Raddon Report

You are here

PFM: Finding the Value in the Tool That Provides Value

June 21, 2018
Share this post: 

When considering innovations in financial technology and “big data,” one often thinks of personal financial management tools (PFM).  You might have heard of names like Mint, Quicken, and WalletHub; essentially, these are financial dashboards.  They are meant to provide the consumer functionality to seamlessly manage and monitor personal finances, regardless where their accounts are located.  Some PFMs offer tools for small businesses as well.  Some PFMs are free and some are fee-based, but regardless of their profit model, each seeks to track and categorize transactions easily, add accounts across different institutions, and view everything from a one-stop-shop mobile app or online portal.  They can also generate different types of charts and illustrations, spending pattern trend lines, different budget models, and net worth graphics. 

By using this sort of tool, consumers can be closer to their cash-flow and the financial goals they want to accomplish.  I’m not sure about you, but so far, it sounds like it could be a significant advantage for any consumer to use a tool of this nature, regardless of age, personal income, or debt level.   

Reality strikes though.  Adoption of PFMs has been tepid at best, and consumers have expressed complications, hiccups and overall dissatisfaction.  In recent research, Raddon found over 8 out of 10 consumers said they have never used a PFM before (83%), while only 12% are current users. 

Of the roughly 1 in 10 that currently use a PFM, the front runner of choice is Quicken, with over half saying they use it.  Mint is a distant second, followed by an in-house financial institution-supported software.

Simpler functions, such as tracking expenditures, performing banking functions, and getting a consolidated view of accounts, were among the top activities performed with a PFM.  More advanced activities, such as investing, were less commonly performed (18%).

Despite the dismal amount of current usage, the more interesting and perhaps actionable insights surround why over a quarter of those consumers who have ever used a PFM have quit (29% of past and present users).  The biggest reason for quitting was due to finding little value in sticking with the software program, followed closely by the time commitment required to keep up with it.  Privacy and security concerns were also significant issues.  Interestingly, only 3% of quitters said they stopped using a PFM because their financial institution stopped allowing their information to be automatically updated to the PFM.

Overall, it looks as though PFM tools will remain a niche tool until someone can develop a feature that will overcome the time consuming nature of the program.

Those institutions who have invested in a PFM tool can still have hope.  To increase interest and usage, PFM providers should consider adding more potential in the functionality and user advantages, as well as streamlining processes and ease of use for the consumer.  Financial institutions that provide PFM software have an even greater advantage in attracting more users.  Recently reported in Raddon’s recent Financial Literacy Study, Financial Literacy: Prosperity Begins with Knowledge, we know over half of consumers (55%) look towards their primary financial institution as a trusted source of education and financial literacy.  Providing a financial institution sponsored PFM with educational insights, literacy opportunities, and a clear path on working towards their financial goals, could encourage more usage among their customer base by providing additional value and user significance.