digital advice

#ItzOnWealthTech Ep 22: The Third Wave of Digital Advice with Margaret Hartigan, CEO of Marstone

“Digital wealth has to be one leg of the digital strategy a bank might have. So it’s going to be payments, it’s going to be mobiles, it’s going to be banking, and it’s going to be wealth management. They have to be coordinated together, because it has to be driven according to the expectations and desire of the end-user.”

— Margaret Hartigan, Marstone, Inc.

Inspired to demystify finance for everyone, Margaret Hartigan founded Marstone, an enterprise-ready tech platform for financial institutions.  Marstone offers a flexible wealth management solution that enables financial organizations to efficiently and affordably reach, acquire, and retain more clients through its core-agnostic offering that meets client needs as their financial position matures.

Prior to starting Marstone, Margaret was a top quintile financial advisor for ten years in the Global Wealth Management Group at Merrill Lynch. A graduate of Brown University, Margaret is an active leader in the alumni and major development efforts there and at Phillips Exeter Academy. She’s a member of the Milken FinTech Advisory Committee, and a former trustee of Sonoma Academy, in Santa Rosa, California.

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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

  • Marstone’s recent partnership with HSBC [04:35]
  • Discussing the value add Marstone presented to HSBC that sealed the deal [09:04]
  • Community banks and credit union’s need for digital advice, and how they are deploying it [14:49]
  • Are credit unions not satisfied with their current TPMs, so therefore looking for more of a digital option? [20:03]
  • What kind of RIA’s are looking to enter the TPM space? [22:14]
  • Marstone’s abilities and offerings around things like mortgage applications, and what is on their roadmap for the future in that regard [24:25]
  • The different waves of the robo advisor and digital advice revolution [26:14]
  • How the apps coming out will impact the work that banks are doing [30:27]
  • Marstone’s partnership with BlackRock [36:51]
  • Discussing the possibility of seeing laddered bond portfolios in the digital advice channel [39:09]
  • Interactive brokers – are they going to be making more of a splash with and start engaging with digital more? [42:48]
  • Discussion around other custodians Marstone is planning on supporting [44:17]

Companies & People Mentioned:

Other Resources

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

wealth management consulting

Complete Episode Transcript:

Craig: Welcome to this episode of Wealth Management Today. I am very excited to announce my guest today is Margaret Hartigan, Co-Founder and CEO of digital advice technology provider Marstone. Hey Margaret!

Margaret: Hey Craig, thanks for having me.

Craig: I’m so happy you’re here.

Margaret: Me too, me too.

Craig: So let’s jump off. So much interesting stuff has happened with Marstone, you guys are knocking it out of the park. Let’s jump right in and talk about the deal with HSBC. Can you give me some background? How did it come about? How long did it take? What pushed those guys over the edge to pick you?

Margaret: Well, thank you. As you know, Marstone was probably the first to be a true enterprise, wealth management platform. By that I mean we were the first ones to go B to B to C; we were never a direct to consumer platform that then expanded into institutional business. We felt given our experience as a team who had previously been in financial services that while we thought we had the right engagement model for clients to work with their institutional partners, whether they had an advisor or they did it self-direct, we thought that partnering with institutions was the smartest path forward. We felt that it was important to integrate to what we considered the backbones of financial services. On the wealth management side, that is typically a custodian or portfolio management provider. But the custodian dictates a lot of the rules of engagement that a bank or insurance company or RIA or credit union acts upon or within those borders when they have a wealth management business.

Margaret: On the banking side, as you know really well, it’s the core processing companies, the Fiserv’s, the FIS’s, the Jack Henry’s, that dictate a lot of the rules of engagement in banking. So knowing that those are sort of the pillars or the backbone that drives both management and banking, we thought, let’s look at one of the largest globally positioned companies that works with the largest companies in the world all the way down to the smallest, and let’s see if they’re interested in partnering with us for a digital wealth platform that will enable their institutions to electronically onboard clients and not have to use paper documents, to have manual entry, and let us integrate into their workflow processes, whether it’s single sign-on technologies for account enrollment or it’s statements, books, and records. We had been working with BNY Mellon | Pershing, and we had long discussions, probably for more than a year, about what we were doing, how we wanted to partner, how we did not want to dis-intermediate them or their clients, but how we could be a credible agent to Pershing as well as their clients, to help them retain and acquire assets, clients, and talent.

Margaret: And in hindsight it was a wild thing to do, because that was putting a lot of chips on black that you would get such an august firm like Pershing to want to work with you and believe in your vision, and then work shoulder to shoulder with you. But it paid off, and Marstone was the first platform to be chosen by Pershing. We won that over an incredible field of very worthy competitors. And together we worked through new API suites and new strategies, and HSBC apparently had been very interested in pursuing digital wealth and financial planning for a long period of time. They were very excited, not only by Marstone’s user experience and its decision to make everything as seamless as possible and frictionless for them to be able to adopt us, but they were also interested in other chapters of our roadmap, with financial planning and things of that nature.

Margaret: So because we were first, it was a long onboarding process. Pershing announced us and then together we continued to work on our collaborations and simultaneously worked with HSBC. And you know what it’s like to work with large institutions; sometimes the timelines aren’t things that you can control and they can be a bit protracted, but it’s been a rewarding experience working with both Pershing and HSBC. And we’re proud to say, as you know, that we announced that partnership at the end of 2018, and what was nice was that we announced it having already done all of the integration and development work. It’s in the final stages of pilot right now, and people are using the platform.

Craig: Yeah, I do know about the large institution’s timelines. I’ve dealt with them, I’m dealing with them now in my business. It’s not easy, it’s frustrating, they often move slowly. So the fact that you got it done, that’s an accomplishment. Sometimes just getting a phone call back is an accomplishment. So what was the big value add that HSBC saw, from the many options you offer? Was it the electronic account opening, was it pursuing digital wealth, was it the future financial planning? Which piece was the big lift for them?

Margaret: I think it was first the user experience, second was our flexibility to be a platform where they could benefit from our design sensibilities and our strategy of how to best engage a client and onboard the client. Definitely it was electronic onboarding. At the time, Marstone was one of the only platforms that actually enabled electronic onboarding; I don’t even think Pershing was necessarily doing it with their clients prior to that. So that was an incredible benefit. It offered a lot of efficiencies in terms of productivity, straight-through processing, elimination of manual errors; people saw it as a great cost-cutting avenue. But I think it’s definitely the willingness to partner with Pershing and abide by all of the rules of Pershing’s engagement that they had with their clients was very, very compelling. Because as you know, financial services, like all companies, are very risk-averse and they want to mitigate risk as much as possible.

Margaret: So the idea that we were willing to do the hard work of integrating into an extraordinary backend like Pershing was something that was not lost upon them. It enabled them tremendous benefits such as having the same books and records, and like I said before, a lot of the analog procedures and workflow processes and activities were then digitized. But they also appreciated our flexibility to allow them to run their own models or to use outside models, as well as to configure our platform, whether it was the risk tolerance questionnaire or to abide by their global standards from a design and branding standpoint. And I think at the time we were probably the most flexible. The reason we knew to be flexible is we came from the industry and we knew that every financial advisor feels that he or she is entrepreneurial and has their own value proposition, which is accurate. But certainly every RIA, every bank, and every asset management company feels that way too. So we knew we always had to be flexible and agnostic to things such as portfolio management, custodial backends, performance engines, etc. etc. So I think that flexibility and that true enterprise genesis were super compelling to HSBC.

Craig: Flexibility is important and it would allow them to basically create their own experience, and as you said, every firm has their own secret sauce. Even though they’re all in the same business, they want to do things a little differently. So being able to deliver their own custom UX is I’m sure incredibly valuable. You sort of downplayed your accomplishment here a little bit when you talked about working with HSBC and taking a shot at trying to close that deal, which would be the biggest deal you’ve ever done. A relatively new firm, relatively unknown if I could say, you said you put a lot of chips on black. On roulette, black is a 50/50 bet – that wasn’t 50/50. It’s more like putting all your chips on double-zero and then hitting it, a much bigger accomplishment.

Margaret: All of our accomplishments have been amazing, but in hindsight I’d say our biggest was BNY Mellon | Pershing. It’s a very prestigious firm, it is the gold standard, and it was wonderful collaboration with the highest ranks of that organization. That was the biggest bet, because what if we didn’t fulfill their desire to do the API’s and the partnership? For a small organization, that was a huge bet for us. But it has proved to be very rewarding, because it enabled the 5th largest bank in the world to successfully onboard and deploy. And that is a very real testament to HSBC and Pershing in the way that the three companies were able to work together. And I think what that demonstrates, which I think is often lost in the media, is how important the backend integrations are.

Margaret: Because what’s nice when you partner with the big custodians, it doesn’t matter which one it is, the client is already familiar with the way the business activities are. So it quiets a lot of the noise and a lot of the decision making, because the rules of engagement are already there. And when you successfully integrate fully into a platform, you are creating rails for piping that enables you to use them over and over again. So what’s interesting is the piping that we use for one large global institution is the same piping we can use for a regional credit union or community bank. And that has tremendous efficiencies, it enables us to be very competitive with cost and delivery, but it took a lot of work upfront. And we’re very fortunate that it worked out as well as it did.

Craig: Oh, indeed. So you’re talking about the rails and the piping that can be used. Do you see a lot of uptake in digital advice? With larger banks you can see why they would need that, but are community banks and credit unions also seeing the same need for digital advice, and are they accepting it and deploying it at the same rate?

Margaret: Well that’s what’s exciting is that when you’re early, you spend a lot of time evangelizing. You’re one of the most well-regarded people in this space and followed it from inception, and a lot of institutions keep coming to the proverbial boat show but haven’t necessarily bought a boat. I think what has changed this year is it’s absolutely on everyone’s roadmap for 2020, which means they have to make a decision in the next two or three quarters. So now I think you are seeing everyone wanting a digital platform. It’s more become digital engagement because some people are recognizing that the account onboarding process we use for wealth management has many other use cases, whether it’s for a mortgage application, banking, lending, or other service lines. So they’re trying to use these front-end platforms like Marstone that have back-end connectivity to take out redundant systems and streamline data collection, as well as multipurpose uses for different account opening documents or applications.

Margaret: What’s interesting is that so many community banks and credit unions want to extend offerings and services to their members or their clients, and wealth management more and more is being regarded as a very important tool and strategy for that, for a couple of reasons. One is it enables them to give a broader offering to their clients. Two, it enables them to extend wallet share or phone share, because it’s mostly app-driven. And thirdly, we’re seeing the wealth transference pick up, and you’re seeing boomers who have been entrepreneurial or have liquidity, who may have worked with a regional bank or community bank or credit union. But if there is not wealth management there, they run the risk of losing significant deposits. And certainly if the money’s distributed to the next generation, if they don’t already bank there or have a wealth management relationship, it’s seen as a great vulnerability to institutions. So I think more and more you’re seeing the community banks, credit unions, regional players who are actively looking to find the right digital partner for them.

Margaret: For some of them, they have trust business already and they want to expand into traditional wealth. Others may have relationships with an LPL, a Cetera or someone else, where they have a revenue share or referral agreement. But there are so many others (and this is what makes our partnership with Fiserv and potentially others interesting) that would like to have wealth management, but don’t want to necessarily take on the fiduciary responsibility or build out that architecture. And so Marstone, in addition to being a digital wealth platform, is also an RIA, and we have the ability to be a wealth management partner sort of off the shelf, if you will. We can do referral arrangements or revenue shares with banks who want to offer that extended service, but don’t necessarily want to take that all in-house. And one of the beauties of this financial technology evolution or revolution is that the services and platforms that were previously only available to the largest bulge bracket firms, because they were costly to integrate or expensive to deploy, are now being able to be absorbed and deployed by small shops because it’s been very streamlined. And that’s very exciting, it enables people that don’t have big IT departments or huge budgets for this to be strong competitors and participants in this space.

Margaret: So I think it’s becoming table stakes, and I think that the universe of people who are interested in deploying these strategies is that much greater. And I’d add that some of the collaborations we’re doing with outside asset management companies and others who want to distribute through Marstone, they certainly recognize that too; they recognize that Marstone and other platforms have the ability to touch a bunch of community banks, credit unions, RIAs, and family offices that they otherwise were not necessarily going to be sending wholesalers to, but they definitely want to be able to service.

Craig: So when you’re talking about allowing credit unions, community banks, and other types of smaller banks to be able to outsource their fiduciary responsibilities for wealth management, and you’re running up against all the TPMs. You mentioned LPL Cetera, because that’s exactly what they’re doing. The wealth management person sitting at the branch isn’t that bank’s employee, they’re an LPL employee or a Cetera employee; they’re dual-hatted, as they say. It’s a little bit harder to get into that and to supplant that relationship. So do you see credit unions not being satisfied with their current TPMs and they’re looking for more of a digital partner?

Margaret: I think if the TPM does not have an intuitive, inviting, and pleasurable digital experience, that is a vulnerability for the TPM. So I think all institutions, as part of their digital strategy and wealth management (is just one leg of that stool) are taking all of that into consideration. Now some of the big TPMs have already engaged with other digital platforms and are less inclined to be open architecture. Others do want to be open architecture, because maybe they aren’t totally in love with the first platform that they partnered with. I agree with you that it’s hard to supplant that segment of wealth manager, and that’s not something that Marstone is actively looking to do.

Margaret: But we are being approached by a number of banks who want to revisit those relationships, and are revisiting the breadth of services, both human capital as well as a technology, that those TPMs offer. What’s also interesting is I think that you’re seeing a lot of RIAs who are going through their own MNA process, but are now trying to compete with that TPM market. So you have these ever-growing regional RIAs or local RIAs who now want to be or collaborate with the community banks, the credit unions, and the regional banks. That’s something that we’re actually seeing pick up a bit, as well as hearing a lot of private equity firms who are interested in acquiring RIAs and potentially working with banks or selling them to banks.

Craig: So that’s interesting, Margaret! RIAs are looking to get into the TPM space. Because we know from statistics and the work we’ve done in research that 80% of most banks don’t have their own broker-dealers. So 80% of the banks that don’t have their own broker-dealer work with a TPM. What kind of RIAs are trying to compete in this space?

Margaret: They’re usually regional and have some sort of a relationship with a larger affiliation group; there’s some sort of nexus there. I’m not saying it’s a huge trend, but we are seeing a number of RIAs who have local banks or credit unions that are looking for this service, and there’s already this sort of locally known entity that the bank feels comfort with. Does that make sense?

Craig: It does, yeah. That’s an interesting observation.

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Craig: One other thing you mentioned, on your roadmap is there an option to open a mortgage application through Marstone? Or is that something that you’re interfacing with and sending data to them?

Margaret: Marstone is pretty clear in what it’s good at and what it’s not good at. So Marstone is designed so that we can be agnostic to different services and different backend vendors. A wise senior executive at a mega-regional bank said to us about a year ago, “You started off in wealth management and that makes a lot of sense, because that’s where you came from.” At the time robo-advisors were the hot thing and people were talking about that, and we never considered ourselves a robo-advisor, we always thought we were multi-segmented, in terms of the clients that we can serve. And having been a former financial advisor and the daughter and sister of a financial advisor, I’m certainly not looking to disintermediate advisors, but what he said was, “Your client onboarding process, your decision tree, all of that… You started off in wealth management, but it has universal application.”

Margaret: And what all of the institutions are realizing, whether they adopted the robo phase or they’re now coming back to market to take a look in phase two, they all know that they have to be ubiquitous front-end. Meaning everything has to be user-centric, and the client experience can’t be inconsistent from mortgage to credit to payments to lending to wealth or trust. So he was looking at us and his organization was looking at us from what you do and the data that you capture, how many additional fields do we have to add to now have one centralized account onboarding system, that could open multiple services? Because those are things that I’m finding now that we would say, I don’t know what you would say Craig, are we in vintage two or vintage three of this whole digital evolution?

Craig: Yes, I have the same question! When we’re talking about the different waves of the robo advisor and digital advice revolution, what wave would you say we’re in now?

Margaret: I would say that we’re probably in wave three. So wave one was the innovators, such as Betterment and Wealthfront and others. Wave two was the adoption of the innovation by the incumbents, so that’s where you would have Vanguard, Schwab, Fidelity, and others. And then third I think is where the digital innovation that Betterment and other people at Marstone forged, I would say now is ready to be absorbed and utilized by every financial institution. So now I think you will find super-regional banks and big wirehouses also in the ranks, even community banks and credit unions you will find as strong competitors in digital. I think that digital wealth has to be one leg of the digital strategy a bank might have. So it’s going to be payments, it’s going to be mobiles, it’s going to be banking, and it’s going to be wealth management. They have to be coordinated together, because it has to be driven according to the expectations and desire of the end-user.

Margaret: And to date, we have not designed digital strategies like that, but going forward we have to. So when you look at digital like Marstone or others, you have to look for a partner that not only has an awareness of integrating to large custodian backends, but they also have to have a keen understanding and some sort of relationship and vetting by the banking platforms. Because right now we have tons of client data, it’s just sitting in siloed applications and legacy systems that traditionally have not talked to each other. And the goal now, through APIs and other technology strategies, is how do we extract this data that we currently have as an institution about our clients, and how do we make the experience better and not have them answer all the same questions they answered five years ago when they opened their first banking account and now they’re opening a wealth management account. So I think it’s becoming more and more digital engagement. Wealth management or digital platform like Marstone is just one participant in that overall strategy; we have to have fluency in other activities that a user has at an institution, but also the legacy systems and other vendors that the institution is currently using. Does that make sense?

Craig: It does, but let me throw a counterpoint here. So you say phase three is banks; I say phase three is…

Margaret: I think it’s a richer universe. Vintage one, like I said, is there’s people called disruptors. Vintage two was the incumbents utilizing the innovation. Phase three is it’s just a broader universe of people that are actually now able to compete, and that will include banks, credit unions, and insurance companies.

Craig: I understand that, but I don’t think so. It is true that it’s expanding. At first it was just the disruptors, and then the second wave you had Vanguard and Schwab and then the big guys stepped in and took over, and now it’s spreading. And when it becomes ubiquitous it’s part of a wave, but I’m thinking of a wave of disruption. So Vanguard came and disrupted, right? They changed the market for digital. Please correct me if I’m wrong, but I don’t see banks changing the market; I see the apps changing the market. Like Acorns, MoneyLion, Stash, and other apps. I think Acorns has almost 5 million users, MoneyLion has like 4 million users. They’re changing digital advice, but they’ve all come at it in a different way. Like Acorns started as a micro savings and moved into wealth and banking, MoneyLion started in banking and is moving into wealth. So how do you see those apps impacting the work that banks are doing?

Margaret: I think that they have done a tremendous job of demonstrating to the industry how best to engage a client and onboard them seamlessly, and not over-architect the process. I think that they nailed a lot of important psychological and emotional hurdles that a financially innocent person has when they walk down the path of exploring investments, planning, or anything to do with money. They simplified it, made it very human and very quick, and gives the user a tremendous sense of accomplishment. Those are extraordinary feats. Disruption, I always struggle with the word disruption because it makes me feel like we’re trying to break something or it’s binary; like one person’s good and one person’s not, and one person’s going to win and one person’s not. I think that we’re in a huge wave of transformation. Banks, insurance companies, and credit unions all want a better experience, they just don’t necessarily know how to do it because they’re highly matrixed or they’re beholden to a lot of those legacy systems. So I think those apps are tremendous and I think again, you’re going to find the incumbents utilizing them and learning from them.

Margaret: So I don’t know that the banks are going to be disrupted or any one of these digital innovators is going to disrupt – that’s my belief. I think the apps are going to be utilized and copied or purchased by other large technology players or banks but they will continue, as innovation always as does; it will continue to influence and teach the incumbents. I oftentimes think of fintech where we are now as, remember pharmaceuticals and biotech in the early 2000’s? Where big pharmaceutical companies were buying their R&D by buying companies like Genentech or things of that nature. And that’s naturally what is going to happen in our space too; we’re already seeing a lot of consolidation. But this idea of disruption and the app being suddenly on the top of the leaderboard, I don’t see that. It will be interesting to see what happens with the behavior, the attrition, and the AUM when we have massive periods of volatility. I think we have to look at what is the intention of the app and the user of those apps. Is it just a savings vehicle, if it isn’t a true investment vehicle? And I don’t know that we know that yet.

Craig: Well I see them differently. At least on the Acorns side, they’ve changed the discussion where it’s not about the savings. They’ve created a savings app, but the experience isn’t focused on the savings, the experience is focused more on education, brands the whole rounding up function; it’s become a little bit gamified. So they don’t talk about retirement necessarily front and center. They’re helping people learn to save and creating a savings process without pushing it right in their face and saying, “We’re all about wealth management.” That’s sort of behind the scenes. So they’re building a habit and educating very well. MoneyLion does a great job educating as well, but without pushing the whole savings and retirement thing to the forefront, which I think a lot of people don’t necessarily feel like they’re ready for. That’s how I see them then changing the conversation.

Margaret: Oh I totally agree with that, and I think it’s right. A lot of people can’t even think about retirement or don’t even imagine it ever being a possibility for them, for one because maybe they don’t ever want to retire; as opposed to what we’ve traditionally thought about retirement, they might want multiple second acts. But I 100% agree with that, and I think they’ve done a wonderful job of empowering people to see that they can do it and show them a path. Over time, I do believe that the wants of a client become broader as their needs become broader and more sophisticated in their complexities of their liabilities and their assets. But again, I think that’s transformative and I don’t know that it is singular to those guides. I think it will be adopted and absorbed by many people. That’s my viewpoint. And Vanguard is such an extraordinary company; they have an incredible value base, an incredible corporate identity, and brand recognition. It’s a trusted company almost like no other. I don’t know that they were disruptive though in robo, it just was so natural for them to be able to transition their offering to that. So I don’t know if that’s disruptive.

Craig: Well, it remains to be seen. You can’t tell what’s disruptive until it disrupts something. So tell me about your BlackRock partnership, that’s a big announcement!

Margaret: BlackRock is a leader in asset management clearly, and they were interested in new ways of distribution. And I think they saw that the partnerships Marstone has, as well as the integrations and the backends like interactive brokers, Pershing, Fiserv, and some of the other people that we’re working with, I think they found that in addition to their great internal platforms that they were still eager to distribute to as many platforms as possible and to touch as many parts of the country or globe as possible. And I think they saw us as a great distribution partner; one of many, because clearly they’re at all of the major wirehouses and whatnot. What’s interesting about BlackRock and JP Morgan is when those guys make a decision, it is sort of the leaders ringing the bell and everyone follows suit. So when you have people that you would think would have potentially been protectionists saying, we’re only going to work within these borders or we’re not going down break rank, when they actually start partnering with the innovation or investing or backing them, that is a real call to the street and the masses. That galvanizes people.

Margaret: When they did that, Goldman has done that, AllianceBernstein has done that, I think that’s when your phone starts ringing a lot with other manufacturers, even in new asset classes that no one would have thought about for digital before. Alternatives, manufacturers and underwriters of fixed income, corporate debt, municipal debt, especially with this administration, in some of the areas of the country that are feeling tax burdens in a way that they haven’t before. I think you’re seeing a real interest in laddered bond portfolios…

Craig: Are you going to see a laddered bond portfolio in the digital advice channel?

Margaret: I think you will see all of the original asset classes that you traditionally only got through a family office or an RIA or a wealth management company; I think you’re going to start seeing all of it distributed through digital platforms.

Craig: Is that on your roadmap?

Margaret: No, but we’ve met with real estate and tons of firms that you’d be surprised that they are interested in their own digital storefronts or distributing through digital front ends like Marstone.

Craig: I think that would be incredible if you can get some of these other asset classes through digital, it’s just a big lift to be able to deliver that. But it’s not unforeseeable that it could happen, as digital advice expands into other demographics and you have higher net worth putting more of their assets in; then you could move into some of these other asset classes. They’re just harder to sell digitally because they often require explanation, it requires a bit of a more of a holistic view of the client’s assets and their goals, which you don’t often get through the digital channel.

Margaret: Yeah, I think that’s right. The way we see digital is digital engagement and digital distribution. So again, it could be wealth management, it could be other things, it can be distribution. But this is the new medium, sort of like online shopping, right? Amazon conquering or whatnot.

Craig: Are you saying this is like the Home Shopping Network?

Margaret: No, I’m definitely not saying that! You and I are old enough to remember in 2000, when people thought the Internet was dead. And it wasn’t dead. So when a lot of people have asked is robo dead, it’s just not necessarily the right question. Is digital engagement dead? Absolutely not. Digital engagement and distribution is a huge cost savings mechanism, it’s a huge risk mitigator, and it offers tons of efficiencies. That’s what is so exciting, and I think more and more everyone’s looking to cut costs. Because what’s interesting is the retail client wants everything free on the front end, right? The fixed lines of distribution, whatever they are, those fixed costs have not come down. And more and more you’re seeing people that are trying to distribute in a more cost-effective way and not have someone in their backpack pocket.

Margaret: And if we’re seeing this transformation where more and more advisor teams are going independent or setting up family offices and whatnot, there has to be new means of delivery to these teams. Unfortunately because of the word robo, people look at it just for the financially innocent, the millennials, or small balance accounts. But if you look at interactive brokers, you look at Schwab or some of these others that have always had very sophisticated, affluent people self-directing, there’s no reason why we’re not going to be getting other means of distribution to these family offices and whatnot. So for me, I just think it’s an evolution play and that’s where the market is going.

Craig: You mentioned Schwab and interactive brokers and sophisticated clients who are self-directing. Schwab has their own robo, of course. We don’t hear much from interactive brokers, those kinds of firms sit more in the background. Are they going to be making more of a splash with digital, and will other types of clients and other segments start engaging with digital more?

Margaret: I think so. So we’re partners and fully integrated with digital interactive brokers, and they have an incredible footprint of countries that they cover. And we’re seeing a lot of interest from their clients, both domestically and internationally, who want digital. I do think you will see these firms that have incredible piping that’s currently utilized by hedge funds and RIAs and whatnot. I definitely think when those companies, the family offices or RIAs or asset managers who are on interactive brokers or Schwab’s platform or someone else’s platform, you will see them launching their own digital strategies. And I do think you’ll see them make a big push, just like you’ve seen Apex and others make a big push that are relatively new.

Craig: You mentioned Apex. Are there any other custodians that you guys are planning on supporting? What’s on your roadmap?

Margaret: We’ve been in talks with all of them, and we all have agreed that more or less when there is a client that wants us to integrate to one of the other major custodians, we’ll do that. And we’re in some of those conversations right now.

Craig: Which custodian are you talking to? All of them?

Margaret: All of them. Pretty much. You can appreciate this, because you have to get to the end of the job, of where you are, and you have to do a good job there and demonstrate proof points. Then it makes sense to do other integrations. But you have to be careful not to be building endless connectivity that doesn’t actually have demand on it. So we’re just being mindful. And I think the other custodians and other cores and other people are doing that too. There’s this illusion of choice that there are so many platforms like Marstone, but there aren’t. So all of the big custodians and cores would be happy to work with any of us, if a mutual client wants to use our platform. And I think that’s where we all agree upon at this point.

Craig: Yeah that’s always the easiest way, wait for the client to come by and then get it going.

Margaret: Yeah. In the early days you had to have the plumbing first to get the clients. Now we’ve proven that, and we’ve proven that we can do very complex integrations with some of the largest financial institutions in the world, so there’s confidence that we would be a good partner for other custodians and other vendors.

Craig: Yeah, the world is changing. If you can get them to agree that yes, we’ll build it and then we’ll go, it’s definitely an easier lift for you. Then you’ve got a client in the bag, rather than building it and hoping you can find somebody. Margaret, you’ve been very gracious with your time. I appreciate you talking to me and giving me this interview for the podcast, I thought we got a lot covered. I have a lot more questions left, so we have to schedule another call!

Margaret: Excellent. I’m looking forward to it, and I very much appreciate you having me on your podcast. Thank you!

Craig: You’re welcome, Margaret! Thanks again.



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