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Please click the image above to view the table of contents for Tiburon's Online Tools & Advice Research Report

New Tiburon Research Report - Online Tools & Advice: The Intersection of Technology & Self-Service

Tiburon Strategic Advisors, a market research & strategy consulting firm serving a wide variety of financial institutions and investment managers, is pleased to announce the release of its newly updated research report on Online Tools & Advice. This research release summarizes some of the report's key findings.

The purpose of this report is to provide readers with an initial overview of the online tools & advice market, including web-based technologies serving either consumers and/or financial advisors. This market is dynamic, as consumer oriented and financial advisor oriented products are being merged to serve both markets, and traditional software products are being moved to the web. This is Tiburon's first draft of this report.

This is Tiburon's first draft of this report; it was recently unbundled from Tiburon's equally thorough online brokerage industry report. And Tiburon recently updated the profiles of some core Tiburon clients, including Advisor Software, Morningstar, & My Vest Corporation

Key Findings
This report has a long list of interesting facts to share:

Market History

  • Financial services technology market developments can be organized into four successive periods of evolution, beginning with the explosion in the use of personal computers & the proliferation of desktop software use by consumers
  • The first personal computer was launched in 1977
  • The introduction of personal computers took place from 1977-1983
  • Quicken’s original business model was born in 1980 of Scott Cook’s experience with Proctor & Gamble, which only makes products driven by consumer need
  • Intuit launches Quicken in 1984, into a market populated with 46 other very complicated personal finance softwares
  • Charles Schwab & Company launched the first desktop trading software, Equalizer in 1985
  • Notebook computers were introduced in 1986
  • Quicken becomes the #1 selling software in the US in 1988
  • The world wide web was created in 1991
  • Between 1995 and 2000, the internet penetration in the United States tripled from less than 15% to almost half of households
  • The investing community caught on to the computer push early; by 2000, over 90% of affluent consumers had personal computers

Market Growth

  • There are 239 million personal computers in use, up nearly 8,000% since 1980 and 30% since 2000
  • There are 1.0 billion personal computers in use worldwide, up more than 20,000% since 1980 and 80% since 2000
  • 70 million personal computers are sold each year, up 60% since 2002, but off the 92 million peak in 2003
  • There are 220 million internet connections, up more than 75% since 2000
  • The share of us population with internet connectivity has steadily grown from 44% in 2000 to 73% in 2008
  • Broadband connections now account for 90% of all internet connections, up from 30% since 2007
  • There are 161 online tools & advice firms, up 20% since 2003
  • The number of online tools & advice clients has steadily grown to 15 million, up 25% since 2003

Market Segmentation

  • In financial advisor technology, home run opportunities lie in products that have a big market, and little competition
  • Many full-service brokers recognize the importance of technology, and oftentimes complain of their firms’ platforms not fully meeting their needs

Sales Enabling Technology

  • Morningstar’s Ibbotson Associates leads all standalone sales enabling technologies in terms of users
  • The most often used sales enabling technology are presentations that come packaged with financial planning software; specialized products such as Morningstar’s Ibbotson & Associates’ presentations are much less utilized according to surveys

Financial Planning Software

  • The number of financial planning software products on the market is just shy of 60, an astronomical figure
  • NaviPlan leads the leaders of financial planning software in terms of users, likely because of its early launch and international target market
  • Financial planning software still has a long way to go in advisor usage; at leading broker/dealers, usage is still well below half of advisors, and when counting only those that use it on a majority of clients, the number falls off dramatically
  • The financial planning software leaders tend to target towards the institutional markets, but across the industry there are copious amounts of players targeting every niche, for advisors and institutions alike
  • Morningstar is the most popular financial planning software across all revenue ranges

Asset Allocation Software

  • Most asset allocation programs are built upon the ideas of Harry Markowitz, the father of Modern Portfolio Theory
  • The crux of the importance of asset allocation software is that the vast majority of the returns on investment portfolios are determined by asset allocation decisions
  • The result of applying asset allocation logic is making a portfolio choice on the efficient frontier
  • Only one-third of mutual fund wrap account providers mandate that their advisors use one of their asset allocation models
  • The number of standalone asset allocation software products on the market is relatively low, at eighteen; many of these products such as Ibbotson are bundled with other software applications
  • Morningstar is the leading asset allocation software product used by independent reps

Data & Research Services

  • One source estimated the news, data, and communications industry to be worth $6.8 billion
  • Morningstar is the dominant data & research service used by independent reps
  • There are few widely used data & research services; Morningstar is dominant amongst advisors
  • Morningstar is by far the most popular data & research service utilized by tax professionals
  • Screening is the dominant way that program sponsors find new separate account managers

Data Download Software

  • Data download software users are dominated by Charles Schwab & Company, with about half of all fee-based financial advisors using its software
  • The Charles Schwab Corporation also leads in data download software assets, by far with more than $300 billion
  • The Charles Schwab Corporation leads all major custodians by assets by far, with nearly two-thirds of the pie

Trade Order Management Systems

  • There are three methodologies for trading within a portfolio management software system, including manual entry of individual trades, trading modules, and custodian trading capabilities
  • Account aggregation is becoming more important in the investments business and may ultimately be integrated into portfolio management software
  • The number of portfolio management software products on the market is relatively high, with 35 total
  • Advent has 4,000 firms using Its AXYS Portfolio Management Software, which leads the industry for fee-based financial advisors
  • Portfolio management software sales are led by Advent, dbCAMS+, & Schwab
  • Over three-quarters of fee-based financial advisors prefer an ASP model where they maintain internal staff to run daily operations
  • A third of fee-based financial advisors believe more than one-fifth of advisors will move to an asp model within five years

Contact Management Software

  • The number of contact management software products on the market is surprisingly relatively low
  • There is a glaring lack of dependence on advisor specific contact management software; the leading two products built by advisors for advisors combine for only 2,000 users
  • The most popular delivery method of contact management software is still software, but ASP models have gained some footing
  • ACT! And Microsoft Outlook have strong usage levels for contact management across all types of financial advisors

Growing Personal Computer, Internet, & Broadband Usage

  • The number of personal computers in circulation will likely reach 570 million by 2013, up over 100% since 2007
  • 80 to 100 million personal computers will be sold each year from 2008 to 2013, up 5% per year
  • The number of internet connections should rise to 264 million by 2013, up 25% since 2007
  • The share of US population with internet connectivity will reach 83% by 2013, up from 70% in 2007
  • The number of broadband connections should rise to 251 million by 2013, up 50% since 2007

Rising Online Financial Services Activity & Parallel Need for in Person Advice

  • The number of online tools & advice firms will steadily grow to 182 by 2013, up 15% since 2007
  • The majority of financial services transactions will likely move to the web over the coming years, including brokerage, banking & mortgages, and insurance
  • Future movement in the investment market will continue to swell the ranks of the validators segment

To better understand the developments for Online Tools & Advice, executives can purchase Tiburon's Online Tools & Advice: The Intersection of Technology & Self-Service research report where the key findings highlighted above are covered in greater detail. Please contact Sarah Sage at SSage@TiburonAdvisors.Com or 415-789-2540.

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