#WinnersOfWealthTech Ep 24: Rich Cancro, CEO of AdvisorEngine

“Everybody fails at some point, but if you have built a level of trust with your clients, there’s no reason for fear.”

— Rich Cancro

This month’s Winners of Wealthtech interview is with Rich Cancro, who is the Founder and Chief Executive Officer of AdvisorEngine. He sets the company’s vision and strategy and brings over 25 years of experience building wealth management technology. Prior to founding AdvisorEngine, Rich served as a Managing Director at Bank of America Merrill Lynch, where he was Head of the RIA custody business and he was also responsible for developing their Global Wealth and Investment Management financial planning and reporting tools. Before that, Rich created industry-leading solutions for J.P. Morgan, Bear Stearns, and DLJ Direct.

I was inspired to start the Winners of Wealthtech series by one of my mentors, Tim Ferriss, who is a best-selling author, incredibly successful investor, entrepreneur, and podcaster. Actually, Tim doesn’t know that he’s one of my mentors, since we’ve never met. But his work and his writing have been a big influence on me, so I’m going to keep saying it until he tells me to stop. (By the way, I highly recommend Tim’s latest book, Tribe of Mentors, which you can buy online or even in a brick and mortar bookstore.)

The feedback on this series has been overwhelming! If you have a suggestion for someone you think I should interview, please send it to me at craig@ezragroup.co.

Now hit the Play button!

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

  • What led Rich from a Bachelor of Arts degree to the path of the financial services industry [03:15]
  • Why he left Waterhouse Securities for DJL Direct when Waterhouse was doing so well [08:08]
  • Discussing the atmosphere while working at one of the first online brokerages [11:46]
  • How the behind-the-scenes acquisitions he was a part of throughout his career affected him [20:23]
  • The Bear Stearns collapse, from Rich’s point-of-view [25:55]
  • How he was recruited to Merrill Lynch [30:24]
  • How RIA custody has changed in the last 10 years [31:02]
  • Thoughts on the fate of Bear Stearns had there not been the mortgage collapse [37:22]
  • What made Rich want to start his own company [38:29]
  • Rich’s introduction to raising capital [40:41]
  • The origins of the first name of AdvisorEngine, Vanare [42:42]
  • What motivated him to purchase Nest Egg so soon after venturing into coding [44:21]
  • What Rich has learned from AdvisorEngine, and what he might do differently the second time around [50:14]
  • Discussing the funding of AdvisorEngine and Rich’s thoughts on it looking back [56:10]
  • How they settled on the name AdvisorEngine [58:47]
  • What has become most important to Rich in his personal life [1:02:41]
  • How he keeps his entrepreneurial spirit alive [1:03:45]
  • How Rich identifies people who are a good fit for AdvisorEngine [1:05:31]
  • Bad advice he has heard being shared within the industry [1:09:39]
  • Rich’s favorite books to gift and why [1:12:19]

Companies & People Mentioned:

Here are a few of my interviews with previous Winners of Wealthtech:

wealth management consulting

Complete Episode Transcript:

Craig: I’d like to welcome to the Winners of Wealthtech version of our Wealth Management Today podcast Rich Cancro, CEO and Founder of AdvisorEngine. Rich, welcome.

Rich: Thanks very much Craig. A pleasure to be here.

Craig: It’s a pleasure to talk to you. We’ve known each other for a while and through the industry, and it’s always great to talk to people I know and respect, and find out more about them. Congratulations on being a Winner of Wealth Tech.

Rich: Thank you very much, I’m excited to be a winner.

Craig: You will get a plaque and a gift card, that’s what all the winners get.

Rich: Nice, looking forward to it!

Craig: I want to go back in time and talk about your career, it has been all in financial services. Some people tend to bounce around, but you didn’t. I wanted to go back to your DLJdirect days and talk about how you went from a Bachelor’s of Arts in college and how you made the decision to go to DLJdirect. Was there anything in between, and what made you take the path of the financial services industry?

Rich: Before DLJdirect, I was at a Waterhouse Securities and actually the third person in what has now become TD Ameritrade Institutional. The first day there was an interesting day. It was basically my first job and in the middle of reading the handbook, next to me was an active trader desk. This is before trades were being done online, in the early 90’s, and it was frenetic. My first 30 minutes I’m sitting at my desk trying to figure out how to use a quotetron, and I get asked to start answering phone calls for another group. And my first experience was I got a phone call, I picked it up, the guy asked for a quote on an option and I am looking at a syllabus and how to actually get a quote, I’m putting A in this, right? And the guy is escalating, I will not repeat since we’re on a podcast the words he was using.

Craig: You can repeat, we’ll just cut it out.

Rich: The word starts with “F” and then “A” was the second word about my competence about giving him a quote. Eventually he asked for me to get off the phone and put somebody competent on. So that was my first few minutes.

Craig: How did you get the job at Waterhouse out of college?

Rich: I think through a recruiter? But the main thing there that I learned being the third person in that group is I did everything; I took calls from advisors, I opened up accounts, I worked with all the operational areas of Waterhouse, I placed trades for fixed income, for mutual funds, for stocks. I did all of that, and what I learned and what I’ve been passionate ever since then is the care that advisors have for their clients is amazing, right? They fundamentally are passionate about the life journey of their clients. And the other thing is servicing advisors, in everything that I did then until now, is so critical to the success for them. Whether it’s operational, getting accounts open, getting them funded, doing it correctly, right down to getting the address right, is super important. Because that’s the first impression that an advisor will have with their client. So when you go through the stream of it as a vendor or as a custodian, what you’re doing with that advisor actually has a significant impact in how they represent themselves to their clients, and their care for their clients. But just seeing the level of care they have for everything going right from a service perspective and everything else an advisor does, was ingrained day one when working with advisors.

Craig: So was it a conscious decision to get into the securities business, or did you just take the first job that looked interesting?

Rich: Oh, you really wanted me to go back!

Craig: What was your major?

Rich: It was business, but what caused me to get interested in financial services was going all the way back to approximately 1980. My grandmother gave all of her grandchildren $500 and we invested it in a stock, which happened to be Chrysler.

Craig: So she gave you the money and she told you had to invest it in a stock?

Rich: Well my father actually recommended Chrysler, and this is right during the time where Chrysler was with Lee Iacocca and was going bankrupt basically. So what that made me do is read the Wall Street Journal every day as a young person, around age 13. I was reading the journal every day, following the stock, what’s going on in the market, and understanding the recession that ultimately came. All those things got me engaged in financial services, and probably what helped was it went from $500 to $2,500, which was huge and exciting. So that got me involved in financial services, and ultimately it’s what I wanted to do. I won’t say the name of the firm, but my very first stop was a firm that I was a stockbroker for; I lasted all of six weeks. I decided that I did not like selling stocks, mutual funds, bonds, and cold-calling 300 people a day. I decided that I loved the industry, but that wasn’t the right place for me, I was not to be a broker. When I started working with RIAs at TD, that’s what hit my soul. That fiduciary standard and that care that I was hearing and feeling every day from advisors hit my soul, and I was always passionate about that. From there I went to what was PC Financial Network, which ultimately came DLJ Direct.

Craig: How’d you get there? Why would you leave Waterhouse when it was doing so well?

Rich: What was exciting about PC then was that it was technology-driven and it was on Prodigy, and I felt like they were at the cusp of something new.

Craig: Let’s talk about what Prodigy is, for those people who don’t know what that is.

Rich: It was the Internet before the Internet.

Craig: Before AOL.

Rich: Correct. It was a network, there were a lot of message boards for sure on there, but it was also a place to get information and content.

Craig: You had to dial in with a modem.

Rich: You had to dial in with a modem, yes thank you. I have the sound in the back of my head now, the bom bom bom bom…

Craig: I was just talking to Steve Strand, who was a Co-Founder of Advent. So he was 10 years before you, founding Advent. He was talking about connecting over 1200 broad modems and optimizing the PC interaction to get more data over that modem.

Rich: Yes. There was a product called Reality Online, and how they dealt with that is you would dial in, download the data, and then you’d work locally and upload it. And it was exciting when the modems started doubling in speed.

Craig: Another old school thing, I worked for ADP when they had brokerage, which eventually became Broadridge Financial. And back around the time you were working at DLJ Direct, via Compuserve I was building the first dial-up market data network, where in a remote office somewhere without a 56KB hardline, clients could dial the phone and get quotes on their terminal, which was revolutionary.

Rich: That was revolutionary at the time. So going back to Prodigy, the network that no longer exists, it was exciting. I was young and now we’re dealing with technology and trades, it started off as individual trades and quotes. Then ultimately we built out an online account opening in 1993.

Craig: When you say online, you mean paperless account opening?

Rich: Yes, that’s right. You would go on Prodigy and put all your information in and it would come across. We were interacting with our clients through email, so that was great. So you’re able to get quotes, you’re able to go online and open an account, all those types of things. We also created this thing where you could actually fund the account as well. As we built out we went out to America Online software, and we are one of the original online brokerages there. That was another transformative moment for us that helped us grow quite a bit.

Craig: What was the market like then, for being an online broker? Online brokers were like robo-advisors now, people were freaking out. Online brokers, what does this mean? It’s going to change things. I remember I had a Merrill Lynch CMA account and they were saying, “Don’t do this, these guys don’t know what they’re talking about.” So what was the atmosphere like, working at one of the first online brokerages?

Rich: Well, it’s very akin to what’s happening today for sure in a different way, in the sense that if you look at the de-regulation that happened in the 70’s that created discount brokerages, then those discount brokerages moved online, and it was just a whole bunch of firms that were created for online brokerage. Then effectively they all were bought and became like five firms. But it was incredibly exciting, right? I remember our first day with 1,000 trades and all those types of things, and eventually that became 100,000 trades in a day. But you watched the momentum and you felt it every day. Like holy cow, we’re growing staff, we’re getting more emails, we’re getting more accounts open, we’re getting more funds coming in, we’re getting more trades; you’re physically watching this happen and it’s a lot of fun, I had a great time. So I started there in client services and then I wrote a memo about improving client service, owning issues, seeing them through, and from there I got a promotion to be the training manager and also to take on quality assurance. Quality assurance was pretty broad, it was both the quality of the service we delivered as well as testing software. That was when I first started to get a little bit more involved on the technology side of it. So I was the first person to do that. We started the QA group and did two things: one was, why are clients calling us, why are they emailing us, why are they sending letters to us, and how can we make it more efficient and make it better for them? So it could have been things they didn’t like about our product, a better service, or a feature they wanted. We were getting granular with like, we’re getting checks – what’s the fastest way for us to get a check? Or a new account out? We had different places to mail things, so seeing which actually was faster for us to process the mail. One of the things that people were calling to do was to get quotes, so we built an IVR system so now you could get quotes online or through the IVR system. It was all about making us more efficient, more scalable as a company, and ultimately delivering a better service to our client base. So everything that we learned through that analysis of why people were contacting us, how can we automate that, how can we make it better, we were focused on that as a company. And on the QA side, testing the software, that was my first time learning about technology. And when you do quality assurance testing you’re doing two things, right? You’re learning about the product probably deeper than anybody in the company, because you’re testing every single thing in the software. The second thing is you’re starting to learn how the technology actually operates, right? So you can start understanding and learning about how software works, and ultimately how software is built. Around 1997 I was asked to be a program manager for what is now NetX360 and NetX Investor. Then we called it NetX Client and NetX Exchange. It was to take the DLJdirect software and deliver that to the clients of Pershing. It was a very informative moment in my career because it’s driven and informed a lot of things I’ve done since then. We were innovating all the time; besides online account opening, we ended up building streaming quotes, IPO center, delivery of institutional research, and a real-time P&L.

Craig: What did you build all of that in?

Rich: All sorts of software, everything from Windows-based desktop through the Internet, which was incredibly cool and very flexible. So if you think about HTML5 today that solves for that now, but we didn’t have HTML5 back then, we didn’t have Web 2.0. So to give our clients the flexibility and the power of moving columns, sorting data, and being lightning quick, a Windows-based application was good for that. Our Chief Information Officer Suresh Kumar, an absolutely brilliant guy, he had a vision on how to build a technology stack, kind of an internal API before APIs became the thing. What was cool was he built out what’s called Tap, which is a series of messages that we are able to put multiple front ends on. So we were able to put America Online to the IVR the Windows application to the end run, and then ultimately on the Internet. All those pieces ran through the same set of messages and made us scalable and efficient, in terms of how we can build the technology and support it. He was an absolutely brilliant guy, I learned a lot from him. I still do, I use him as a mentor to this day. He’s just a great guy. He had incredible passion and in many ways pushed the business harder than the business. He had a great partnership with my other mentor, Blake Darcy, who was the head of DLJdirect. The two of them had a great partnership together and mutual trust of each other, and to this day they’re both my mentors. So with that said, going back to quality assurance testing and doing program management, my first client was Vanguard Broker Services. So you talk about putting pressure on someone, it’s Vanguard! What I learned is that when you build (going back a few minutes ago) direct-to-consumer software that is cool, and now you need to build it for different brands. So you think about a direct-to-consumer where, it had a lot of flexibility, it was highly automated, but it was built for one kind of operational framework, one risk framework, one brand, one set of pricing, and things like that. But now when you’re going into basically the custody world and now you’re delivering to other broker-dealers or RIAs, now you’re dealing with multiple risk frameworks, different brands. In the case of broker-dealers, you have thousands of reps with thousands of brands, and they have different levels of access of what they’re allowed to do around portfolio construction and fee billing, all that stuff. We had to peel back a lot in the features and kind of restart. So our original delivery of Net Exchange client was a pretty basic website, still pretty good for the time, but we had to peel back a lot of cool stuff and then basically rebuild out to what is now, NetX360. What I learned is, when you’re building out effectively Enterprise software, it’s different than building out for an enterprise, right? So in other words, feature control, function control, data control, entitlements, branding, compliance, disclosures, all that stuff, you have to build it very flexible, so it can operate with different types of businesses. And it was an important lesson, I’ve still got some scars from then.

Craig: Did any of the acquisitions that were going on behind the scenes, like when DLJdirect was spun off or when Credit Suisse acquired you or Bank of Montreal, did any of that stuff affect you at all?

Rich: Sure. What you’ll see as you go through my career is that there’s a commonality with my firms being bought.

Craig: Yeah, what is up with that?

Rich: That just seems to follow me wherever I go. Along those lines… first let’s take one step back, because we have to talk about the really exciting part. Ultimately DLJdirect did an IPO, which was super cool. So that was a fun part of my career. And then Credit Suisse bought DLJdirect, so when that happened we went from DLJdirect to CSFB Direct. Then as part of that, CSFB Direct was sold off to Bank of Montreal, through their Harris Bank, so it’s called Harris Direct. It was at that point that I decided to move on and go to Bear Stearns.

Craig: So you went to a stalwart Wall Street firm you thought would never have a problem, THE Bear Stearns.

Rich: Yes.

Craig: You were safe there.

Rich: Yes. I love the way you’re joking with about my career, Craig.

Craig: Well you know, it’s only the biggest financial event in the last 90 years.

Rich: Yes, I understand. And I participated in that. One thing I want to mention, this is important when I think about mentors, when I moved over to work on the NetX Client Pro, Brian Shay and Jim Crowley, who were both senior people at Pershing at that point, they took me under their wing and they educated me on the clearing custody business, the broker-dealer models, and they were great mentors to me. That was super important to my career, so I just want to make sure I mention them. They were great partners to me, very patient in educating me and teaching me; I have very warm memories of that. So at Bear Stearns, I would say two things. First of all, I came in as the Head of Product Development for the RIA custody business, which was a newer business at the time. And it was also a bit of a COO function, because basically it was a newer business and I was tasked… When you think about product, it was kind of like the whole thing. It was anything from revamping the technology, trade rebalancing, financial planning, to client portal. But what we also did there was we built out a whole new managed account platform which had different flavors for it, so separate account managers. We also built out a rap program, and we revamped the mutual fund platform as well. If you recall, Bear Stearns had a little ding on its mark in the mutual fund custody and clearing business, so we revamped it and extended the product offering, we increased our NTF platform, we did a lot of things that were beneficial to our clients and also created a better risk framework, and so and so forth.

Craig: Was there someone at Bear that recruited you?

Rich: Yes, John Tires. He was someone who I worked with for a bit at DLJdirect. He was the Head of Sales and ultimately became a co-head of when the RIA and the broker-dealer businesses got combined, he became a co-head with Joe Giarci at Bear Stearns. Bear Stearns, on the clearing side, was obviously a top-tier player in the hedge fund clearing and custody business, had a nice broker-dealer business, and was now growing their RIA business. What we were seeing was the trend to fee-based business. So we had some broker-dealer clients that just threw away their broker-dealer alliance and just did a 100% RIA. And really, as a broker-dealer they’re more like portfolio managers. So they ultimately moved away from FINRA and became FCC registered, informed RIAs. And we saw hedge funds doing the same thing, hedge funds creating RIAs, so what made sense to us was to basically combine those businesses, because the toolset (and where we were investing) was in the fee-based business. So to support all the advisor activity of those types of firms was among the core reasons why we combined it. So just traversing through that, and certainly over a beer and not a podcast I could certainly talk about the weekend that was, that I got a phone call on a Friday afternoon around 4:00 saying, “Hey, we need to prepare for meetings with J.P. Morgan and others tomorrow morning.” That was March 14th, 4:00, and I spent the nights at Bear Stearns working with some of my colleagues, preparing the presentations. And Saturday morning away we went, meeting our or potential new colleagues. It was to say the least, an interesting 48 hours.

Craig: Right. And that was because the Fed told Bear, here’s some money, which they thought was going to last a couple of months. And they said, no, this is for the weekend, and you need to be sold by the end of the weekend.

Rich: Well as you know it’s quite fluid, and I wasn’t personally talking to the Fed, but it was very fluid. I think it changed pretty quickly from, we have a backstop at J.P. Morgan to, you need to find a home. What we were being told by the executive management at Bear (there were probably 40 or 50 of us working on that stuff that weekend) was if we don’t have a deal done by the time the Asian markets open, we’re out of business. So what was happening that weekend, and it was very surreal, you had one set of people meeting J.P. Morgan, and they’re the business unit that we would probably become part of. And you had another set of people, the tech and ops side, that were thinking how am I going to wind this thing down? So it was parallel tracks. And then you had another set of people called brokers, who were trying to get their client files out the door just in case there wasn’t a Bear Stearns on Monday morning. So that was Saturday, it was a very active Saturday. And Sunday we started meeting with smaller groups, like more specific to the group that you’d be working with. And sometime late morning a phone call came into our conference room and they said hey, we got to go. And that was it, no reason. And as it turns out, as we all learned, there was a point where J.P. Morgan was not going to go through with it. And it’s the first time, it was a Sunday, that I had a beer during the workday. The few of us that were in those meetings, it was like crickets in the building. No one was talking or updating still several hours later. So we said you know what, let’s go to the pub down the block and have a beer. We had a couple of beers and later that evening, I think around 7:30 we’re watching CNBC in Bear Stearns, no one’s saying anything. And remember this is a Sunday, normally we’re in the office, right? There’s usually thousands of people there and very, very active. Now you’re down to a handful of people on a few floors, and $2 came across the screen. That was an interesting weekend. And then we had the pleasure of the day after that, all the protesters outside of our building and going to work wondering if you had a job or not. It was crazy, the protesters were inside the building up against security. It was an interesting way to go to work. So from there through that transition, I ran the RIA custody business and there was a plan that we built out to grow it. A few months into, that there was a decision to sell the business and it was ultimately sold to RBC. I decided not to move forward with that transition, and so I left and went to Merrill Lynch.

Craig: Why Merrill?

Rich: That’s a good question.

Craig: Because they had the same problem, they were sold to Bank of America.

Rich: I had so much fun with the J.P. Morgan/Bear Stearns transaction that I wanted to do it one more time. No, it was an interesting role. Ultimately I ran the RIA custody business there, but it was also an opportunity to be responsible for the financial planning and reporting tools across Merrill Lynch, the Private Bank of Merrill Lynch, as well as US Trust. And ultimately what was very cool about that was I was able to spend time with a whole bunch of smart advisors. And to learn from like working out with them side by side of as basically a product owner to learning about how they interact with clients, how their clients feel about what they’re providing them. It was a great learning experience, I had the opportunity to host them, basically reporting and planning a group of advisors, and it was a good opportunity.

Craig: Was there someone at Merrill who recruited you there?

Rich: There were a few people there, but John Tires was there as well. John’s a phenomenal person. He’s also been very helpful, in terms of learning from him and his style. He’s got a great style about him; he’s very creative, very smart, a deep domain expert in wealth management, and just a good guy. That was me being recruited there. I did that for a few years, and then went on this journey.

Craig: Before we move on, how has RIA custody changed since you were at Merrill 10 years ago?

Rich: Do you mean in terms for Merrill, or do you mean overall?

Craig: Overall.

Rich: Oh, that’s a great question. We could probably spend a lot of hours on this, but I’ll keep it short.

Craig: We have time.

Rich: I think there’s a few consistent things, but then also things that have just been so rapidly changing. One is if you go back a few years ago, who you were servicing as the RIA is fundamentally different. If you go back to the early days when I was at Waterhouse, it was a fairly basic offering, right? In terms of people were buying stocks or mutual funds, there was no such thing as ETFs at that time. Maybe someone was buying some fixed income, but basically it was planners that did some form of fee-based business as well. And from there it became a much more sophisticated business, particularly the service. On the investment side it went from that to okay, we’re going to start offering option overlays, or maybe we’re going to start offering alternatives. So the sophistication of those offerings became pronounced. And then the other part is the growth of separate account managers, right? So the idea that these institutional managers are now being accessed to provide some kind of connectivity to them for the advisor, so now you’re getting access to “professional” money management. And then the whole idea of UMAs, right? So one portfolio, one account, you’re having multiple managers. So the sophistication of the offering blossomed, and therefore the custodian needs to service that grew. If I look at Bear Stearns for example, what we were doing well with was advisors who targeted higher net worth and ultra-high net worth. And the big part of that was some of the specialized lending that we were able to provide to that market segment, which was fairly unique. But larger clients have larger clients, right? And sometimes they have very sophisticated needs around lending. And we were able to provide that in many cases to people, at a very competitive rate.

Craig: From the custodian?

Rich: Yes, the custodian. So to help advisors win business they wouldn’t be able to win if they couldn’t provide help on the whole assets and liability side.

Craig: Allow me to just break-in on this thought-provoking interview that I’m doing for a word from our sponsors. I want to take a little break from this episode to talk to you about one of my favorite sponsors, the Invest in Others Foundation. Invest in Others is a non-profit, you can find them at investinothers.org. They look to raise money and give out awards to charities that are sponsored by financial advisors, so it’s financial advisor’s favorite charities and charities that they spend a lot of time supporting. Invest in Others looks to get sponsorships from the industry and funnel that money to advisor’s favorite charities. I like this non-profit, I think you should take a look at it. Again, that’s investinothers.org. They have a couple other programs: one is a Grants for Good program, delivering money to different needy organizations and needy groups. They’re also starting a corporate awards program, which is going to be a little bit different but still within the industry and another way for financial services and wealth management corporations to help donate money to people in need. I like Invest in Others, I think you should take a look at them at investinothers.org.

Invest In Others

Craig: So it sounds like Bear, because you keep referring back to Bear, that they were on the cutting edge of a lot of this stuff and that if they hadn’t had that big mortgage back problem, they would have been more known for these innovations rather than the collapse.

Rich: Craig, are you going to make me get upset?

Craig: Yes, I’m looking for tears.

Rich: I know, you’re about to get it on video.

Craig: The video won’t go out, I’ll save that for the paying subscribers.

Rich: We were on the cusp of building an amazing business, and we were doing a lot of things. And again, under John’s leadership, there’s a lot of cool stuff that we were doing. It’s unfortunate that another area of the business crushed the rest of Bear Stearns, but it happens.

Craig: Happened to a number of other companies too. So Merrill, you left there after a couple of years. Then what made you not go to being another employee somewhere, what made you start your own company?

Rich: For quite a while I had two thoughts that I thought were opportunities to help advisors. The first of my two ideas is what I’m doing now, and the other one was doing a roll-up strategy. Basically what I wanted to do was acquire RIAs and create a regional and then a national brand. The business model that I’m a fan of are the ones that are able to find that middle ground of advisors helping them be successful around their investment framework and their messaging and how they operate and interact with their clients, maintaining that but centralizing everything else, right? So all this stuff that most advisors probably started at a bigger firm and peeled away. And as they become successful at 250 AUM or 5 million or 1 billion AUM, somewhere in there they realize, “Holy cow, I went away from doing what I like doing, which is growing my business and my relationship with my clients to dealing with operations issues, HR issues, compliance issues, tech issues, which custodian should I be with? Should I be with two custodians?” All this stuff that isn’t their passion. Right? So take all of that stuff and take it off their back, centralize all of that and make it scalable. And I think a lot of advisors, you can see with all the M&A activity, I think you’re seeing that it makes a lot of sense to them. So we started down that path, but the challenge I was having at the time was the chicken and egg, right? That was my first time ever trying to raise capital, which is a whole different skill set that luckily I’ve learned.

Craig: Was someone helping you there? Did you have a mentor or coach to help guide you through that experience?

Rich: I reached out to several people, Mark Diberson being one of them. I didn’t know him real well then but I knew of him and we’d interacted a little bit prior. Mark is a super bright guy and straightforward. So he was one of the people, as well as other folks that I spoke with. So I did that for a while, and ultimately in that process I looked at the technology that was being offered to advisors, because I wanted to have a great technology stack. Something that was seamless, that was integrated, easy to use, so on and so forth. Something that you can scale this business, right? And at the time I was struggling to find something that met my vision of what I wanted that to be. The other part was I thought it was important then and now that the technology should be something that is extending the advisor relationship with the client. So I went back to, well, my first idea was the technology stuff, which is something that I’m good at, something I’ve had a lot of history with, and something I’m passionate about. And, and after seeing was out there at the time, I said I’m pivoting right back to that idea and I’m going to go run with it. And that’s what we did.

Craig: And then a lot of things happened. So where did you get the name Vanare? That was the first name of the company.

Rich: It was, and I’m still passionate about the name, but I’m very happy we changed the name. Vanare is very personal to me. I grew up in Cold Spring Harbor on Long Island. We had a second home on Lake Vanare, and we would spend our summers there when I was growing up. It’s a place where I learned a lot of things for the first time. We rented out part of our property to a riding stable, so I learned how to ride a horse there. I caught my first fish there, learned how to swim there. I learned how to snowmobile and ski there. So when I was thinking of a name for the company, I wanted to make it personal and that’s where that came from, Lake Vanare.

Craig: So you started coding in 2014, and then the same year is when you, you bought Lex Sokolin’s company Nest Egg. What made you make that decision so quickly?

Rich: Lex Sokolin, I was introduced to him by a former colleague of mine of Merrill Lynch, and as soon as I met him I was like, I’ve got to work with this guy. This guy is smart, he’s thinking differently than a lot of people. And you’ve obviously met Lex, he’s a smart guy and thinking out of the box, thinking differently. So he and Vladimir Bernoff, who was part of Nest Egg, slightly different personalities but both super bright, both worked incredibly hard. I started working with them before we acquired Nest Egg and I realized we need to put this thing together; once we were in a position where we could do it, we wanted to put the companies together. And so that’s what we did, we bought Nest Egg. And Lex and Vladimir joined as Co-Founders, and away we went.

Craig: What was it about Nest Egg, why’d you pick them? Was there something about their technology, something besides the people?

Rich: Yeah. Well, I liked the thinking, right? This got the place of how to extend an advisor’s relationship. For me and where Lex had pivoted to was to use the technology to help advisors scale their business. That was kind of the early beginnings of Vanare.

Craig: Yeah, it seems like not that long ago but it’s already five years.

Rich: Yeah. It feels a little longer though. It’s fun. Obviously doing a startup is a whole different gig for me. It’s fun and it’s exciting. Especially early on, every new potential client, every new product release are so critical to your success, you’re like hanging on it, right? You’re hanging on getting that new client or getting that phone call back from a VC, or whatever it may be. It’s so critical to your journey, it’s palpable.

Craig: If you had to start up again, what have you learned from the AdvisorEngine/Vanare experience, and how would you do it differently?

Rich: Oh, I’d probably speak to my wife more. I think she’d appreciate it. You know, it is a journey. I’m still obviously learning, I learn stuff all the time about what a small business is. But it took me a solid 18 months to reprogram myself. When you are coming from bigger firms with pretty big jobs, you have a lot of support, right? Either directly or indirectly. Some of these firms, HR alone has multiple types of HR departments, Marketing has all sorts of departments. And when I’m sitting in my loft and I’ve got my cat next to me and I’m looking out the window and I realize I’ve got to go get the printer paper, it’s different. The difference is, and we talk about this when we recruit people, when you’re a senior person at a big company, stuff comes to you all the time. You’re solving problems, so of course you’re thinking about stuff and you’re doing those things, but probably the bulk of your day is stuff coming to you, right? People want to show you their plan, they want to show you their budget, they want to show you their thinking, or we have a problem, right? So can you help me solve this thing? When you do a startup, it’s the reverse of that, right? You’re thinking not only like the vision and strategy and all that, but how do you solve it? What are the things you’re trying to solve for?

Craig: No one wants to talk to you, they don’t know who you are.

Rich: Right. You basically have to identify the problem and you have to solve the problem. And that’s from the little stupid things like the printer paper, to the business, all that stuff and everything in between that you’re doing. You have no one to give homework to, you’re giving yourself homework. So it takes time to re-program, at least it did for me. I can’t say that for everyone.

Craig: No, it did for me too. I worked for Broadridge for 10 years, then left to become a partner in a boutique consulting firm. And it took me about a year to get out of the, let’s do a memo and have a meeting mindset to, we’ve got to do this now, or we’re not getting paid.

Rich: Yes, then there’s that sense of urgency. Every call, every email you may get back from whatever that could help you grow your business or whatever it may be, is so super critical.

Craig: So what else would you do differently besides speak to your wife more? More family time?

Rich: No, what I meant by speaking to my wife is, I’d probably prepare her better for the journey that we’re about to go on. And by the way, my wife is phenomenal. She has a great career, she’s super bright, and she works incredibly hard.

Craig: What does she do?

Rich: She is the Compliance Director at Brown Brothers. So we talked about converting mentality. The other one is, it’s all about raising capital, if you’re doing a startup. My job was raising capital, right? My passion is our clients, my passion is building a great product, I’m passionate about providing great service to our clients. That’s where my passion lies. My passion is not in raising capital. Most people have a natural tendency to do the things that they are passionate about, like who wants to pay taxes on January 15th? What I’ve learned is that’s actually my number one job, is raising capital in a startup venture.

Craig: Rich, you were worried we wouldn’t be able to fill 45 minutes with your career. We’ve done an hour.

Rich: We have done an hour. Well you have a lot of good, probing questions.

Craig: Well you’re an interesting person. So let’s start the wind-down phase, where I’m going to ask these other questions that are not about your career but more about you and how you think, and I think also bring out a lot of interesting aspects of people. The people who listen like these questions as well. What has become more important to you in your personal life over the past few years?

Rich: In my personal life is my family. It’s probably important to say that the same time I was a starting Vanare, we were also having children. My daughter was born in 2012 and my son in 2015. Getting married has been great, and having children has completed my life. It’s incredibly fulfilling to have children.

Craig: And they won’t even know, because they were too young to even know what was going on, when the crazy start-up days were going.

vRich: That is right.

Craig: So the startup phase is sort of over, and now you’re a real company with real clients and money. So how do you stay motivated and keep your entrepreneurial spirit going?

Rich: Well I still consider us a startup, and I don’t want to ever lose that, quite frankly, because then I think you start getting potentially complacent. I would say there’s three things that motivate me. One is I love our team, our group of almost 90 people now. I absolutely love our team. They’re super good people, they’re smart, they’re passionate about our client base. And then second is our client base. Serving advisors and helping them is something that’s, going back to my Waterhouse days, has always been in me. It resonates with me, and one of the journeys we’re on is to help advisors deliver advice to the 7 trillion of assets that don’t have an advisor today. And that’s probably the people that need it the most, are the people who are not getting advice. So my altruistic point of view on all this is I’m hopeful that delivery of our technology will enable advisors to serve a set of clients that they just don’t serve today. And the third is my father. I have a picture of my father on my desk, I look at it many times a day, someone I’m very proud of. Somebody who unfortunately passed away at a fairly young age, at 55 when I was 14, 15 years old. But there’s many things he taught me before then that I still carry through to this day.

Craig: Now that AdvisorEngine is 90 people, you’re doing a lot of hiring, how do you identify people that will be a good fit?

Rich: We’ve developed six values. We took this very seriously and we still take it very seriously. It’s a camaraderie, curiosity, creativity, crushing it, celebration, and clarity. Mark Cuban was interviewed recently about who his famous employees are and who he likes to hire and work with. And the first three things were a lot of things most people would say: smart, hardworking, creative, things like that. But he added a fourth, basically the people who take problems off of my plate, I love. And it’s so true, right? You want to be working with people who can solve problems.

Craig: Bring me solutions, don’t bring me problems.

Craig: Do you a gift books to people? If you do, what books do you give most often?

Rich: I wouldn’t say I do it a lot, but what I did do is I gave everyone in our company a couple of years ago “The Hard Thing About the Hard Things” by Ben Horowitz. And while there’s some colorful language in there that I don’t subscribe to, the journey that he went on and described is very raw, and I think every person that works at a startup should read that. Every founder, every employee, because it gives you insight into the pure emotions and stuff that’s happening. The most recent book I’ve read is “Shoe Dog.” And just to see that journey, which ultimately was like an 18-year journey from when he started it to when he eventually did an IPO. Not quite as raw Ben Horowitz’s book, but the journey, the ups and downs, and all the stuff that happens. It’s another great book, and that was an 18-year journey. That was a long journey.

Craig: Well I’m going to wrap up now. I think this was great. I learned a lot, and I think people are going to enjoy listening to it. I appreciate you spending the time to share all this with me and the audience.

Rich: Great, well thank you. Take care.

wealth management consulting



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