#ItzOnWealthTech Ep 7: Best Practices in Broker-Dealer Technology with Aaron Spradlin & Billy Oliverio from United Planners

“We were able to speed up our development and delivery of solutions to our advisors by not trying to be the center of the universe, which is where a lot of broker-dealers were spending a lot of money.”

— Aaron Spradlin

Aaron Spradlin is the Chief Information Officer at United Planners Financial Services. He received a BS degree with a concentration in Business Management from Golden Gate University. He joined United Planners in 2007, coming with 15 years of broad-based financial services industry experience including compliance and IT. Prior to joining United Planners, Aaron has been a sought after industry consultant as well as being a Director at Charles Schwab and Business Analyst for AIG.

Billy Oliverio is an Executive Vice President and the Chief Marketing Officer at United Planners. He has over 20 years of industry experience working in small, medium and large-sized firms tackling complex projects and initiatives. He has also served time in the regulatory environment as the Chief Investigator of Enforcement for the Arizona Securities Division where he managed all aspects of white-collar crime investigations.  Billy is an honors graduate of Arizona State University.

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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.

Topics Covered in this Episode

  • United Planners’ technology infrastructure [01:10]
  • How United Planners differentiates itself from other broker-dealers [04;59]
  • What makes up the core of United Planners’ infrastructure, and how that connects to their other systems [08:08]
  • What United Planners was able to pull from the “silver bullet” experience, and how that affected the way they thought about integration going forward [15:51]
  • What’s underneath United Planners’ account opening process and how it works [25:57]
  • How the ability of API’s to provide a more robust experience has improved over time [33:47]
  • The biggest challenges they had to overcome while building United Planners’ platform [38:53]
  • Aaron and Billy discuss the most significant lessons they’ve learned through their biggest mistakes made [45:06]
  • Best practices they would share to those starting up a new broker-dealer [52:18]
  • Thoughts on the EnvestnetMoney Guide Pro deal [01:02:22]

Companies & People Mentioned:

If you are interested in more information about some of the topics Aaron, Billy and I discussed, these blog posts would be useful:

wealth management consulting

Complete Episode Transcript:

Craig: Welcome to the Wealth Management Today podcast. I’m really pumped today to have two industry leaders from United Planners on the podcast. The first is Aaron Spradlin, the Chief Information Officer for United Planners.

Aaron: Hello, it’s great to be with you today.

Craig: We also have Billy Oliverio, who is the Chief Marketing Officer for United Planners.

Billy: Good morning!

Craig: Good morning! I’m so glad you guys could make it, I’m really excited for our conversation. What we’re focusing on here is some best practices and how if we were having a round table discussion of Chief Information Officers, Chief Marketing Officers for broker-dealers, what would we be talking about and what would we be sharing? So I’m looking for a lot of good information and a lot of good things we can share with the rest of the industry. We’ve discussed this before and one of the big things I want to talk about was United Planners’ technology infrastructure. I’ve heard a lot about it, we’ve talked about it, and I know you’ve got a lot of great things going on. So can you tell me a little bit about that overview and that structure and how you guys put that together?

Aaron: That’s a great question. We’ve been at this now for about 10 years. When I joined the firm and we first started really building up the infrastructure, one of the first things we asked ourselves was what is the industry going to look like? There are only two major time periods in which United Planners engaged in really rethinking our platform; about ten years ago and then about five years ago with Orion. The first one was really about a client-centric world. At the time we saw everything in the industry being account-centric. I had come from Charles Schwab and my experience there as well as my experience at AIG I just saw such account-centric platforms, and we realized that the future of the industry was going to need to be client-centric. Now what drove that also was the innovation that was happening inside of financial services technology; CRM’s and wealth management platforms back in the day were also very client-centric, they thought of everything from a client perspective. So empowering our advisor’s practice has really required that we rethink that platform, and then beyond that we were thinking about becoming more of an advisor-centric firm.

Billy: I would say yes, advisor-centric, but to your point, where we saw the industry going is really where the industry was. And we just decided that that’s how we should redesign our system, so our advisors can have a better experience in managing their client relationships. So with that said, as Spradlin redesigned our system from account-centric to client-centric, it was really revolutionary. It was so obvious and basic, but it’s such a heavy lift from a technology standpoint, but Aaron took that project on and redeveloped and retooled our system to be a client-centric system, and that became an easier and more intuitive process for our advisors when they work with our Home Office system and how they establish their business. It’s not new account form, new account form, new account form, new account form. It became more of a, I have a client, this is my client. And they establish a client record, and then from there they then start to associate the different types of registrations, and then the different types of accounts that link and connect to those registrations. When we explained this to advisors, they were just like thank god someone actually redesigned the system to better apply to our current world and environment; to be client-centric. So that was really a game changer for us, in our system and improving our advisor’s fintech environment, to give them that kind of flexibility in how our system connected better with all the other fintech systems in our ecosystem.

Craig: Before we go on, can you explain a little bit about how United Planners is different from other broker-dealers? Because you’re majority owned by your advisors. Can explain how that works?

Aaron: Yeah, sure. This is really becoming an even more hot topic in this day and age, with our marketplace. United Planners is very unique in that, yes, we are an independent broker-dealer and registered investment advisor. But the very unique factor that we have in this industry is that our firm is designed as a limited partnership that is privately owned, as well as advisor-owned. So as I better define that and articulate what that means, the firm is majority owned by our advisors that qualify to be limited partners. That component of our firm is comprised of 55%, so 55% of our firm is owned by our advisors that qualify to be limited partners, and the 45% is owned by the general partnership, which is owned by three gentlemen: Tom Oliver, Dave Shondell, and Mike Baker. This was designed so that it does not get taken over or bought and sold in a manner that the advisors were not aware, informed, or had a right to say yes or no. And this plays into one of our taglines, which is we are adamantly not for sale in this day and age, given all of the consolidations going on in the marketplace. So that’s what makes United Planners unique, is the advisor-owned component, and majority owned. And that’s very important because there are other firms that have tried to copy and mimic this limited partnership structure, but they’re nowhere near 55% majority owned by the advisors. That means that at the end of the day when the chips settle, 55% of our profits get shared back to those advisors. It’s a nice additional added benefit to those advisors, this additional compensation factor, in addition to their ability to have a true voting right and say in what happens to the destiny of this firm. So that’s what makes United Planners unique, and that’s very important to know. So thanks for asking.

Craig: You’re welcome. I thought it was interesting to discuss. So going back to the overview of your technology infrastructure, can you go through the specific systems? What makes up the core of your infrastructure, and how is it connected to other systems?

Aaron: Yeah, sure. We have a platform that we refer to as Connect Up, it’s really about three fundamental systems. We are designed very open architecture from the beginning, so we built pieces. Each piece has its own system, each system operates independently and stands alone, but they’re all highly integrated. So when our advisors come into the portal, that portal is made up of three core systems and then integrations with vendors; I’ll go through each one of those systems. The first one we call the UP Portal, that is the fundamental security piece that holds all of the advisor’s logins and where they do their business; we call it an identity provider. It lets us know who our advisors are, what systems they use, and what integrations they want. It is essentially the underlying way in which we’re able to create all of the efficiencies and act in a way that is transparent to our advisors in how we integrate their various platforms, and do so with the “security first” mindset. That technology was core to us then saying, now that we have a way of securely letting our advisors in and knowing what tools they have and giving them SSO or Deep Dive 1.0, which is essentially nothing more than a simple link, what do we want to do next? What’s the next problem we need to solve? The next problem was client-centric, we refer to that internally as SOAR, or Source of Accurate Record. We built a second system, which is essentially a system that was built on for people on the phone. It’s a highly normalized database that we built that houses all of the information that we have in our firm.

Aaron: Then we built the business layer and that was able to then set all the rules on how our systems should work, and then we expose that through user interface. That source of accurate record became critical to the way that United Planners was able to innovate, because 10 years ago that’s what we did; we stood up and said, what is client-centric? It’s really about entities coming together for the purpose of registrations, and those registrations having associated accounts that are held at various firms. Let’s create a structure for that, and then let’s create a structure for how we know and integrate that information, and then set rules around that. So for example, if you have a registration we say okay, we’ll grab this person and grab this person or grab this person and grab this entity, link them together within the system, and then say what is their role? And based on knowing how people are related to each other through registrations, we’re able to identify how people are associated with our firm. Are they really clients to the firm, or are they just associated to a client of the firm? Are they a trustee or are they really somebody that actually is a client owner? Which helps drive a lot of the innovations firms need to do, such as how you do householding or how you solve what information you can or cannot share with them. It is fundamentally defined by the relationship that that person has with you, and that relationship becomes more important when you start talking about the fact that some advisors don’t even open accounts with clients. So a system needs to be able to handle how an advisor handles their practice.

Aaron: Back to client-centric and SOAR, somebody could have a single client agreement with us, that single client agreement could allow them to establish some type of an advice relationship with that person, and that’s as far as that relationship goes. Our system doesn’t need an account to establish that relationship. Historically, most firms had to create accounts or concepts or processes or paperwork to somehow create the concept of something. Well, in our case we’re like no; there’s a piece of paper, there’s a person, there’s a relationship, you are now associated with us. And if they want to establish an account and a registration, that’s great, that’s a separate process. So we’ve put all that together and now that we had the source of accurate record and this identity provider, the next step we took was to say okay, let’s integrate all of that. So what we started to do was look at where our advisors were doing business. At that time it was primarily at Redtail, Albridge, and a couple other firms. We looked at their open API’s and we said we know where they do business, we know how they want their data to flow, so let’s start solving problems for them. So we went ahead and did integrations with Redtail and Albridge a long, long time ago.

Craig: So this sounds like it was more of an iterative approach. Would that be correct, or was it a giant plan that you worked across many years?

Aaron: We use the word organic, but you’re right. It was very organic or responsive to what was the need. A technical term would be minimal viable product, so we were very much looking at the MVP, seeing if it worked, getting a response from the advisors, and then building on top of it. So we were doing a lot of skunk work and going, “Wow this works,” let’s invest in it.

Billy: And I think to your point, Craig, I do think that iterative term does make sense as well and it ties to what you’re saying Aaron, which is that one thing led to another and it was just natural for us to take that next step because it made sense, right? It just made sense, based on what we know is going on in the industry, in our advisor’s office, and what made sense for them to be efficient in their workflows and how their technology should interact with one another.

Craig: So the silver bullet, I know about that. That was an industry trade organization kind of protocol that didn’t take off, but what did you pull from that and how did that help you in your integration processes and the way you thought about integration?

Aaron: What I pulled from it was the idea of what they were trying to do. I knew what they were trying to accomplish, but when I looked at it I didn’t think the data model and where they were at was the biggest struggle they were having with it. And I of course came late to the game, so I wasn’t there for the whole part of it. But I said, yes this is needed, but we need to have a model that’s more IAA or client-centric. So rather than trying to solve everything as far as down to accounts and how accounts are held and some of the problems they were looking at, I was trying to focus more on how are we going to create a data model that I can then share with my vendors, my vendors then start adopting that model, create a Rosetta Stone so that I can convert their client to my client and then convert that client over. And by doing that could I ground-up present people with an alternative or a model in which they could start to say, wow this model works, maybe we should adopt it. So rather than coming top-down and saying, well everybody should adopt this, we’re trying to iteratively build a model that we thought solved the problem that they were trying to solve there, that eventually if it did it well enough maybe could become a standard. So we’ve always shared our data model with everybody, many broker-dealers and firms have called us up and we’ve shared with them the model. Some people take in some of it and some people haven’t, but it is very open sourced.

Billy: And that’s how open we are, whether it be competitors or colleagues in the industry. We are very open to sharing this information with the industry, but it’s very hard for firms to actually act upon that because the very core, fundamental first step someone needs to make is, we’re going to have to redevelop and retool our system to be client-centric versus account centric, or however they’ve designed their system. It’s redeveloping the foundation and chassis so that you can build iteratively on these different components we’re talking about. So it’s all about the advisor-centric, and giving them a tool that works with how their environment works.

Aaron: When we decided, we said we need a data warehouse. So I’m going to build everything on the concept of a data warehouse. I know I need three components: I need storage of information, or object storage, which is what AWS is. We need a source of accurate record, a system for back-office purposes, and we need an identity provider so we know all the different systems. So we basically had four core things that we knew we knew we needed, and then we iteratively built on top of that. So unless you have the right architecture to start with, this is almost impossible to do. The last thing that we did is we said we’re not going to try to build the systems or be the center of the advisor’s universe; we’re going to integrate with the advisor’s universe. So why rebuild a CRM? I’m not going to do that, I’m just going to integrate with their CRM. Why build a planning software? I’m just going to integrate the planning software. We were able to speed our development and our delivery of solutions to our advisors by not trying to be the center of the universe, where a lot of broker-dealers were spending a lot of money at that time (this was 10 years ago) on building a “one size fits all” system. That’s not where we went; we said, there’s too much innovation in fintech. We have to do what we do good, and then we’re going to integrate and we’re going to bring value to the advisor. One of the things we said to ourselves was, what if we weren’t regulatory required? Would they still be with us? And that was that question of, are we going to be meaningful in that relationship with our advisors? Are we going to deliver something that would want them to stay with us no matter what? Because we saw fintech really solving problems for advisors in ways that other platforms were not, and we wanted to make those platforms better. So you can go use Redtail, but Redtail through United Planners is a much more amazing experience than just Redtail alone.

Craig: Is your platform more of a supermarket, where the advisors can pick different tools? Or is it, here’s our package, this is what we recommend you use. If you use something else, you’re not going to get as good of an experience because it’s not integrated.

Billy: One thing to start with is our philosophy on the business model, which is open architecture. So yes, we do permit our advisors to use different financial planning, fintech providers, MoneyGuidePro or eMoney Advisor, CRMs like you’re mentioning, Redtail or Junxure. Some systems integrate better than others just based on our advisor adoption and the demand to integrate deeper. Another example of a nice integration that we’ve done over the years is with Orion Advisor, which stems back going on seven or eight years now. We have about 450 advisors across the country, doing business in all sorts of different ways. When we talk about this open architecture, we’re doing business with all the RIA custodians: TD Ameritrade, Schwab Advisor Services, Fidelity, eTrade Advisor Services, Pershing LLC, which is our clearing firm. We are very open architecture, so we had this business everywhere. And to the spirit of this discussion, we were looking for a fintech partner where it would help us manage our business better for these advisors that had their business all over the marketplace. So with Orion we chose them because they fit the bill best, and we did a lot of integrations with Orion where there were a lot of checks and balances as it related to the regulatory requirement, the data that we needed to go into their platform, as well as our platform. We did a lot of deep integrations with Orion to make the advisor’s experience better and more efficient, as well as regulatorily compliant for our oversight teams.

Billy: We also did a lot of designing in our system to create special Orion tags and features to make sure we had the required information and documents on file, which is a good example of deep integration. Aaron mentioned the paperless office; helping our advisors, really supporting them in becoming completely paperless. We designed our system so that all of those regulatory documents are built in, including correspondence, various logs like trade blotters or securities and checks logs, complaint logs, and advertising. All that was built in and we did it in a uniform fashion so that we don’t have advisors working in different ways and hindering our compliance efforts. Then this spins back to what Aaron mentioned about grabbing docs from Albridge or our custodians, where we do the e-document suite where we repackage that and put it into our system and then share it back to them. So if the advisor chooses to work mostly out of their Redtail ecosystem, all of their electronic documents are there, even though they entered it once and they’re using it many. So that’s how all of this iteratively comes together, in this technology ecosystem playground/sandbox.

Craig: I’m going to go back a second, one thing we didn’t talk about was account opening. What’s your platform for account opening? You talked about paperless, what’s underneath that account opening process and how does that work?

Aaron: We’re open architecture and accounts are typically just open where the advisors do business and we receive the account through our data feeds, so it really depends on how the advisor is doing business. But in today’s world we have done and have been part of a Docusign integration that we did a long time ago. Our philosophy was, we’re not going to go buy an account opening system. Instead, we’re going to invest in the future, which is we think advisors are going to want to open accounts through many client innovation tools that are coming to market, as well as the tools that the custodians were building. And we realized that all that was going to be done digitally, and most of the time it was being done through Docusign, starting with TD Ameritrade. So we said, let’s just integrate highly with the Docusign platform so that no matter what happens, as long as we’re copied on that digital signing we can go ahead and get a copy of the account opening paperwork and our paperwork, and then automatically process that. So that’s something that we did and we invested in so that if they open the paperwork, they do electronically through TDA or any other platforms out there, that we can electronically receive that paperwork, process that paperwork, put it into our AFO system and drop them through Redtail platform for them. So we don’t actually open accounts here except in the case of our Pershing brokerage operations, which can be done through our AFO system, which does have an account opening process. But that’s not the primary way our advisors are interacting with us today.

Billy: For the people out there, AFO is advisor front office, that’s our proprietary advisor workstation, advisor front office that we’re talking about. Opening new accounts or opening accounts, e-signatures, me and Aaron have worked very closely on this over the course of time. And you’re right, this is a very important topic or component. And as Aaron was saying, it gets complicated. So my summary to this is this: we’ve been advocates of supporting electronic signatures for five years, and today we have 10 different esignature workflows. And again going back to what Aaron mentioned, we’re building our system around how the advisors work. When I mention open architecture, that term is very ambiguous, right? What does that mean? If you look at our AUM, 90% of our business is done in the open architecture, which we defined for the spirit of this conversation as a way from Pershing LLC, our clearing firm relationship. And that’s another unique differentiator for United Planners, that most of our assets are done away from our clearing firm, that’s very unusual. But we’ve made that business decision to support that because that’s where the ball is or where the puck is going, if you will. And our advisors, just as an industry trend, are moving more towards fee-based. That’s what you see in the actual DNA of our revenue, 60% of our revenue is RIA, fee-based oriented. If we go back 10 years ago, our revenue was about 25, 30%, fee-based, and now we’re at 60%. So this evolution in our industry we’ve been tracking along from an industry standpoint, which is good. It means we have our eye on the ball, we’re moving along with our peers in the industry and that’s where the advisors are going. But getting back to the esignature discussion, five years we’ve been dealing with esignatures and supporting it, we have 10 different esignature workflows. The big question is why do we have so many esignature workflows? Well to Aaron’s point, our advisors do business with several different service providers: Schwab, TD Ameritrade, our money managers like FTJ FundChoices, CLS, and the list goes on. We have lots of different service providers that have lots of different esignature workflows, because they all want to control that new account opening experience, and everybody’s trying to do it a different way because the technology evolves. We also try to make the experience best by including all documents in the same envelope so that it’s a single signing experience for the advisor and the client. And then as Aaron mentioned, our technology in the backend grabs it all and then gets it into our system, so it’s more efficient for the advisors.

Aaron: This is about looking to the future. People used the word “robo” many years ago, now it’s digital advice, but United Planners saw the digital advice platforms as truly innovative, and we wanted to be very supportive of that trend in the market. That is why that trend really is about who’s engaging the client in the best experience possible, and one of those experiences is the account opening experience. So rather than trying to invest in that ourselves or thinking that we need to be the center of that, we realized that we were going to let that market play out and we want to support whoever was going to win. Schwab spent a lot of money on some really innovative account opening experience, other vendors are out there trying to do it that we’ve partnered with, that have got amazing account opening or client engagement experiences. So our perspective is what are we here for, and how do we bring value to those relationships? And that’s where we invest our dollars, and that’s how we’re able to keep our spend and our purpose very clearly defined and not trying to get out there and compete against the market.

Craig: How long have you guys individually been at United Planners?

Aaron: I came here when they became independent, 11 or 12 years ago? I came when they left Pac Life and became an independent firm, owned by the current partners. The day after that independence, I joined the firm. And then you joined about four years ago, Billy?

Billy: Yes, 2010. So I’ve been here 9 years.

Craig: What have you guys seen, talking about integration and I want to go back to API’s and fitting all of these systems together in your ecosystem, how have you seen the ability of API’s to provide a more robust experience for you? Has that changed since you’ve been here?

Aaron: Today there’s something that’s being termed in industry called the API Economy. 13 years ago, there were a few vendors that had APIs, and I would say the first one I really saw out there in the market doing this was Redtail, really driving an API first platform. Then we saw Albridge move that direction, and that was pretty cool. Then more and more vendors started building their platforms with API’s. I think the main difference today is that we’re seeing companies building API first and API only technologies, meaning that they don’t even have a user interface, they’re just a platform like Twillio. It’s amazing how Twillio runs Uber, and they also run United Planners. So we use a lot of these tools that are out there that are just API only tools, that we can use to power our platform. And that is continuing to expand at an accelerating rate, the amount of things that you can buy. Like Plaid, I started using Plaid on a couple projects about four or five years ago. They were coming out of Silicon Valley and they were awesome. We built on top of their API a long time ago on a couple projects we were testing, and it was crazy to see how all of a sudden it comes out of there and it comes off the top of a traditional wealth management platform. I think that’s going to continue to be a trend. And of course, now we’re seeing the purchases that are starting to happen in our industry and the consolidation, and that’s now the new risk our industry faces.

Billy: I think that stems back to a question you had on some best practices and risks is the challenge that we face in our industry today with these consolidations. A partner that we begin within day one, we try and vet very carefully from, a culture, ownership and direction, and philosophy that they have in our business. But year two, year three, year four, they may get put on the market and bought by a larger shop, and that could impact our relationship with them as it relates to integrations and our direction from where we began in our relationship to where it is in their new norm and their new world, by be owned by somebody else. So that’s a risk that we all have to manage, and hopefully it doesn’t take us two steps back when we put in a lot of time and resources into certain integrations in the way that our advisors do business.

Craig: And that is something that you have to watch out for, right?

Aaron: It is. When we selected vendors, we looked at culture first; that’s one of the reasons we chose Orion. From a culture perspective, we really want to find firms that fit with what we are trying to do and that iterative development, that were willing to co-invest with us and were willing to innovate with us. That’s why when they can get too big or get purchased, all of a sudden that culture changes and we find that that’s where there’s risk to those smaller vendors and the mid-size firms. You’re really relying on somebody else to provide your infrastructure, and that infrastructure is really dependent on a partnership. And sometimes that partnership changes drastically once they’re purchased. We’ve actually seen that happen in recent years, where all of a sudden the culture changes, the people we were working with are gone, and it’s a whole new pricing structure. That’s the newest risk we’re starting to see in the market and that’s how things are changing, is that part of the market today.

Craig: What would you say would be the biggest challenges you overcame with building this platform?

Aaron: In the early days we made the right decision architecturally, which is decision number one. Number two, we built a minimum viable product and that was a really great decision also. But as you know, over time you have to start to decide where you’re going to continue to invest and where you’re not. That was a big challenge, so we had to start deciding where we were going to invest and not invest. And those are very difficult decisions. So we got to a point and we said, let’s go ahead and build something we call the critical initiative process. So about three years ago, we started to engage internally and say, okay we’ve got to make some really important decisions going forward. We’ve got a lot of infrastructure, we’ve got a lot of built-in supply chain. But complexities emerged, instabilities emerged as a challenge, and now you’ve got to reinvest in that infrastructure because it’s been many years. So let’s start building into our DNA how we’re going to make decisions; let’s build a process for making decisions that we can all agree upon. So we started something called the critical initiative process, which then was tied into the business plan. We would meet monthly as a leadership team and talk about, where’s the investment this month? Where’s the investment next month? Where’s the investment next quarter, and how are we tracking against what’s going on in the market? So having a process to do that.. and really, the process was about saying no. The hardest thing is how you build a process to say no, not how you build a process to say yes.

Billy: I was just nodding my head over here saying yes, we have a problem saying no. Naturally, we want to do everything.

Aaron: We were so good at it. Our biggest problem was we were saying yes to everything, but then all of a sudden that becomes it’s own problem. So then you have to decide how you’re going to actually grow healthy once you get to a certain size. And we’ve now become, I think they’ve defined us as the smallest large broker-dealer in the nation. And now our capacity and our size really required a new way of being innovative, by learning to say no. Which was taking the innovation out of the hands of the innovators and putting it into the hands of the business decision makers, and tying it to the finances of the firm. That became a critical next step to how to tie those two things together and still be innovative. And that’s a process of saying no, which is one of the hardest processes of the company to do.

Billy: I think if we take a step back and look at this in a layman’s terms, the approach was just as we’ve preached to our advisors: do what you do best and outsource the rest. That’s a quote that one of my colleagues uses, but it actually makes a lot of sense. Do what you do best and outsource the rest. And so we tell our advisors to do that with their practice so that they could be efficient, scalable, more productive, and more profitable. And we actually practice that too. That’s how we redesigned our system, how we did it in a fashion to partner better with our service providers so that we are actually outsourcing some of those heavy lifts. We’re not trying to build a system that says, “build it and they will come,” the advisors will conform to how our system has been designed, so that they do it this way. No, we’ve done it in a way that’s flexible and advisor-centric, client-centric, and it does have that spirit of outsourcing. If they use Redtail, we’re not going to build a CRM; we’re not in the market of building a CRM. But we’ll build our system to interact well with the CRM or a financial planning system or a portfolio management system, or any of our RIA custodians and so on and so forth.

Craig: One of the things I like to ask everyone is, we learn a lot more from our mistakes than we do from our successes. You guys have both had a lot of successes in your careers, but if you can pick out one of your mistakes that you learned the most from, can you tell me a little bit about that mistake, what led up to it, and what you learned from that?

Aaron: One of the things we do about mistakes here is we do postmortems, that’s how we learn from those mistakes. So today whenever there is a mistake, we will engage in a postmortem process and try to come up with action items to make sure it does not get repeated. But originally, we were being very innovative and we were wanting to outsource, and we wanted to outsource our data aggregation. We really wanted to be very innovative around how we were doing that and have more control over what that experience looked like at the time. At the time, our current aggregator had gotten purchased, there were some cultural challenges, and we really weren’t happy with it. So we found a very small firm that was very innovative, and the reality is that some things are too important to do the way we were doing things at the time, through this organic, iterative process. It really was a project that required a little more of an RFP and a process to it, a sizing. We thought about what we really wanted to accomplish, and we engaged the project in a skunkworks way. Then we were growing it, and once it got to the point at which we needed it to be activated or turned enterprise, it started collapsing on itself because the firm we had done that with wasn’t prepared; they didn’t have the finances to really support what we were doing. So while the technology was there, the rest of the resources the company needed, that that other company needed to be able to activate on the vision wasn’t there. That was a real lesson at the time in trying to rethink the way that we engage and how we make decisions, where the critical initiative process comes from now. It was a win but a huge loss, because it was a mass amount of investment: time, energy, political capital, that ultimately ended up just falling apart. the one thing I would say about that was it was interesting to see that that technology did continue to go on and ended up at another firm, and they’ve been very successful with it. But we weren’t the right fit for it at the time, and I think we should have done a better job of really engaging in a process to make that decision before we had gotten so far in the project. That was a major burn of time, energy, capital, and it was a mistake.

Billy: That was an example of our data aggregation project, but we’ve done the same similar scenario with esignatures, as well as an oversight tool for trade review and account review. And it’s frustrating, we have some successes, but we also had some mistakes and missteps. And the time, the time is what kills me the most. Yes there’s dollars involved, but we were committed to these things; a lot of people were dedicated to each of these projects for at least a year, if not almost 18 months. And you can’t get that back.

Aaron: Yeah. The second mistake I’d say along those lines is having too many projects going on within the firm, especially in my department at the time. We were so innovative and we had such a skunkworks going on that a lot of things were happening and getting far along before the business had been engaged. Then all of a sudden it became a demand from the advisors for certain things that we had started to share. So another mistake we could talk about was, I actually made Evernote regulatory compliant. As a really innovative project we did a partnership with AWS, and we said what if we were to start archiving stuff in the cloud? What if we allow advisors to go out into Google or anywhere else and be able to use non-wealth management tools for wealth management? And we knew the industry was moving that way, so we’re like how do we allow them to do that but yet stay regulatorily compliant? One of the most powerful tools out there that most people don’t use for wealth management is Evernote. Evernote allows advisors to share notes and do all kinds of amazing things. So we actually engaged a project and were able to make Evernote regulatory compliant, and be archived in our system for advisors to use it. We then made that announcement to the field and said hey, this is a new technology. But it became pretty apparent we hadn’t really thought through the support of it, how we were going to support it, and how we were going to do it. So that’s again another thing where the innovation and the product gets ahead of the business plan, the support model, the revenue model, and all those things that are required to run a business. So that’s where we started to realize that we could do anything, but not bringing TO market is the best thing we’ve been doing recently. Which is to say, you know what? It’s a great idea, but this is just going to be too much for not enough value.

Billy: Yeah, It’s controlling the throttle. I refer to it as throttle control; we could go crazy with whiskey throttle and all these technologies, but there’s the digestion, the adoption, the understanding, the value, and the support.

Craig: So we’ve learned from mistakes, we’ve had issues, we’ve moved on and grown as technologists. Are there some best practices you can share? All the work you guys have done evaluating, selecting, integrating, all the technology you guys have put together. What are some of the best practices? If someone were to come to you and say, hey we’re starting a new broker-dealer or we’re in the same position, what are some things you could share that would help them avoid some of the problems you guys ran into?

Aaron: Well, it’s a new world. Today’s world compared to when I started many years ago has dramatically changed, so the challenges that everybody would be facing would be dramatically different. But the one thing I can tell you that has made all the difference for us has been culture. United Planners has a very specific culture. This is a controversial thing for some CIO’s when I talk about it, but for United Planners this is what’s been most effective for us. We work with vendors and we partner with vendors based on culture. Because technologies change, but if their culture doesn’t fit yours and who you are, then don’t chase the technology. Because that’s the number one mistake everybody runs into, is they get enamored with the innovation and technology. Our culture is fiercely not for sale, so why would I pick a partner that is 100% venture owned, right? Because they’re definitely not fiercely not for sale. They may have the most innovative technology in the world, but unless I really am prepared for them to be sold and what that means to my business, I have to understand the risk of that. So that culture matters. We work with partners that have been traditionally fiercely not for sale or privately owned. It is part of the decision-making process that allowed us to have stability and consistency to grow and make mistakes together, because that’s the one thing that will happen; there will be mistakes. There will be times in which they made a mistake or we made a mistake or the contracts up for renegotiation. And unless you’re aligned in your interest, your future negotiations get more difficult, your dependency on them gets higher, and you find yourself with a really bad partner. It’s really hard to unwind those. So it’s not a typical answer you’re going to hear from a CIO, but it’s the typical answer I give, and it’s served us well.

Aaron: I could give you examples of those in our industry. The best example for us I would say is Orion. When we approached Orion years ago, we saw a technology that was very innovative in the industry, but wasn’t really ready for us in the way we were thinking about building our firm. So it was really a discussion and meeting with the team over there that we realized that we could build something together; that they would be there for the long run, and they were the type of environment that we could work with. And it was a great choice, because when we made a mistake in the data aggregator and we asked them to help us out with some things, they were willing to do that. And they took some hits on that, and there were some hits that we took, but we worked together working through those things, because we were both aligned in our interest and where we wanted to go. And it was really never about the technology; it was about a partnership to solve a problem. And we both had toolsets and capabilities, and we came together to do that. Another one has been Redtail. I think their culture of open API and innovation and pricing has been a great partnership for years.

Billy: To Aaron’s point and to your question, pick your partners wisely, the right culture. But I think part of that culture is the commitment to the advisor community, and that’s what we saw with Orion. I give huge kudos and props to Orion; they’re a great company, great culture, great management team, great support folks there. But the commitment to the advisor community and doing what’s best for the industry and the advisor as a whole, not just what we can do for our own self, I think that that’s important to see in the fabric of the people that you’re dealing with and the relationships that you’re developing. So to add on to your question of best practices, I’d say be collaborative, be methodical, stay true to your review processes, whatever they may be, socialize it internally with your management teams, you business teams, your oversight teams, your technology teams, and also your advisor team, your advisory council. Make sure we’re all in sync with, yes this is a need, yes this is the best way to solve for it, and the vendor vetting. That’s another component of our recommended best practice, which kind of ties back to this whole culture and commitment to the advisor community. I think the last part I’ll mention is take your time. Do not chase the technology, as Aaron mentioned, do not get too distracted and enamored with the shiny new toy syndrome. Take your time and go through your process and stay committed to that process, because that’s the reason why you have a process; to you minimize those mistakes.

Aaron: That’s the biggest thing I think that has changed in the industry today, is because of the fintech growth is we are inundated with shiny new toys today. It is really hard in today’s market to find and differentiate products. There’s so much overlap and so much confusion in the market. A lot of promises, a lot of venture, so it’s a lot harder today to go through a selection process as far as how you’re going to vet the vendors. So the last thing I’m going to suggest as a best practice is outsource it. Go find industry thought leaders that are out there, that are in that space of vetting vendors, that know what’s going on, who’s reliable, who’s not. There are many different people that are in that space that are consultants. Today I think a consultant is a mandatory for anybody new in the industry in particular, but even people that are looking to transform or people that are looking for a new model. Go find one of the experts, because there are a lot of people that spend every day looking at fintech, looking at the industry, looking at how to build your practice. Reach out to one of those individuals, hire one, and have them lead you through the process. it is going to be almost impossible to do it yourself, especially if you’re an advisor. It’s just gotten too confusing, even for myself. I go to these conferences now and I get overwhelmed by the number of vendors that are in the market now.

Craig: You want to give me a quick, one-minute feedback on the Envestnet, MoneyGuide Pro deal?

Aaron: I would say that that’s an example of it just depends on where advisors do their business, how they think that their product should be financed and built, that’s a great partnership for those two firms. That decision is good for some Money Guide Pro users, and some might not benefit from it. But I would say it’s sure a sign of the amount of money and change that’s coming to this industry, and I think you’re going to see even more of those type of things happening with Silicon Valley startups continuing to come into wealth management and maybe new purchases, some unexpected players. There’s going to be a lot of disruption coming up, and I see that as a good but I also see it as significant disruption. I don’t know where I stand on that, but Money Guide is an amazing company. They’ve been a good partner of ours for many years, the team over there has always been one of the best cultures in fintech, and I really hope that they can maintain that innovation and culture while at Envestnet.

Craig: I really appreciate that comment, I know that was a last minute addition to our conversation. This has been really informative for me. You really provided a lot of value, a lot of information, a lot of insight, and I just want to thank you both for being on the podcast.

Billy: Thank you, we really appreciate spending the time with you.

Craig: It’s always a pleasure.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com