One of the oldest financial planning software vendors has new ownership.
Advicent, the owner of NaviPlan, has been acquired by InvestCloud, a company that builds a variety of cloud-based applications for financial advisors. Advicent provides planning technology to more than 140,000 financial professionals across 3,000 firms, according to a statement.
Terms of the deal were not disclosed. Sources with direct knowledge of the company, who asked for anonymity, say Advicent’s owners, Vista Equity Partners, have been looking for years for a buyer that would assume the planning fintech’s debt. After having successes with other companies in its portfolio, the time was right for Vista to absorb a loss on Advicent, sources say.
The company owed as much as $80 million to debt holders, according to one source. Vista Equity Partners and Advicent did not respond to requests for comment.
“We are not disclosing any financial terms relating to the acquisition,” said InvestCloud CMO Mark Trousdale in an email.
In February, private equity firm Motive Partners recapitalized InvestCloud and combined it with two other fintech companies in its portfolio — Tegra118 and Finantix. The combined company is valued at more than $2 billion, according to the company. Motive Partners did not respond to request for comment.
By combining Advicent’s cash flow, trust and tax planning software with InvestCloud’s digital client and advisor platforms, the company will have a comprehensive technology suite for advisors, says InvestCloud co-founder and CEO John Wise. Advicent’s capabilities will be available immediately to InvestCloud’s clients via its digital app store.
“Advicent is a highly differentiated planning engine covering the simple goal-based assessments that most of the known financial planning engines cover; however, and importantly, Advicent also has advanced retirement income scenarios and estate/trust planning focusing on the very difficult planning aspects of tax and cash flow,” Wise said in a statement. “The Advicent team has created a great asset which, when combined with InvestCloud’s expertise in digital design, gaming theory, decision theory and data science, will accelerate the Advisor experience and drive better adoption and better outcomes.”
Despite being one of the first digital financial planning software packages on the market, NaviPlan has struggled to grow its base of financial advisors. Technology Tools for Today’s 2021 survey of advisor technology found that 2.36% of advisors use NaviPlan, which was the same as T3’s 2019 survey. The company came in at 1.76% in the 2020 survey.
By comparison, eMoney, which sold to Fidelity in 2015 for $250 million, has 29.71% of the market, while MoneyGuide, which Envestnet acquired in 2019 for $500 million, is used by 36.82% of the market, according to the survey.
“It has been a very competitive market over the last several years,” says T3 founder Joel Bruckenstein. “At one time, they were the number-one vendor of financial planning software in America, and they did have a bullseye painted on them.”
The challenge for NaviPlan is that it tried to emulate new competition from eMoney and MoneyGuide rather than go deeper on its complex, cash-flow-based planning roots, says XY Planning Network co-founder and Financial Planning contributing writer Michael Kitces on Twitter.
There’s still a strong core in what NaviPlan offers. But to me the company lost its vision on what made it unique and differentiated, and that took them down a very bad road.
— MichaelKitces (@MichaelKitces) May 5, 2021
“Naviplan provided deeper planning tools at a time when others were going shallower. So Naviplan copied them and tried to go shallower. Now planning is going deeper and cash-flow-centric tools like RightCapital are leapfrogging NaviPlan in what was originally its core space!” Kitces tweeted. “There’s still a strong core in what NaviPlan offers. But to me the company lost its vision on what made it unique and differentiated, and that took them down a very bad road.”
Though Tegra118, the former investment services business at Fiserv before it was acquired in 2019 by Motive Partners, has some financial planning capabilities, it likely would have taken too much time and additional resources to make it competitive with other options on the market, Bruckenstein says.
“It’s no secret that over the last several years, there has been a lot more interest across the board in financial wellness and planning,” he adds. “There’s not a lot of independent companies left that [InvestCloud] could have bought.”
Advicent is focused on the most complex components of financial planning and has a “massive” opportunity to pair with InvestCloud’s expertise in intuitive user design, says Advicent CEO Angela Pecoraro in a statement.
“As digital plays a more and more critical role in the advisor experience, InvestCloud’s platform will enable our clients to reduce complexities, increase flexibility and be a game-changing power for client-to-advisor collaboration by applying behavioral science to improve client outcomes,” she says.
InvestCloud’s latest acquisition proves the company has plans to compete with some of the largest advisor fintech platforms on the market, Bruckenstein says. The name is popping up more frequently among executives at large wealth management firms, but the jury is still out on if InvestCloud has what it takes to win customers.
“It’s great to buy the pieces, but you really need to have them deeply integrated and figure out what the go-to market strategy is,” he says. “I think that’s the question people still have on their minds.”