a way to differentiate from competitors. (MoneyGuide customers can already adjust calculations based on their market assumptions.)
Large firms have had the desire and resources to build their own financial planning tools, but they don’t have interest in the expensive creation and upkeep of the supporting calculators that MoneyGuideEngine provides. The model governance — the process of proving the efficacy of the calculators to other software or business partners — is arduous. The continuous updates required due to changes related to government social programs and taxes are another deterrent. And the routine rethinking and necessary redevelopment of the software overall every few years have kept most wealth managers from creating their own.
That work is “somewhat thankless,” Leal said. But it’s difficult, necessary and makes for a commercially viable product, even if it means companies are building their own financial planning software and not using MoneyGuide’s solutions. “You could debate a little bit that some of the value we are providing could be diminished. We had to get past that,” he said.
Historically, Leal and his employees have explained MoneyGuide’s powerful algorithms and advisor-facing tools in one pitch to customers and prospects. “My concern about just selling the APIs is I can’t tell the whole story anymore,” Leal said.
“We kind of came to the decision that, you know what? There is more than one way to tell a story. Then we decided we're much better off providing this functionality and letting other creativity occur.”
Building in-house financial planning software won’t be for all wealth managers. There will still be plenty of traditional customers and MoneyGuideEngine can also serve a new market of startups and other companies interested in offering self-directed financial planning.
On how financial advisors might feel about MoneyGuide powering financial planning services that don’t require their assistance, Leal said advisors shouldn’t worry. Financial plans belong to, and should be created by, the client, he said. Advisors are there to help clients accomplish those plans and MoneyGuide can’t supplant that.
“I’m not looking back,” Leal said. “I know it's the right decision.”
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.