Emerging Information Systems Inc. (EISI), which makes NaviPlan and Profiles financial planning software, is being acquired by Zywave, an insurance industry technology provider. The transaction, which is expected to close within 30 days, illustrates how financial planning remains tied to sales of products. Both companies are privately held and no price for the acquisition was announced.
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Based in Winnipeg, Canada, EISI says its planning apps are used by 250,000 advisors. Zywave, which is based in Milwaukee, Wisconsin, was founded in 1995 and provides web-based business management applications to insurance brokerages, including CRM, business analytics and technology-enabled content tools.
EISI was founded in 1990 by Mark Evans, then a newly-minted 25-year-old computer science Ph.D. Evans was an associate professor at the University of Manitoba in 1988 when one of his graduate students, who working part time for a financial planning firm in Winnipeg, asked him for help in differentiating the planning firm. After a six-month research project about planning software, Evans formed EISI.
Until 1996, EISI had five part-time employees and five users, all working at the Winnipeg planning firm. Then Evans got a break: He pitched the creation of an American version of his software to LPL, Allmerica, and Chase, and they bought it. By 2001, NaviPlan had grown to about 5,000 users.
While the giant brokerages and insurers allowed their reps to purchase NaviPlan, sales were done one at a time, and RIAs comprised more than half of the user base. Evans saw the potential for creating a Web-based system that would allow B/Ds to control their reps better. NaviPlan was the first to market with a Web-based, enterprise-wide solution.
Unlike other Web-based planning software applications, this one would not run on a Web server owned by EISI. The company instead created an application that would run on a server owned by the brokerage or insurer, giving it greater control than if EISI ran the application itself.
By 2002, Morgan Stanley, AXA, Prudential, Bank One, and other giants had lined up for enterprise deals where they deployed a customized Web-based version of NaviPlan on their own servers and integrated it into their back-office systems and, more importantly, made it the only planning application used by their sales forces.
In 2006, EISI acquired Financial Profiles, its biggest competitor. EISI says it customers include 11 of the top 25 banks in North America, 17 of the top 25 brokers, three of the top five Canadian insurance companies and seven of the 10 largest U.S. life insurance companies. EISI has nearly 300 employees, while Zywave’s LinkedIn profile indicates it has fewer than 200 employees.
EISI has about three times the number of users of its three largest competitors combined, according to a September 2010 report by Aite Group. So it has great influence over how financial planning is practiced and will spread.
The fact that it is being acquired by a company that makes technology solutions for insurance brokers indicates that the financial planning process delivered to the masses is likely to remain tied to product sales.
What do you think? Is the sale of EISI good for financial planning?