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Financial Planning > Behavioral Finance

Fidelity’s eMoney Deal Will Help It Compete With Robo-Advisors: Kitces

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It may not be the biggest news to hit Boston in the past 24 hours, but Fidelity’s announcement Monday that it is acquiring eMoney Advisor is turning some heads.

Fidelity Investments’ purchase of eMoney Advisor is part of the Boston-based company’s “larger vision to continue enhancing its digital solutions across its retail, workplace and institutional channels,” it said in a statement.

The wealth-planning software offered by eMoney is used by advisors and clients alike. It features a personal financial management (or PFM) tool that displays a range of financial information on one portal that investors and advisors can access at the same time.

Plus, the tool “can be leveraged in many others ways as well, including offering it to … retail clients, and mining it for a potential treasure trove of big data insights!” explains Michael Kitces, director of research for the Pinnacle Advisory Group, in a Monday post in his Nerd’s Eye View blog. With the planned purchase, the provider of clearing, custody and investment management products and services to RIAs, broker-dealers and other groups “has instantaneously taken a giant step into the world of financial planning tools.”

Moreover, the acquisition “better positions Fidelity advisors to compete with robo-advisors,” says Kitces, who closely tracks tech trends in the financial services industry. The PFM tool will let Fidelity advisors “craft an advisor-client collaborative portal very similar to how [robo-advisor] Personal Capital uses its PFM solution with its clients.”

The appeal and robustness of the personal financial management tool, in fact, is likely the main reason Fidelity opted to acquire eMoney, Kitces states. “Fidelity [may have] purchased a great PFM dashboard for clients with financial planning software thrown in!” he explained.

Kitces says Fidelity could move to make the PFM tool available to advisors on its platform at a discount, “similar to how TD Ameritrade acquired iRebal and made it available on a discounted basis, and now free for the online version, for advisors who custody there.”

Building Blocks

The news that Fidelity is buying eMoney comes on the heels of other tech-related M&A news.

In October, Fidelity Institutional Wealth Services formed a “strategic alliance” with Betterment Institutional. The move, according to executives, reflected the RIA custodian’s deep interest in educating its RIAs about the benefits of using technology to improve the customer- or investor orientation of their practices.

And in December, Fidelity Institutional Wealth Services announced a collaboration with LearnVest, which will provide Fidelity IWS RIA and National Financial broker-dealer advisors with preferred pricing on LearnVest’s subscription-based digital advice platform. In addition, the partnership will allow advisors to give emerging and mass affluent clients access to a “financial wellness” microsite with content provided by LearnVest.

According to Kitces, eMoney gives Fidelity “a PFM solution to offer directly to its retail clients.”

In other words, the acquisition may not be only about helping its institutional-advisor business, “but also about its direct-to-consumer channels,” he says. To compete with other large financial institutions, Fidelity is probably looking at PFM “as a way to expand wallet-share opportunities, especially in its massive retirement plan division.”

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