RIA Technology

#ItzOnWealthTech Ep 10: The Consultant’s Roundtable on RIA Technology News

“Seamless integration – what does that mean? It’s like saying jumbo shrimp. It’s an oxymoron because there aren’t any truly seamless integrations.”

— Kristen Schmidt

As Founder of RIA Oasis, a tech strategy and implementation consulting firm, Kristen Schmidt sees the real-time hurdles firms face when it comes to technology, integrations, and workflow building. As a technology strategist and speaker, Kristen works directly with advisors and planners to assess, research, and implement technology platforms. Her passion is uncovering business solutions by marrying tech with best practice initiatives.

Gavin Spitzner has over 25 years of experience helping banks, RIAs, and broker-dealers overcome complex obstacles standing in the way of accelerated, profitable growth. His consulting firm Wealth Consulting Partners, LLC helps wealth management organizations break through corporate inertia with applied strategy, support, and guidance. 

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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

  • How the Envestnet-MoneyGuidePro acquisition is playing out in the industry [03:05]
  • Envestnet Insurance Exchange [08:00]
  • What is seamless integration? [15:00]
  • Will everyone eventually become a TAMP? What will this do to the TAMP model? [23:15]
  • Thoughts on subscriptions and their pricing [37:00]
  • Artificial Intelligence – is it a threat or boon to advisors? [46:00]

Companies & People Mentioned:

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

wealth management consulting

Complete Episode Transcript:

Craig: And on this episode of Wealth Management Today, this is the Consultants Roundtable. We have two consultants that I’ve worked with in the past who I greatly respect and have a lot of knowledge in the industry. The first is Kristen Schmidt a technology strategist and consultant for independent and hybrid RIA’s, and your company is called RIA Oasis.

Kristen: Good morning.

Craig: You’re welcome. And our other consultant is Gavin Spitzner.

Gavin: Good morning Craig.

Craig: Good morning! And your company is Wealth Consulting Partners, where you advise enterprise clients, including banks and RIA’s, and you do wealth management business and technology strategy. And thank you for being on the program.

Gavin: Great to be with you.

Envestnet Buys MoneyGuidePro

Craig: Yes, and this is the first time you guys have met and I’m really happy about that. I’ve worked with both of you on lots of different projects, so I’m excited to have you both on this discussion and talking about what’s in the news and some of the things that are moving the industry. So the first thing we’re going to talk about is Envestnet, and haven’t we heard enough about Envestnet? They seem to be sucking the oxygen out of everything. They’re either acquiring somebody or announcing a partnership or launching something. So the first one we wanted to talk about was the MoneyGuidePro purchase. So Gavin, what do you think about that and how it’s playing in the industry? Since we’ve had a little bit of time to digest that.

Gavin: Well I’ve been an advocate and a fan since that was announced, I think they got tired of all the firms asking them if they’re connected and integrated deeply with MoneyGuidePro. They’ve been very, very focused on financial wellness, especially over the past couple of years coming out of the Yodlee acquisition. And I think at the end of the day, it’s about the advisor experience, efficiency, connecting all the dots in terms of planning, aggregation, data, proposaling investment management. But more than anything, it’s about data, right? MoneyGuidePro really plays well into their data strategy, from what I see. It’s something like 2 million plans worth of data come with that, so it really puts them in the catbird seat, in terms of helping firms and helping advisors leverage data much more effectively.

Craig: How about your Kristen? From your point of view in the RIA’s, where do you see this playing out?

Kristen: Yeah, I would agree with that. One area I see it strengthening is that financial planning-centric mentality that firms are trying to have. And I think that as much as Envestnet was fostering that type of servicing with advisors, they certainly didn’t have the technology to support it right directly. So I think that it definitely offers advisors more of an all-in-one solution, which we know Envestnet is obviously trying to strive for. I do think that advisors are still wondering what does it mean, right? We see this often, especially when Envestnet purchases something and there really isn’t clarity for these RIA’s as to what does it mean for me as a subscriber? What will change and what will stay the same.? So I think even though this has been out there and we’ve been marinating on it for a couple of weeks, I think we’re still a little unclear as to the trajectory of what Envestnet will do with it. But I agree with Gavin, this is definitely a large data pool that they now own.

Craig: It’s a huge data pool, I did a blog post about that. And to me it seems more like a data play, and how will this help advisors? They’ve already had integrations with eMoney and MoneyGuidePro, they announced it at their conference 3 or 4 years ago. From my experience, eMoney and MoneyGuidePro have always had some of the best API’s and most robust API sets in the industry, so I’m not sure that integration was the issue. I saw this being a play that they want to get more advisor eyeballs, and a significant portion of advisors spend most of their time in their planning tool rather than in their investment tool. So do you guys see this as Envestnet realizing that there’s another class of advisors that they’re not really servicing, that focus more on planning?

Kristen: I definitely see that as the play, in a sense of finding that financial centric advisor in those types of firms. But I believe that this is also a stretch to what I consider the four main food groups in our industry: CRM, portfolio management, client portal, and financial planning. And if you look at Envestnet and how full their plate is, they have secured three of those four. And with the purchase MoneyGuidePro they have this full plate: all food groups are sustained. So I think the client portal plays a very large part in this.

Kristen: Gavin I don’t know about you, but I have these conversations daily with advisors, which is, “I have all this data but I don’t know what to do with it.” It’s one thing to collect it, but where do I put it, what’s the value of the data? And by the way, these advisors are spending a ton of time with the data, with their clients, building the relationships. So I think if you look at the data pool and say wow, Envestnet does have their advisor view and client portal accesses with Yodlee, that’s also the play; that data can now push and be relevant to your clients on demand through online access.

Gavin: I think that’s a great point, and I absolutely see the same thing. They’re aggressively pushing into the client portal space. They went down the road with FinanceLogix and trying to build that in, and some folks have said the MoneyGuidePro deal is a reflection that FinanceLogix didn’t pan out. I don’t really look at it that way, I think they folded some of the capabilities into their native systems, especially around the portal. They learned a lot from that, and I think that puts them on the road towards realizing just how much better their client experience or advisory experience could be, fully owning the number one market share. Really leveraging that and integrating that into the full client life cycle, on behalf of their enterprise clients and advisors.

Gavin: I think the other part we haven’t touched on yet, but I think you can’t look at this in isolation without looking at the insurance exchange and credit exchange. I think they have clarified their mission around financial planning, helping advisers deliver better client experiences, leveraging all of that data, rounded in planning. And by integrating these other capabilities like the insurance exchange and credit exchange where it is holistic financial wellness based planning and advice delivery and any ongoing management of that, it’s hard to argue with that. When we’re out there talking with advisors and firms about how they’re going to grow and differentiate, it is really based on that premise.

Envestnet Insurance Exchange

Craig: Yeah. I was just writing about the insurance and the credit exchange on my blog, and how combining that with their model exchange creates a pretty powerful ecosystem in the advice space. Would you say Gavin?

Gavin: No question. And for the hundreds of firms that want to buy and outsource a turnkey end-to-end solution, with the exception perhaps of an Orion, they are quickly becoming the only game in town. And to Kristen’s point before, they’ve got those main food groups, having gotten into CRM. Tamarac has some native CRM capabilities, but their play has been more to integrate with the leaders like a Salesforce, primarily. But yeah, for the market that wants something turnkey and end-to-end, it’s very compelling. Obviously a lot of work to be done around integration and clarifying what this means for existing users of these different capabilities, and then it’s going to lead the market for certain firms and advisors that want to piece together what they would consider a best of breed solution to the other players in this space.

Craig: What do you think Kristen?

Kristen: I actually just had an experience yesterday with a client in regards to integrations, and I think that it’s a good topic to bring up and a reminder to advisors and planners that just because something is noted as integrated, that is not blinging, and we need to not be the mosquitos is looking at the light. I think that as consultants we always want to try to educate and as Gavin mentioned, really be that strategy around it. Does the data push and pull, which way, is it bilateral? Is that button really valuable, or does it just look fancy?

Kristen: But I will say that as we look at the larger firms that are starting to adopt those four food groups that I mentioned, what I’m seeing, especially with Envestnet, they are starting to charge for integrations, with Salesforce for example. That’s an example of my client recently. To integrate Tamarac with Salesforce is a per user charge per quarter, that isn’t disclosed and you find out once you start setting up the integration. Orion also has one. So we’re seeing the large leaders in our industry also struggling to hold up in a sense of cost and efficiency, to the universal leaders such as Salesforce. Right? We know Salesforce is not based in our industry, we’re a small blip on the radar for Salesforce. Yet a powerful one. So we’re seeing these pieces of the puzzle kind of come together, and what happens is yes, Envestnet and Tamarac are the giants, but I think we still have a ways to go in creating what they’re often calling a package, and understanding what’s included in that package and the impact it makes to these firms. And Gavin I don’t know about you, but that’s how I joke that I’ll always have a job in this industry, is translating that.

Gavin: I think that is where we add value, because the providers are moving so fast, it’s hard for the folks on the front lines to even be able to absorb it all and then present it to firms and advisors in a cogent and coherent way. And the buyers, they don’t know what they don’t know. And we’ve all seen it, they make assumptions in terms of what comes pre-packaged as part of the fee versus what might be a modular fee or what might have an integration fee. So yeah, I think that’s value that we add to help paint that full picture, to say what is the whole ecosystem, where are the connection points in terms of data, application, user experience? And frankly, help buyer and seller speak a common language and not make assumptions where they get 3 or 6 months down the road in terms of implementation, and there’s a lot of finger points saying, “Wait a second, when you said integration we assumed it meant this.” And it’s hard; it’s not blaming anybody, it’s just the facts of life when things are moving so quickly.

Kristen: Craig you’re on Twitter, right? And Gavin you’re on Twitter as well. What we’re seeing is heavy influencers in our industry coming to simplicity saying, stop using words that sound so powerful, yet mean nothing for an impact of our business, right? Seamless integration – what does that mean? What does that mean? It’s like saying jumbo shrimp. It’s such an oxymoron to say seamless integration because there isn’t a seamless integration, and that’s the purpose. You integrate, but you monitor and you manage, and that’s what technology is bringing to the table. All-in-one, what does that mean? All of what? What food groups, which areas? Does all-in-one help me focus on my business and the services I offer? Or is it an all-in-one for another business? I think it’s the same thing, integration fits as one of those coined phrases that are overused in the industry, and partly because they’re defined differently for every firm.

Challengers to Envestnet

Craig: Well, if we say all-in-one means all four food groups, and I’m stealing your term Kristen I love that, all four food groups. How many firms have it, and who can challenge Envestnet for the business?

Kristen: Well obviously Tamarac and Envestnet are the leaders, and that was kind of the goal. When we were talking about the MoneyGuidePro purchase, if you look back hindsight is 2020. Those of us who’ve been in the industry and following this, you’ll recognize that MoneyGuidePro stopped building their client portal years ago, because they made that agreement to play nice in the sandbox with eMoney. And when we saw that, we knew that they were heavy into integrations and less on their own technology.

Kristen: Of course, now hindsight is 2020, they didn’t need a portal because now Envestnet has one. So Envestnet and Tamarac are on the high list of all-in-one. I think the biggest question I work with firms is, do I buy an all-in-one package? Another competitor that’s trying to gain momentum is Advyzon, and the question for advisors is will you build your own all-in-one and manage your own, or would you like somebody else to have done it for you? And then you get into the theory of, as a firm do I want to put all my eggs in one basket with a company? And I think that’s actually where we have some fear right now, is if I go all-in-one with one company, what if they get bought out? That’s a huge question I get all the time, right? Everybody’s getting eaten, and now big fish are eating big fish. What does it mean for me? I think that’s where there’s a little fear.

Gavin: I think those are great points, and I think it does speak to picking your anchor partner. And that might be different for different firms and advisors, depending on their practice pattern if you will, but it’s a huge decision because the pain of a conversion is massive. Nobody likes to go through those. We’ve all seen this with firms that have gone through massive changes; it disrupts business. I don’t care what providers say about, “We can get you up and running in three months.” It’s a massive disruption.

Gavin: So I’ll take it in a slightly different direction and maybe build on what Kristen was saying, in terms of who you partner with. I think one of the more interesting things going on, and this might take us a little bit into the general TAMP conversation. Firms, especially for RIA aggregators that have built out their own ecosystem, leveraging underlying technology providers like Envestnet or Orion and then are both using that for their own RIA advisors, but then also delivering that on an outsourced basis to unaffiliated RIAs that say, look I don’t want to go through all those bill-by-rent decisions on building things out. If I can private label what you have built that integrates the four food groups (to Kristen’s point) and if that’s still economically viable, if I can still make a margin on that in terms of what I deliver to my clients, then that’s kind of interesting.

Gavin: Look at United Capital. I think I tweeted something about the fact that they announced they now have more in their FinLife CX outsource solution than they do with their own internal RIA. I think they hit $25 billion in lightning speed, in a couple of years. Their firms are leveraging that fully-baked capability, they can leverage Salesforce as part of that or bring in their own CRM in a pretty tightly integrated fashion. And then other RIA aggregators are doing similar things, whether it’s [inaudible] focus with their different acquisitions. That to me is a really interesting space to watch, and what that does to the market dynamics.

Kristen: You bring up a good point, but here’s an interesting piece to that puzzle. Is this just United Capital and their girth, or is this the industry and where it’s going? I talked about the four food groups and there is a bit of an orphan in those four, which is CRM. I’ve done this a while and I see the ebbs and the flows of interest of technology conversions, right? There are years where I do multiple portfolio management [inaudible], and suddenly I’m heavy working into financial planning this year. I’m also very heavy in CRM’s, just purely by cravings from advisors.

Kristen: But if we look at the United Capital platform, 18 months ago they were offering a CRM opportunity along with their proprietary client experience tools, which really have no match and are amazing tools, but now they don’t offer CRM. They offer for you to plug yours in. So we’re starting to see that come peeled off. We’re starting to see Envestnet really focused on financial planning, some of those insurance pieces you mentioned, their entire TAMP offering, their client portal and aggregation, and CRM isn’t talked about as much. So I’m starting to see that shift where the CRM space is starting to tighten a bit, and advisors are also realizing that that truly drives their business in a sense of growth and client service, and how do I plug those pieces together?

Gavin: Well certainly in the bank space I do a lot of work. I won’t say that the war is over, but Salesforce absolutely is the 800 pound gorilla. So if they’re everywhere, usually driven from the top down to banks and then to wealth management groups, inherits that and figures things out over time. I don’t know that it is an orphan, but it is a little bit outside that, and frankly it makes things easier in that space where you don’t have as many smaller CRMs that have 5% or 7% market share. It makes it easier for firms like Envestnet to have that bi-directional interface, and I’m sure that will build out over time in terms of workflow tools, client portal integration and all of that. Although that was an interesting thing I saw last summer at IN|VEST conference, that Salesforce was rolling out their own client portal. So that’s going to be an interesting dynamic in the marketplace, in terms of how they partner, or not so much, with some of the other providers.

Everyone Wants to be a TAMP

Craig: That’s a good point. With TAMPs, do you see everyone becoming a TAMP? And is that going to destroy the TAMP model, or just make a stronger differentiation between firms that really know how to do it and firms that are doing it to make a couple extra bucks?

Gavin: I think that firms that can carve out a niche and provide something holistic that appeals to a certain market, especially in the RIA space, they’ll win business. And one whole area that we really haven’t touched on yet is digital advice providers that might’ve had their roots in just pure robo capabilities, but they’re sitting there saying hold on second, we built from scratch. We’ve got digital, much more frictionless capabilities inherent to our capability. And rather than just stop at, we’ll be your digital advice solution, why stop there? Why can’t we be an RIA capability that you put all of your manage accounts on?

Gavin: In the bank space we saw Citizens Bank, based in Rhode Island and throughout New England, announce they’re deepening their partnership with SigFig, which started off as just their specified robo advisor solution. But they are building that out to offer a fully advisor-led TAMP solution that has models and automatic rebalancing and digital client engagement tools and more. So I’m doing a lot of work helping firms figure out digital strategy; those worlds are starting to blend, so I think that you definitely need to keep an eye on. Digital advice providers and where they fit into this puzzle.

Kristen: I would agree to that. I’m seeing that as well, although because I’m more on the RIA and institutional side of the industry I’m seeing it for a certain segmentation of clients. I think advisors and planners in our space think that one solution will service their business, instead of thinking about what solutions service a certain segment. And I’m a broken record on this, but that doesn’t mean segment based on AUM alone, right? There are other values applied. The clients that determine their segmentation, for example, are they a COI or a center of influence? Are they not rich now but they’re going to be getting rich, so we want to treat them with white gloves?

Kristen: So all those different segments, I think exactly what you explained Gavin, fit for a certain segment. And remember, all of those segments are also age relative or personality relative, right? Depending upon what the expectations are for service and deliverables. I’ll also say in the TAMP space, I agree with you Craig, it’s exploding. Does everyone seem like they’re acting like they are a TAMP? What I’m also seeing is a bridge towards firms having interest in hiring a CIO or a Chief Investment Officer as a service or an outsource. Back in the day we used to hire for that, that was multiple positions in the firm to help that train keep running. And now we’re seeing a lot of RIA or hybrid models offering their models to others, but are also offering that customization for an advisor. Right?

Kristen: So the biggest gripe when you look at a TAMP and you say to an advisor or planner, you should use this, it brings efficiency to your firm and allows you to grow. Instead of trading you can be rainmaking, and growing the firm. And the answer is, I don’t want to put my clients in buckets, right? I don’t want cookie cutter, and I don’t want my clients to think I’m cookie cutter. And what’s interesting is the way that I talk about that with clients is, that’s not your value. And that’s the reason I believe TAMPs are starting to get bigger, is that it’s a huge value to the overall wealth of your clients and the relationship. But what the value is that you’re bringing is the relationship itself; it is the wealth management, the goals planning, the financial planning, and the net worth conversations. If that’s the value you bring, then the TAMP and the investment management modeling is a small percentage of that.

Kristen: So I’m starting to see a lot of advisors willing to instead of give up the entire piece of investment management, taking segments, going to that digital side, or taking a small percentage and having an outsource investment manager help with a lot of those assets.

Gavin: No question. There’s an absolute correlation between the pivot towards planning-based practices away from asset management as they become commoditized, decompression, all the things we know. And that correlating rise of comfort with outsourcing things that used to be core to many of these practices. So I’m with you. Given your focus in the RIA space, are you seeing some of that outsourcing? Would you put it in the camp of RIAs leveraging Schwab intelligent, Betterment for advisors, capabilities like those? Or are you thinking about different types of firms?

Kristen: I am seeing advisors research their options. Schwab Intelligent, a little less on the Betterment side. You’re probably seeing that a little bit more on the banking side than we are here, but it’s coming. I’m actually seeing a lot of the larger RIAs from $300 million to close to $1 billion assets under management I’m seeing firms researching that outsourcing piece like you mentioned Gavin, of using Schwab Intelligent portfolios or using a Betterment.

Kristen: A lot of those sized firms still want the personal touch of a CIO or somebody helping them manage the portfolios, and they still want to have a voice. So what I’m seeing is RIAs outsourcing their models, their services, their people. And then these advisors feel as if they have a connection and a voice to what happens in these portfolios. So I’m starting to see a lot of RIAs turned investment managers offering those services outsourced, and we’re starting to see those connections of the people rather than the packaged products. That’s what I’m seeing currently.

Craig: Interesting. So less packaged products you’re saying?

Kristen: Here’s the shift. As mentioned before, I think that everybody’s researching all of those options; one is cost. If you’re not taking your entire book of business to those types of platforms, the costs sometimes is outweighed. Secondly, if an advisor doesn’t have segmentation completed, if you haven’t identified exactly which types of clients in which accounts are going to go, you’re in a fog of how much you will give them and then how much that will cost. So oftentimes when advisors start researching this option, they get caught in the mud because they realize their business isn’t organized to be supported by some type of outsourced TAMP, even if it is just a piece of the pie. And then lastly, again the struggle at a consulting level is a lot of these advisors and planners believe that the investment management piece of the pie is their value. They’ve been selling that as their value for 20 years, 30 years, 50 years. So when you have to shift that trajectory and say, of course that’s one of the values you bring, but the true value is the holistic approach to the financial planning relationship, suddenly they have to value the rest of the services they offer. And it’s hard to figure out that balance.

Gavin: Yeah, we’re barely in the first inning of that shift. For all the talk about shifting the financial planning adoption, it’s one thing to be a user of MoneyGuidePro, eMoney, Naviplan, whatever. And it’s another thing to really deliver that and even price that as your core value. So in five or seven years, we’re going to be in a very different place where investment management other than really high net worth and institutional, your complex mandate type business concentrate positions, low cost basis, other than those scenarios, it’s going to be very certainty.

Gavin: We’re already seeing fees coming down to zero. Maybe the allocation and rebalancing that part is worth 25, 35 basis points. but the value and how, how advisors charge is going to adapt and adopt to, to a planning based practice, which has all kinds of implications. And one thing we didn’t touch on yet is, was Schwab, what I consider a massive shake up an industry moving to subscription based pricing. and, and not subscription in the sense of that’s the big change, but really tapping out a fee for their case on unlimited access. I’ll be at remote versus face to face contact combined with automated investing, for 30 bucks a month. So the numbers get crazy when you get into, million dollar, $2 million portfolios you’re talking about, what is it like a, at $1 million, it comes out to two under, under four basis points all in Brookline that’s taking clients out to lunch and out to golf and all that, that sustain some folks for some time.

Gavin: But, I think when folks have large rollovers and really calculating the value that they get from their advisor of ours not really going deep in terms of planning and coaching and making that an ongoing process, it’s going to be hard to compete with those types of value props.

Schwab Subscription Pricing

Craig: But do you think that was a target? Who is Schwab targeting with the subscription pricing? Is, is it advisors or was a vanguard?

Gavin: Well, I think it’s all the above. So definitely, I mean, for all the blogs about alienating advisors in terms of the custody business, nothing’s changed. That’s always been the case. And it’s true more or less of all custodians. I think from it just from a direct marketing positioning, I think it’s the baby boomer rollovers more than anything else.

Gavin: Not that it’s only that, but, something that’s very compelling. Just somebody rolling over whatever it might be, $700,000, $1 million, they don’t care as much about the 50 to a hundred. The way that they priced it, it breaks even at just over $100,000. So they’re going to grandfather the folks in that have less than that until they exceed that, it makes more, it’s more positive to them to shift to the subscription based pricing. for, for me it’s, it’s the pre retiree that has an episodic advice needs initially, that having, that CFE access will appeal to and, and just the pure pricing versus paying an advisor that they only want to meet with twice a year anyway. I’m the 1% or one and a quarter percent or a one and a half percent.

Kristen: Yeah, I would agree to that. I think, generically I think it, it everyone got real worried about Schwab was getting into, my space, right? This is our space and why are you trying to do this? But I think when you really boil it down, just like you having good, first of all, you are going to get what you pay for. And we all understand that being part of the industry. Does the consumer, does that end client, that demographic that got him just mentioned? Do they understand that? No. And that’s actually the ideal in for our advisors and planners, right? I believe this is actually a stepping stone. It might be a good one. Most people who are subscribing to that are either on educated or educated enough that they need to know something. They don’t understand the space, but this seems like a good choice. At least I’m doing something. It’s not just sitting right.

Kristen: And so once they can enter that realm and they realize that maybe they’re craving more or maybe that they wish that they could get more of a relationship of, attention of options and choices, that’s when they’ll go shop to find advisors that are offering services like that. for that holistic approach. I think our challenge in this industry, especially on the institutional side, is that we are trying to find the end client who has never made that jump right. Or has been sitting with the same advisor for 20 years. And I don’t his name. And I think if we look at it in a different perspective and say this is a stepping stone and they will come to you understanding a little bit more about their money, but craving more about what to do with it in plan. what a great value proposition for advisors and planners for people coming off of that platform. We’re very worried about them going in. I’m excited for when they come, when they graduate from that point.

Craig: So you see it as more advertisement that these types of cheap services can’t provide. What advisors can provide in that. Clients that try it, we’ll realize any more than calling advisor.

Kristen: There was a great article about this and was throwing it into the bucket of, is this the next Netflix? There’s a lot of people who cut the cut the cable, right. But a lot of people cut the cable and then went back. They realize what they miss. And I’ll tell you my story. I did Netflix and subscribe the $7.99 and now I have two kids. I’m an already paying whatever it is. $14.99 I offered it. I didn’t get enough.

Kristen: So subscription models have this. Yeah, see and I don’t even know because it auto debit to me. Right? So that’s the whole idea of subscription. So that’s what I’m saying is this does have that same, a concrete floor of the house mentality like Johnny was mentioning. And that is the subscription looks good in a sense of it. We’ll take care of me. It’s automatic and at least I feel like I’m doing something right. but what happens is you suddenly then either look at your bank statement or try to really figure out, am I getting value out of it? Right. And you’re either going to ask a question or ignore it. And I think we have more people asking questions because they are trying to get the value out of it. And so do they learn a little bit, identify what they really need and then crave the relationship? I think so. I just think we’re going to need some time for all of that awareness to come about.

Gavin: I love that perspective. I think that that’s a great point. If I’m an advisor the way I should look at it to say, look, yes I have to up my game. I’ve got to be able to scale personalized advice to, to compete with that and be able to have a strong value proposition firms of the cost and the value I’m providing that service. If it brings more, billions more into some kind of a planning and advice framework and then there’s going to be some of those that yeah, I don’t know that they crave might be a strong word, but at least be open more open because they’d have a taste of it.

Gavin: And then if somebody comes along that that really focuses on, on, whatever niche they might be in a small business owner that has a liquidity event and I need more personalized attention, divorce, people that have specific financial issues, I think that that friend buried to the need to really specialize in a marketplace and become the expert in the market and build your planning focus around that. I think those two things coming together, that that is where the opportunity is.

Kristen: Yeah. And, and let’s put this full circle here. We were just talking a while back about how, I think we all hope that advisors and planners are going to shift to be more wealth management centric. The technology, the infrastructure, the business strategy is all pushing that way. So if you really look at it, when Schwab came out with that announcement, I kind of looked and said, we’re not ready anyways. We’re not ready for those types of crimes. And I’m not sure we want to them. We all want what we can’t have.

Kristen: But once, if you really look at it, are those the clients you really want are the ones who want to be on a subscription model and not talk to you and not see your value. That’s not your segment. And they will be someday. but not today. And so I think we all crave what other, companies are having, whether it be in the technology space or investment management space, but I think it’s okay to let that segment do their thing because I do believe it’ll do marine back.

Gavin: And I agree. I don’t think that the average advisor is ready at one thing we didn’t touch on Craig, maybe this will be a topic go deeper in the, in the future podcast we were talking about CRM I meant to bring up is, is AI. It’s a game changer in terms of leveraging all that. We talked about data, we talk about financial planning and so be able to take all of that data, Mary to a client’s personal financial plans or budget, their financial priorities in real time. So the plan is living and breathing in an advisor then becomes the coach and the mentor and the person that’s finding insights out of all of this, not just salad, more product, finding personalized insights to the client. That’s a value that a remote advisor that doesn’t really get to know the client and isn’t able to spend that time finding those insights through VR and AR enabled CRM.

Craig: So how is this having some conversations with people on LinkedIn about this and how their opinion was that AI is a threat to advisors and it’s going to take their jobs and my opinion was that this is a boon to advisors and it’s going to free them up from a lot of effort they were doing manually as like a portfolio rebalance and any other tool is a boon. If you’re a human, you’re going to find new ways to leverage the tools to improve your business as opposed to looking at it as a threat that you’re taking away my job. If a computer can do that, then you should find something else to add value to that.

Kristen: I completely agree with that. I think it’s interesting as I listen and as I’m speaking, I’m, we continuously come back to the word value and that value proposition. and, and whether you’re talking about fees where they were talking about services or technology, I think that’s what every advisor right now is questioning. And they haven’t had to do that in a very long time. the expectation was you walked into a client meeting with a performance report that was 30 days stale of value in home and you talked about it matching up against the s and p and that was good enough and it’s not anymore. And so it’s making advisors shift their mentality and their business models.

Kristen: And when you make that shift, you’re actually right. You have to look at these pieces and say, can I use a little bit of that to leverage myself? Instead of saying, can I bathe in AI and be worried about my value? And I think that’s the other thing we have to that’s really important here is a lot of times from thanks that when they bring on a technology, it has a surface layer. It takes over the entire piece of business or an entire role to replace a human.

Kristen: And I actually think, to Gavin’s point, AI comes into the picture and then we all say, where does it fit? Does it replace anything? Because we automatically assume that things like AI or a tamp Robos, that digital side, we automatically think that that replaces something. And I often say, what about the other side of the coin, which is it doesn’t replace it rather enhances it. And that just adds more madness to your tech stack in your ecosystem and your people. And again, you know why we’re talking today

Gavin: And that’s why I prefer to say AI is “augmented intelligence” versus “artificial intelligence” as an advisor or wealth manager, that that’s the mindset that they should have. This is augmenting my ability to deliver personalized advice, personalized advice at scale. It’s not taking my job away here to your point.

Algorithms Are Taking Over

Craig: Algorithms and software taking over a lot of tasks, but there’s some things that algorithms cannot do yet and that’s find new stuff that humans need. And that’s what humans are still excelling at is, is learning what are the humans need and find new stuff for them.

Gavin: Being able to communicate that and convey it in a way that inspires and motivates action. That for me, that’s the near the top of the value chain for advisors. I think more and more, as 30 years ago it was just the act of trading was a service and asset management and financial planning. But now I think looking ahead, how do I take all this incredible data and digital engagement tools and access to planning, but actually have the right conversations at the right time to inspire and drive the right behavior. Because whatever wealth level of a clients that everyone is struggling with, certain issues around a trade, off decisions, cashflow decisions, future needs, and having that coach second translate things in a way that actually gets you to do something that’s in your long term best interests. That’s the highest value in my mind.

Kristen: And to your point, Gavin, I think, I think in our industry we’re identifying those tools as the end of the race rather than being the catalyst to promote the relationship building. Right? So I’d like to use AI to then get this result. Instead of saying AI is going to just open the door, right? Or the digital space is going to open the door for me to then foster the relationship with the client.

Kristen: At the end of the day, we’re really talking about wanting to build that relationship to open the door to learn more about what they have or what they need. Just like you said, where does that tunnel lead us? It leads us to uncovering other assets they forgot about or they weren’t telling us. It leads us to manage that 401k that we didn’t know even cooked. And then that leads you to, all the conversation happening within the industry. Whether it’s Michael, it just never went out talking about how, you can bill on that and the olive oil your moment you’re having and saying really.

Kristen: And so I think we’re, we’re forgetting that point that as much as we want to foster the relationship of what we know today, the real value of this data, right? Pinpoint us back to the original investment conversation. Why do we want all this data? Because there’s still more, we know there is and there’s value in giving that net worth, proposition to clients. But also there’s always more nest egg somewhere and we’re trying to uncover that ultimately.

RIA Technology

Craig: So I think you know what, there isn’t more of this time for this podcast. I want to get out of time. So let’s wrap up if we can. This has been great. I think we were talking about doing this once a quarter or whenever Envestnet acquires something, whichever comes first.

Gavin: It begins with understanding what your value proposition should be and the technology, the data strategy. You have to come from that, that place and then the answers will, will reveal themselves for your particular, wealth business roles or advisory practice. Don’t get enamored by the shiny new toy and just try to bolt on one more thing because you think that’s going to be the winner. The thing that pushes you over the top, have that clarity and then figure out the right strategy.

Kristen: I think that with all of the pieces we talked about today, many advisors are coming to people like having an eye to help make decisions and I often try to simplify that by saying no matter what avenue you are researching, it is a rinse, repeat mentality, which means by the time we’re done researching, something will have changed and you need to look at it again.

Kristen: So matching all of these pieces of this to your business strategy, to your services offered to your business plan and whether you want to grow, don’t try to make a decision but rather eliminate what does not fit for you in those spaces. Elimination as the first step of decision so that you can narrow scope of what you truly need to grow your business or to build those relationships with clients. So I think my message is, we don’t have to shop for everything, but we do take value in shopping for what’s needed to help your business grow.

Craig: And on that note, I would like to thank both of my guests, Gavin and Kristin, you’ve been wonderful and thank you. If that’s fantastic discussion. I felt we could’ve gone on for another couple hours. We can’t do that. We’ll save it for the next time. Thanks so much. And look forward to talking to you guys next time.




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