“The technology trend that we’re seeing is clients want fewer systems and fewer vendors. What we saw in the ’90s and the early 2000s was a shift to “best of breed” and firms were plagued with having to integrate and support many relationships and individual technologies and make sure they worked together.”
–Yaela Shamberg, Co-Founder and Chief Product Officer, InvestCloud
Yaela is a culture junkie who loves art, laughing at her own jokes, eclectic places and interesting people. As a founder of InvestCloud, she is exceedingly proud of their culture, innovation, design and all the fun they have while building beautiful things. Her product role serves as a platform to further InvestCloud’s shared vision and create value for their clients. Yaela is happiest when eating ice cream and talking about InvestCloud – reach out to her any time to share in either.
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Topics Covered in this Episode
- 30 Second Elevator Pitch
- The Genesis Story
- Best of Breed is Going Out of Style
- Starting with Client Portals
- InvestCloud White
- #ItzOnWealthTech Ep. 63: How to Avoid “The Race to Average” with AdviceTech.LIVE
- #ItzOnWealthTech Ep. 60: Technology is the Front Door for Advisors to Work with Custodians with Lauren Wilkinson
- 50 Portfolio Management Software Solutions For Advisors Can’t All Survive
Complete Episode Transcript:
Craig: When Yaela Shamberg co-founded InvestCloud in a West Hollywood garage back in 2010, the first program she and her co-founders wrote was an investing game just to prove that they could build portfolio tracking with real time pricing. And while they’re not building games anymore, InvestCloud is making waves in the market, building on their success, selling client portals and working hard to become a player in the portfolio management system space. I spoke to Yaela about how clients can better leverage digital tools, about trends she’s seeing in platform consolidation, and a whole lot more on this episode of the Wealth Management Today podcast.
Welcome friends, to the wonderful world wealthtech. I’m your host, Craig Iskowitz, and I run a consulting firm called Ezra Group. We’re experts in everything related to wealthtech. We deliver growth oriented solutions to banks, broker dealers, asset managers, as well as technology providers through our premium advice and research. On this podcast, I speak with some of the smartest people in the industry who are on the leading edge of both technology and innovation.
And I’d like to welcome my guest to this episode of the Wealth Management Today, podcast Yaela Shamberg co-founder and chief product officer at InvestCloud. Yaela, how are you?
Yaela: I’m great. Thanks for having me, Craig.
Craig: I’m glad you could make it. I know we went back and forth for a while and we finally figured out how we can make this work. You’ve got a very busy schedule, which is great, it means your company is busy and you’re servicing clients, which is always a good thing.
Yaela: It is a good problem to have.
30 Second Elevator Pitch
Craig: Can you give us a quick overview, like give us, give us the 30 second elevator pitch on InvestCloud?
Yaela: Sure. InvestCloud is a digital platform provider for asset managers, wealth managers, and the asset servicing company. So we build tools, digital apps, mobile applications, portals for every, every persona and user experience really within that realm. So whether those are internal operational users, all the way through to elaborate client portals and simple client portals, mobile apps and various tools for wealth advisors and managers for client management, client reporting and and portfolio management, etc. So really the whole gamut around money, money management, and then kind of reporting on that. And so our goal is really to be able to deliver first class integrated cloud tools for all of our clients, regardless of their size, so that any client can have access to really first class digital platform tools in the cloud where traditionally that was an exclusive right, only for those willing to spend millions and that had the teams in place to be able to support that type of technology and infrastructure.
Craig: And that’s a worthy goal of integrated cloud tools. Although everything’s sort of moving to the cloud, which is good, it’s helping a lot of firms out. Getting off of the desktop systems and local servers. We used to call the smoking servers in the offices.
Yaela: Oh, okay. That’s a good one. Smoking servers. I’ve not heard that, but it is. I remember working with some of our clients and when we asked where the technology was, they pointed us to a closet which was hanging over actually a building, which was over water in a fairly fairly vulnerable area known to have earthquakes. And so we’re like, that’s not a great technology plan, great tech closet, but let’s talk about getting you in the cloud and getting some proper disaster recovery in place for you. You’re exactly right.
The Genesis Story
Craig: Can you talk a little bit about your background, tell me how you came to start InvestCloud and what prompted you to do that?
Yaela: I love this story, but I’m biased. We started 10 years ago in a garage and that garage was in West Hollywood, kind of Los Angeles. And the problem we were trying to solve was that a lot of us had come from obviously the technology side of financial services and also financial services. And we saw that there was a lot of different systems out there. They were all over the place. They didn’t speak to each other. They were in different locations. And the overhead of the management of that was really, really painful. And so not only that, the user experience was really kind of partitions in disparate. And so what you had was an industry that is really thoughtful in its execution about money management and money preservation, but didn’t have user interfaces and technology tools that really showed that cautious view and that high touch service that’s offered.
And so what we wanted to do was create a set of beautifully designed tools that all encompassing, like the whole platform actually together spoke beautifully together and was from the ground up to be able to actually deliver a cohesive and beautifully designed experience to all types of users. And so that was really the vision, to get rid of kind of that unintuitive workflow that so many people are riddled with and think more about what do we each have in our lives? We have many of us have Apple devices, right? That are intuitive and beautifully designed. So how do we bring that to market? We started with that in mind and we actually built a game first because we were in a garage and we knew that we weren’t going to be selling to clients. So we built a game called Play My Millions and that game was built by myself and a couple of my colleagues.
We were five people, literally in a garage building ground up. And that was to be able to show that we could do intraday market realtime pricing, create watch lists, do portfolio accounting, look at attribution and exposure. So to be able to showcase that people could go in and have a paper portfolio and then actually trade on that and view that. And so that there were tools that they could use, that they could see what we could do. So we spent the first six months building that and then kind of taking that to market and starting to sell. So we sold our first client and partnered in 2012 with our first client. And then from there, I don’t know what 10 years later, we have over $2 trillion of assets running through the platform. That’s just for our smaller clients. That’s excluding our large clients. We have over 700 clients on the platform and global offices and over 400 employees. So we still love the garage, but we’re not in there anymore.
Craig: So it’s the 10 year overnight success.
Yaela: Yes, much like Hamilton.
What Are Client Saying
Craig: Exactly. And I’ve never heard anyone say in our industry, I mean, lots of other industries you’ll hear people say they started out building a game or building one thing that pivoted to something else, but I’ve never heard anyone in wealth management and financial services say we started building a game and then moved into digital advice or digital portals and client management tools. It’s a very unique origin story or genesis story. But one of the things we also want to talk about was some of the conversations you’re having with your clients. What are some of the things that they’re coming to you for and how has that changed over the past six months?
Yaela: That’s a good one. That’s a fun question. So what we’re seeing is obviously we all understand this new medium of the importance of digital. I think in the wealth space, what we see as a lot of our clients have been talking about going into digital centric tools and digital client communication and leveraging that, but there’s been either internal friction about that, or people think “no, my business is all in person. I’m an advisor and my clients trust me and , and I do the rounds and I see them and we have a personal relationship”. Well now suddenly here we all are all at home and needing to communicate and needing a robust set of tools and a variety of different flavors to be able to communicate with our clients, not only communicate with existing clients, but we need to figure out how to grow our businesses in an era where you’re not out networking, referrals look different.
And so that person to person contact is different. So we’re having a lot of accelerated conversations where people knew they needed to get there, but they weren’t sure how, or there was internal, like I said, there was a little bit of friction or stiction as to how they were going to, or when they were going to do it. So a lot of our clients and, or potential clients are starting to talk to us about how do we get on an accelerated path because our clients do need, and they do deserve that type of communication and information at their fingertips. So that’s one thing we’re seeing a lot of. The others as they’re looking to grow their businesses, how do they better leverage digital tools? And I think digital advice is a way that we’re seeing a lot of a lot of interest there.
And when I say digital advice, I say that because it’s a really broad range of tools and how you can use them as a wealth manager in your business. So I think people used to think about it as almost trying to replace human interaction or human advice. And it’s so not, it’s about supplementing that. So whether it’s about reaching out to emerging mass affluent clients, or the younger generation of your existing client base or whatnot, or supplementing for your existing client base who want more digital tools and self service and interaction, there’s a whole array of tool sets out there that can be leveraged. And it’s about picking the right model for the right client and no longer is it about just one model that has to fit everybody or about replacing a human element. It should very much be enhancing.
And so when I talk about digital advice, the conversations around that, what are we having? I think robo was a bit of a big word and then a scary word and then a dirty word. But the truth is how do you create and supplement either a hybrid or a robo experience, which is just part of the overall picture? Financial planning is a big area that a lot of people are talking about taking those traditional tools, which were onerous and too time intensive and unintuitive, and that clients never really understood because out of it, they get like this big paper document, “here’s your financial plan”, and create something that is more intuitive for the advisor and the client to be able to participate together. And so some really fun and engaging workflows there around goals, around things that actually have sentiment that people understand.
So that’s definitely part of our digital advice platform where we’re seeing a lot of traction and interest. Self-select is another one, we call it digital self-select. And if you think about advisors that have client bases, they really span a pretty wide spectrum of individuals that are like, “you take care of everything for me” and other individuals that are like, “I want to be very involved in this. I want to see what’s happening. I want to be able to make my own investment choices if and when applicable and I want to be able to self service in areas of my life that I would like”. And that just depends on maybe tech savviness or investment confidence or any arrangement of things. , the factors are no longer just age and wealth.
There’s so many more variables. And so something like self-select, which allows supplemental investing, maybe an assigned portfolio, or maybe in a separate sleeve, various tools, again, making it kind of engaging and fun. So your clients aren’t holding assets elsewhere that they’re then trying to manage outside of you because you don’t offer that tool set for them there. So it’s about creating the right tool set for the various personas of your different client base. And we’re seeing digital advice take on a lot of different flavors and bring that to market with the clients. So that’s, that’s an area we’re seeing a lot of it in. And then there’s the, and then there’s this more technology trends that we’re seeing, which is fewer systems, fewer vendors, partners, whatever you want to call it, fewer systems. And I think what we saw in the nineties and early two thousands is “the best of breed”.
And a lot of people went to that place. And what that meant is that they were then plagued with having to integrate those and support those relationships and support those individual technologies. And then making sure they work together. And what we’re seeing hands down, and I’m sure we’re not the only ones saying this is people are shying away from that and they’re saying, “what I need is a platform underneath me to stand on, to be able to build on. What I don’t need is 17”. And we do have some studies and some metrics, and I think it was something like over $50 billion in assets and you had over 30 systems, maybe it was like $30 million, but you have this correlation between the amount of success and or wealth you have in your platform and the huge number of systems, and then vendor relationships that you actually have to manage.
And so big trend there, partner with the platform and then start to build your tools from there and look at your business and also a platform that can actually change with you over time, because we know that this business is changing and very few people know exactly where it’s going, but they know they need the flexibility and agility to be able to respond and actually match client demands and or areas that they want to take their business in. So those are some of the primary trends that we’re seeing and the conversations that we’re having around client base.
Best of Breed is Going Out of Style
Craig: So, yeah. Let me decompose this and we’ll just go backwards. So technology trends, fewer systems. So I interpreted that to mean that “best of breed” is turning into all-in-one that this, that you’re hearing platform consolidation is a trend. I was going to back you up on the correlation between assets and number of systems. We see this as well. We work with some of the top 20 broker dealers in the country. And the number of systems they have in the back is unbelievable.
Craig: Especially the ones who are older and are the results of many mergers. You tend to see systems that never get shut down. How are you guys dealing with that?
Yaela: So we have this great process in addition to how our technology is architected, which I’m very proud of, I would love to take all the credit, but I can’t because I have some really, really smart colleagues and partners. But when we built InvestCloud, we built a data repository as really being central. And we call it a digital warehouse. And it’s a digital warehouse because it takes in data from hundreds of different systems and different sources. So whether it’s your market data, whether it’s your accounting data, whether it’s trade data, whether it’s client reporting, whether it’s your CRM, it really doesn’t matter. Documents, it’s structured and unstructured. All that data goes in. It’s beautifully organized and our data model extends to the entire financial services industry. So it’s very specific to financial services in that it’s super, super deep, which means that we have yet to see a set of data and a problem that a client brings to us that we can’t solve by bringing that data into the digital warehouse.
So we bring all the data in, and then we create on top of these beautifully designed user experiences. These apps that solve some of their business problems or their workflow problems or some of those operational needs. And then what you have is you have all the data centralized, you have kind of your engines and your data sources, and then you have this beautiful client experience and internal user experience. And then behind the scenes, you can actually start to unplug either vulnerable systems, expensive systems, whatever it is, you can unplug them and you can migrate either if you need a different engine orange, one of our engines. We’re pretty agnostic. We play very, very well with a lot of technology out there because that’s the point of actually kind of bringing it all together. But bringing it all together in a new way where everything goes via this digital warehouse means you’re no longer cuffed or chained to this older system for all of the old data that’s in there.
And then you’re trying to keep it alive because you need that data so that you can complete your inception to date reporting. Pull the data out, put it in the data warehouse and then mix it with either a new engine, a new system, and then something where you can blend it. So you can have performance inception today, security level performance, attribution, risk composites, things like that without trying to patch it together, which I think a lot of people get stuck with and don’t feel that they can get off it.
Craig: Well, you can’t have performance without transaction.
Yaela: Right. I worked with a client and we loaded literally 18 years of transactions into the digital warehouse. There’s no reason they need to keep their accounting engine alive just because they need a record of transactions. So we take the entire history of transactions. Pre-calculate a performance because we know that was what was reported, positions, tax thoughts, whatever it is, pull it into the digital warehouse, turn off your old accounting engine, turn on a new accounting engine and you have your data uninterrupted. And what’s more important is your user experience, whether it’s internal advisors, client service teams, or your clients, an uninterrupted client experience, they don’t know you’re doing plumbing in the background and they shouldn’t. It shouldn’t be on them to feel the impact of that.
Craig: So that’s unique. That’s different. A lot of firms won’t take transaction performance history because it’s too complicated, requires too much effort to clean.
Yaela: And they don’t know where to put it.
Craig: And they don’t know where to put it. Do you guys do that for a lot of clients?
Yaela: For a ton of clients. A lot of our clients come to us because they say, “listen, we need a client portal and we need one fast because we’re behind the times”. And we say, okay, here. And then they’re like, “we need a mobile app”. And we’re like, we know we told you, you need a mobile app, here’s a mobile app. And then we say, actually, it looks like you could use some advisor tools cause your advisors actually need to be able to see the same data and have the same experience and also be able to kind of emulate and become user for your clients to be able to service them. And they go, “yeah, we need that”. And then they suddenly start kind of looking under the covers and they think, “wow, I have a lot of other problems here in this closet, the server closet behind me that I’m trying to get off of. And I don’t know how I have this the seven year plan”.
And so then we’ve already done the hard work of overlaying some of that data. And then they’re starting to see the value of it. And they realize they don’t have a whole nother set of options available to them that I don’t think they necessarily realize. And some of the more sophisticated clients, when I say to just get it, I mean, technologically with, with their teams in house are realizing that they need to take this type of methodology. So they’re looking around for partners because they’ve been trying to do it themselves for years. And it’s just not what they’re built for. They’re at money management, putting money to work, client relationship growing assets and servicing clients. So let them do that and let some of the other technology specialists help help solve these age old problems.
Starting with Client Portals
Craig: So that links back to your conversation you’re having with clients about, they want to accelerate their path. Hey, I need a portal, and I need it now. So they come to you and you can, you can drop that portal in because your system seems to be built in a very modular fashion. Whereas other vendors started with a monolithic platform and you have to take the whole thing. You can’t really break it apart, but you built it starting with the portal, which is what was your first product then started adding components and you kept them separate. So how has that helped you?
Yaela: That’s a very good point. Thank you for bringing that up because when we did architect InvestCloud and what we still hold true to today is like you said, that hyper modular approach. So we have it listed almost as if the periodic table so that clients can take the functionality and the apps that they need and really bring those together and piece those together. So almost if you think about it like a Lego piece, you have a Lego kit and you kind of build the castle you want, but you’re not starting from scratch. So that means accelerated time to market. It means that there’s a huge amount of cost savings and it means a lot of flexibility for saying, okay, this is going to be version one. And then now we’re going to be able to add this app and then this app, and then we’re going to do this release.
We do weekly releases, just like Google does a release. You don’t know when there’s a release happening behind the scenes. So there’s no reason that you shouldn’t be able to do frequent releases for functional adoption to clients using our library or our hyper modular apps. So you gain a lot of efficiencies and a lot of leverage. It’s also a library of apps that continues to expand. So we have over 350 now, but , next time we’re talking, Craig, there’ll be a few more or half a dozen more, that will be on the platform in a few short weeks. Things like that, that offer an immense set of tools and leverage for people to be able to to go to market with.
Craig: One of the other things you mentioned was digital advice self-select, and then you also mentioned digital advice and you said self-service. So I find people are confused as to what digital advice means it had at one point 3-4 years ago, or even 4-5 years ago, digital advice meant onboarding, all the digital advice vendors in our space. Now I’m talking about robo advisors, but the digital platforms in our space, were really just onboarding vendors. And they quickly realized that that’s not a viable business longterm. They started adding more functionality to where they were almost like a robo platform where they can manage the money all the way through. Is that what you mean by digital device? You can take the money, onboard the account and manage it all the way through?
Yaela: Yes, but I think it’s also different flavors of that. To your point, gain the operational efficiency by doing onboarding. Or if someone wants to, when I said kind of self service, if someone wants to go and open a new account, there’s no reason paperwork needs to necessarily be involved. Maybe you have the right kind of client that does want everything FedExed to their house to be able to sign or DocuSign. But you have just as many clients that are willing to log in and go through a really well-designed intuitive experience and kind of do an onboarding or open an account and fill out information. And so when I think of digital advice, I actually think of the entire spectrum and then taking the pieces that are right. So digital onboarding is an important piece. Like I said, self-select is maybe you do have money that you want to put to work, you want to make your own investment selections in addition to the advisor relationship and the value you’re getting from that advice. So various flavors like that.
And then we have clients that do offer complete robo experience to either a select group of clients or in conjunction with. They have their traditional client traditional accounts, and if you want to open a robo account, cause you want to play around with it, because you’re a bit of a tech tinker, or you want to look at some digital vice or what they offer, there’s no reason you shouldn’t be able to also open that up and have that, not create any additional operational overhead for your advisor. Right? It’s one more value add, and it’s one more set of tools that makes the advisor look modern, look like there’s variety and look like there’s different things available for different times in your life for different client bases.
Craig: We’re running out of time. I know you gotta, you gotta jump in a couple of minutes and I wanted to get to recent announcement you made. All your products are color coded, and this is the White product, which was just announced. Can you explain that a little bit? Give us another 30 second overview of the White product.
Yaela: Yes, absolutely. Thanks. So we do, as you call out rightly we name our different products colors. So we have Blue, which is client communication, automation and management. It was our first kind of product launch is one of our most popular, certainly with, well over 400 plus clients on there using a variety of those tools. We have Orange, which I mentioned that digital warehouse. So that is really that data aggregation automation, and what not bringing that all together and analytics and a little bit of our kind of data science hub is in there as well. And then we have Black, which is performance analytics and risk calculations. Green, which is- trade processing. Oh, you beat me to it.
Craig: Yeah. I’m just following along with the storyboard.
Yaela: Trade processing and accounting built for operational efficiency and automation. And then what you have also is you have White. And so White is really, for those of us that are designed junkies. White is the intersection of all the colors. If you took the different colors of light and you put it together, you get white and hence the name White. So White is really a packaging of all of those colors together and a seamlessly integrated single platform. Removing that whole best of best of breed, patching things together, and really what you have is front middle and back office tools that are available in the wealth space for plug and play.
So we have clients, for example, that use it because they’re actually opening a TAMP. They want to be a world class, new technology, single platform TAMP because a lot of the TAMPs have this problem too, that they’ve kind of integrated a patch together, all this different technology, this for onboarding, this for portfolio management, this for reporting, this for advisor tools, this for CRM. So White brings that all together. So we have some clients that use it as a TAMP offering to be able to service other wealth advisors. And then we have wealth advisors that come to us directly and actually even asset managers that use it directly and they say, I want this front, middle and back, front to back for my team to be able to use. And so that’s hence the name White and as the combination of all of those colors and all of those functions.
Craig: It’s a great name. And I want to talk a lot more about this, but we’re out of time. What my my company does, is Ezra Group is an expert in portfolio accounting, wealth management platforms, fee-based advisory. So when I heard about White being another option, I really wanted to learn more about it, but we’ve run out of time. So maybe we can schedule the call and get more in depth as to how White works, how clients are using it next time. Would you be open to that?
Yaela: I would absolutely be up for that. And we also have some cool things in the pipeline as well that because I’m too product officer, I’m a dork about products and I love to talk about those so we can always talk about what we have and then what’s coming to. Those are some of my favorite conversations.
Craig: I would love to hear about that, but we’re going to have to wrap up. Thanks so much Yaela, I appreciate your time. Have a great day.
Yaela: Thank you Craig, for having me.