While new financial planning and trading technologies are always top of mind for financial advisors, tools that help them tackle the complex tax needs of their clients are quickly gaining popularity.

Wealth managers’ adoption of tax planning tools surged to the second most adopted software category over the past year, according to a new survey produced by the consultancy T3 and president of Accredited Investors Bob Veres. In fact, more than four in 10 advisors (43.2%) now use tax planning software, up from just about three in 10 advisors (29.7%) in 2022

Tax planning can become a key differentiator for financial professionals, and also keep customers’ tax demands in-house rather than at a third-party firm. As advisors turn to tax planning to help address client needs, the tax planning software segment is expected to grow as new tools hit the marketplace.

“The jump in tax planning is by now a familiar story,” according to the 2023 Advisor Software Survey from T3:Technology Tools for Today and Inside Information survey released Tuesday at the 2024 T3 conference in Las Vegas.

The 81-page report queried more than 2,917 firms between December 2022 to March 2023, the majority of which had less than $1 million in assets under management.

The explosive growth of category leader Holistiplan was cited as another major reason for the increased adoption. The College Junction, Texas-based company has the most market penetration of any tax planning software service available to advisors.

"Holistipaln jumped into this category and owned it from day one," the report said.

Through an algorithm, the technology uses character recognition to read over tax returns and generate reports that could uncover tax opportunities, according to the company’s website. Advisors can then run various scenarios to determine future outcomes. Since launching in July 2019, Holistiplan has added over 16,000 users, according to the company.

Holistiplan’s 32% market share dwarfs its closest competitors; FP Alpha with 3.94% and Intuit ProConnect/ProSeries with 2.61% and Drake Tax Planner with 2.24%. However, there are other notable options, many that received stellar reviews in the T3 research.

"FP Alpha offer a much broader feature set, plus similar OCR data entry and automated suggested for advice to clients," the report said. "And we should not overlook Drake Tax Planner's 8.18 average user satisfaction score, which stands out, albeit in Holistiplan's shadow."

Holistiplan received a satisfaction rating of 9.04, one of the best in the annual survey.

 

Through an algorithm, the technology uses character recognition to read over tax returns and generate reports that could uncover tax opportunities, according to the company’s website. Advisors can then run various scenarios to determine future outcomes. Since launching in July 2019, Holistiplan has added over 16,000 users, according to the company.

Holistiplan’s 30.67% market share dwarfs its closest competitors: Intuit ProConnect/ProSeries with 3.35%, FP Alpha with 2.90% and Drake Tax Planner with 2.24%. However, there are other notable options, many that received stellar reviews in the T3 research.

“FP Alpha continues its climb up the market share ladder, nearly double where it was last year,” the report said. “And we should not overlook Drake Tax Planner’s 8.18 average user satisfaction score, which stands out, albeit in Holistiplan’s shadow.”

Holistiplan received a satisfaction rating of 9.04, one of the best in the annual survey.