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“Not all checks are equal. You can go get funding from somebody who will give you a check and no more than that. Or, you can get funding and a partner in a journey that will inspire you, support you, push you. There’s so much capital being poured into our space right now. The check is the easy part. The success story after the check is what’s really important and just never lose sight of that.”
— Sean Brown, President & CEO, YCharts
With over twenty five years of leading technology-centric companies of all sizes to success in hyper-competitive markets, Sean has a proven process-oriented approach to achieving results, with significant experience aligning vision, product, go-to-market, and operational plans to achieve measurable commercial objectives.
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Topics Covered in this Episode
- What is YCharts? [03:35]
- Charting & Beyond [09:55]
- SMAs + Advisor Tools in the World of RegBI [19:46]
- Fintech Mergers and Acquisitions [24:37]
Complete Episode Transcript
Craig: When Sean Brown was head of corporate development for a multinational software and solutions provider, he managed numerous acquisitions ranging from small domestic firms to large international public companies. He was able to leverage this experience when he sold YCharts, where he’s currently the CEO, to a private equity firm this year. I spoke to Sean about the transaction and how it changed YCharts’ feature plans, how adding SMA data to the portfolio analytics suite increases the number of competitors now gunning for them, and a whole lot more on this episode of the Wealth Management Today podcast
Hey, thanks for joining me here on another fantastic day in the wonderful world of wealth tech. I’m your host Craig Iskowitz, and I run a consulting firm called Ezra Group. We are experts in everything related to wealthtech. This is the point where I usually give our standard marketing pitch, but I’m going to change it up a bit so I can sneak in a plug for our market analytics team that has been doing some incredible work, led by our very own head of research, Jean Sullivan. If you are running a FinTech firm looking to expand into new markets or develop new products, you’re going to need data and insights on the client segments that you’re targeting. You absolutely have to know what prospective clients are looking for the size of the obtainable market, what your revenue potential is, who the top competitors are and what functionality gaps exist in your product that need to be addressed. You can get all this information and more from Ezra Group research. If you’re on the executive team at a growing FinTech vendor, please contact as a group right now, by going to our website ezragroupllc.com and clicking on the button that says “Schedule a Complimentary Discovery Session” at the bottom of the homepage.
I am happy to introduce our guest for this episode of the podcast, Sean Brown, CEO of YCharts.
Sean: Hey Craig, thanks for having me today.
Craig: Sean I’m glad I could have you on the program. Always glad when I can get people I think are interesting in the industry doing interesting stuff onto this program. And just so everyone knows, I’m recording this from I’m in England and where are you right now, Sean?
Sean: I am in Lake Forest, Illinois, about 30 miles north of Chicago.
Craig: Yeah. So using the power of the internet power of technology with thousands of miles away having a conversation and it’s wonderful. Can you please give the listeners a 30 second elevator pitch for YCharts?
What is YCharts?
Sean: I’d love to. YCharts is a 10 year old company, SaaS based software company, with a pretty simple vision and mission which is to enable wealth advisors and asset managers to make smarter investment decisions and better communicate with their prospects and customers. That’s what we do. We’ve got over 6,000 customers, the majority of them are either asset managers or wealth advisors.
Craig: That’s fantastic, really like your product and what you guys are doing in the market. But before I wanted to go into a little bit more of the trends that you’re seeing, but before we do that, can you just give a quick overview of how you got here? Like you started out in consulting, which I have a soft spot for consultants, but how did you get to be running this FinTech startup, YCharts?
Sean: Well, I’ve had a career that may not look linear, but it always felt linear to me. I started my career as a software developer, got a really good grounding in technology, got an MBA and then became a strategy consultant where I was learning and developing and my chops in strategy. Then I went into the startup world and held, you know, CFO, COO roles. Went into corporate development where I was traveling the globe buying and selling companies for a public company that bought my startup. Always circling around the finance space and the technology spaces at every stop in the journey, which led me to lead a division of interactive data, which was sold to ICE and now be the leader of YCharts.
Craig: Decades of work to become an overnight success.
Sean: I think that’s the truth, and I’ve made a whole lot of mistakes in my career and I’ve got some gray hair to show it, but yeah, I’ve got a little bit of experience in how technology can be applied to financial services.
Craig: You know what writers say is, good stories come from bad decisions.
Sean: I like that. I’ve always been such a big believer that you learn so much more from your failures than you do from your successes. And I’m not saying anything that hasn’t been said since Mesopotamian times, but sometimes when you succeed too quickly or too often, you don’t realize how good fortune weighed in there. When you fail and you’re introspective, I think you learn some great lessons that you try to apply going forward.
Craig: You mentioned how many clients you have and it’s a large number of clients of advisors and asset managers. So you’re talking to these guys every day. What are you seeing out there? What are some of the trends you’re seeing in the market?
Sean: I think the big thing you’re obviously seeing is advisors much like every other industry in America or in the world, including in the UK where you’re physically located right now, the world’s been turned upside down and a lot of things you used to do through face-to-face interaction need to be done through digital mechanics. You know, specific to advisors, we were seeing this before the pandemic, but it’s only been accentuated in the pandemic. You’re seeing them have a real emphasis on how are they gonna justify their fees. You’re seeing them want to make sure they’re doing all the right things to retain their clients. And you’re also seeing them say, how do I reinvent the way I do business in light of the pandemic, and in light of the fee justification, in light of models and in light of a number of other things, how do I reinvent my business so it better serves the customer and also helps me grow my small enterprise.
Craig: I’m sure they’re looking for technology to help do that, so what are some of the ways that they’re coming to you and what are they asking you guys for? Are they happy with what you have? Are they looking for new stuff and how are you reacting to that?
Sean: I think the big thing we’re seeing advisors, they’re not using these words, but I’d summarize it at that, they’re looking for technology to help them bring order to chaos. And when I say chaos, there’s just a lot of things hitting them at the same time. And if you think about some little things, like there was a stage where an advisor could be in touch with their clients a couple of times a year, send out a quarterly statement and maybe have a steak dinner or two. And that was perfectly sufficient as long as the statement that they were receiving on a quarterly basis was upward trending, going upward and to the right. The patriarch and the matriarch of the family would give each other a high five and say, we’re progressing towards our goals. I think the shock of late Q1 of this year helped clients of wealth advisors and helped the advisors themselves see, things aren’t always going to go upward and to the right, and how is the advisor going to stay in persistent touch with their customer? How are they going to make sure that they have the right portfolio and asset allocations and long and short, how are they going to reprove to that client that the 1% of AUM that they’re paying is well, well, well worth it. So we’re seeing them apply technology to say, how am I going to better communicate with a prospect? How am I going to better configure a portfolio or a proposal? And how am I going to better stay in touch with my constituents?
Charting and Beyond
Craig: Yeah. And those things are something that every advisor needs to do, every firm really needs to do. And I know you how started out, YCharts, the name has “charts” in it, so it implies technical analysis and charting is really some cool stuff. That’s how I first heard about you was your charting many years ago. And then you added other functionality and now you really have a lot more portfolio analytics built in. How has that been changing over the years? How have you seen that type of tool evolving, being used by advisors? Are they using it differently, are they using it the same as they always have, are they using more of it? What are you seeing?
Sean: Yeah. The first thing I’d say is it’s kind of funny when I think about the YCharts name. It’s almost like if Jeff Bezos had named his firm Online Books, you know. We started out as charting and the premise we started out with was, a picture is worth a thousand words. Visualization is a wonderful way to communicate. It’s a wonderful way to derive insights, and it’s a wonderful way to communicate them. When we really started to focus on wealth advisors though, we saw that their needs are just plentiful in the areas of how are you going to better support my workflows. Yeah, granted, I see how you can help me build a compelling technical or fundamental chart. Got it. There are other players that can help with that. I think our mission is really how are we going to empower them to manage their workflows and, how are we going to help them make the complex easy and make the easy, quick?
So, you know, the things we’re really focused on is if an advisor knows they have a prospect meeting, we know what they’re going to do in that prospect meeting, they’re going to talk to them about their current holdings, and they’re going to talk to them about their recommended portfolio. Well, we know what you’re trying to do, and we think we can get you 80-90% of the way there through some pre-canned templates.
Hey, we know on a quarterly basis, you want to send out to all of your clients, a quarterly economic analysis and a little secret is we also know because you’ve told us, you’re not an expert on macro economics. So this is a laborious process that takes you a week where you dread it and you put the kids to bed at night, and you scratch your head and say, what’s monetary policy again and how does GDP fit into all this?
Well, what we do is we create that template, quarterly economic analysis for you, that you put your logo on, you take out some of our commentary, you add some of your own commentary, but anyway, it turned something that was taking you a laborious five days into a non laborious 30 minutes to an hour. And so long and short is, our goal is how are we going to help advisors make their lives easier? How are we going to save them a half a day to a day of time a week? And we keep finding ways to do that.
Craig: And that’s really what it’s all about. The one commodity we only have a limited amount on his time, and if you can save advisors a little bit of time every week or every day it’s going to add up.
Sean: Especially when you weave that into the fee compression, how do you fight fee compression? You either better justify your fees or you succumb to lower fees and say, I need to bring in more clients to keep my same revenue. So all of this in my eyes weaves to how are you going to better use processes and technology to make a better portfolio, better returns or better communicate to justify your current fees? Or if you say I’m going to lower my fees from one percentage, point to 0.75 percentage points, how am I going to take on 25 new customers? Well, I better have a good way to prospect. I better have a good way to create a proposal and a financial plan. And I better have a really good way to stay in touch with that prospect so that they say you’re really earning your three quarters of a point fees that you’re charging.
Craig: Yeah, it’s interesting how fee compression has really hit every aspect of the supply chain except really advisors. They really haven’t been affected too much, but they’re starting to feel it. Do you see that more from your clients?
Sean: Yeah, I think what we’re seeing is, especially those that charged on the higher end of the fee ranges, our perception is they’re getting crushed. Those that were the 1.25, 1.5, 2 percentage points of fees, they’re getting absolutely crushed. Now, those who had built a business around 1% of AUM and below, they’re seeing less pressure on their fees, but I would anticipate, if I go buy poptarts at the local grocery store, those poptarts are the same poptarts at two stores down. And I better make sure the client experience in my overall offering justifies them coming into buy poptarts from me. And it’s the same thing with advisors. If you’re going to have a generic offerings with, you know, I’ll do a financial plan, I am not specialized on a niche, I’m going to have a generic financial plan, and I’m going to manage your assets through a passive approach using ETFs and models. Don’t be surprised when people start to say, well, why is your approach any different from that guy’s approach where I could save a substantial basis points?
Craig: Indeed. A lot of advisors still see their value added in investment management, in offering investment management services. What we call Rep-as-PM in the managed account world, very popular assets still flowing in advisors, still doing that. So your product seems like it’s a great fit for those types of advisors. How are they using your product differently now? Are they changing what they’re looking for? Are they looking for different types of products than they were two or three years ago?
Sean: Yeah. And you’re honing in on the folks we love talking to, the advisor’s portfolio manager. They have moved from the day where, you know, they were focused on stocks, to then they were focused on mutual funds, to then they were focused on ETFs. Real focus now on models and leveraging pre-canned tailorable solutions, whether those are commercial models, or those are models that they’ve got 8 of their own that have been thought out. And those models are generally comprised of ETFs and mutual funds. So we’re seeing the evolution through time of products that embed diversification from day one. And we’re seeing advisors say, Hey, I’ve got a template model that’s pretty good for 25% of my customer base that’s this age with this type of risk profile, I’m going to propose that, but I’m also going to take a look and say, what are their assets held away and how are their exposures and how does this fit within their investment philosophy, then I’m going to tweak it.
So we continue to see the use of replicability, which again, when you’re trying to build once and sell or use multiple times, that’s a prime opportunity for technology to be applied. And that’s what we’re seeing, people come to us and saying, I’m going to build my models in your software. I’m going to tweak them in your software. I’m going to evaluate the relative merits of performance and exposure in your software, and then I’m going to confidently get into a prospect or client meeting using that information.
Craig: Yeah, it makes sense that they would want to do that. They’re looking for efficiency and being able to pull in a model is saves you a lot of time, rather than doing all the research yourself. Not that they couldn’t do it through your software, and you have tremendous number of screeners and tools and ways to filter and slice and dice the market. But where are they going with with these products? Are they changing what they’re looking for? I know you just came out with SMA data, why did you do that? Cause I thought that most advisors aren’t really involved with separately managed accounts. Is this something you’re seeing? Obviously you’re seeing an upswell of advisors asking for this.
Sean: Yeah. First of all, one thing I’d say on the work they’re doing is, let’s not forget the regulatory overhang, which is, advisors have a duty to have done their homework and to have documented the homework they’ve done to provide a solution that’s in the best interest of their customer. So, we’re a nice repository where you can do your homework, press some easy buttons, helps you do the right analysis, help you save the right analysis so that you can confidently state to your customer or anybody who comes to look over your shoulder, we did the right thing for our customer. I think what clients are generally looking for is how can you make the analysis I want to do and need to do as easy as possible?
Advisor Tools in the World of RegBI
Craig: You brought up a good point, RegBI is changing the way a lot of advisors do their business, at least on the compliance side. What tools do you have that advisors can use to help them in that area?
Sean: Well, we’ve got pre-canned analyses, which is a really big one, which is we know the thing is 80-90% of people who want to do a fundamental analysis or an exposure analysis or a relative merit analysis, we know what they’re trying to do. And you put in two security names, stocks, ETFs, mutual funds, models we’ll help you compare the relative merits. To the point you brought up earlier, which I don’t think I fully answered on SMAs. SMAs is something for high-end customers that advisors want to have as an option. And we just felt it was right thing to put in and provide to them something that they don’t want to have to switch to another tool to do SMA data. We think the most enlightened advisors want to have access to a whole lot of different asset classes.
They want to do some good solid analysis, but they don’t want to start from scratch with a blank sheet of paper and okay, how do I compare these two portfolios? We think the best thing we can do is help them very quickly and efficiently do these analyses, help them save off these analyses and help them present these analyses to their customers to say, I’ve got your back. I’m thinking about this for you. Here’s my proof points. Hope it works for you. Let’s talk more. And, you know, when they want to meet their regulatory obligations or need to prove it, they’ve got a really nice documentation trail that helps them do that.
Craig: Yeah. I think it’s interesting that you guys moved to SMA data. I mean, we work with a lot of enterprise firms, broker dealers and banks, and they put a lot of client assets into separately managed accounts. It’s very popular with HNW clients, especially on the wirehouse side, huge users of separately managed accounts. So it’s interesting that more RIAs are using SMAs. Whereas the majority of assets in the RIA space has always been ETFs and mutual funds. So seeing them move into SMAs, do you think it’s also the fact that there are more SMAs with lower minimums, no trading costs, the fractional shares gives other options for mass affluent clients?
Sean: Absolutely. Absolutely. You know, we have access to over 10,000 separate accounts. Just saying 10,000 means there’s a lot out there and I’ve always found the laws of supply and demand tell you there wouldn’t be 10,000 if there weren’t ample needs and interest in them. The challenging part, whether you’re talking about separate accounts or you’re talking about models is everybody gets those at the conceptual level, but how do you compare them? Models, there are 10,000 models out there and model marketplaces. And a lot of them look something like this is a 60/40. That doesn’t mean they’re the same thing. So how do you do your homework to compare two 60/40 models to know which one’s right? And how do you know the exposures of those models and how do you know the underlying securities?
The thing we really like to see that our clients are doing in our platform is they’re taking these aggregated things, whether those are models or those are mutual funds, or ETFs comprised of a bunch of holdings is saying, what are the atomic pieces each of those aggregated things? And how can I look and see what is my exposure in these two different models or these two different SMAs? What’s my exposure to big tech or FANG stocks? And we just find our clients really leveraging that functionality quite a bit and having very robust discussions with our customers afterward.
Craig: Yeah. I mean, I think a lot of clients don’t even realize their exposure. They think, Oh, I’ll buy a little Apple stock, I’ll buy a little Facebook stock because it’s in the news, they don’t realize how much they already own in any large cap mutual fund.
Sean: Hugely important, hugely important. People have no idea how much exposure they faced in some of these things that look like well-diversified assets on their own, they may or may not be, and you or your advisor should do your homework.
Fintech Mergers and Acquisitions
Craig: Yes, they should. Which is why they need tools like YCharts. One area we’ve seen a lot of movement in, every year it seems to get more and more is M&A. The mergers and acquisitions and the amount of money coming into the space, especially not just buying RIAs and buying a broker dealers, but buying FinTech firms that service the wealth management space. We’re seeing a lot of that. And you guys just closed your own deal. Can you talk a little bit about that?
Sean: Yeah. We were acquired by a private equity firm out of Philadelphia called LLR Partners, which is really a thrilling milestone in our journey. It’s neither the end, nor the beginning of a journey. It’s a continuation that’s going to help us grow the way we have an opportunity to grow in our future. So we’re really excited about that. And broadly, if it’s in a context of the advisor space and the space for fintechs that serve advisors is a very, very, very attractive space. A lot of fundamental dynamics for advisors that say, when they break away from a wirehouse or wherever they’re coming from, they cut their chops. If they’re an RIA, they cut their chops on having their own enterprise.
But some of them realize the way to achieve their goals is actually to get economies of scale, which says they may want to merge and engage in M&A. In a lot of ways, the FinTech spaces is fairly similar, which is, it’s not that hard to put a technology asset out in the market. It is challenging, and it is a many, many, many year journey to make a profitable, viable solvent enterprise. And so anytime you have economies of scale as a driver in a market, and any time a market is growing at a significant clip, those are fertile ground for M&A, and I think we’re seeing a lot of that now.
Craig: You have a lot of experience in M&A, you spent years, a couple of years in strategy development, as you mentioned, traveling the world, buying up companies for a public company. So you have probably a lot more experience than the CEOs of other smaller fintechs. So how did that experience help you when LLR came called and said, Hey, we want to buy your firm, how did that change the way you approached that transaction?
Sean: Well, I think one things I’ve learned over the course of my career is M&A is not successful just because the buyer and seller agree to a price. In fact, sometimes that’s a recipe, you know, for a lack of success. I think what makes M&A successful is a shared vision of the future, tight cultural alignment, shared accountability and an understanding that M&A doesn’t work just by handing somebody write a check.
Sean: M&A works when there’s a check plus strategic collaboration, plus shared execution. And so I think the thing I learned through my career is like a marriage, it’s not just about the ceremony, it’s about setting the conditions for a successful marriage going forward. And so bringing that to YCharts, for the past handful of years we have been growing tremendously fast, but we’ve also been self-funding based on many, many years ago, some venture funding we raised, we’ve been constraining ourselves based on our cashflow. And we got to some great milestones revenue-wise, cashflow positive, all those great things. But there’s so much opportunity in the wealth advisor, asset manager space, there’s so much need for somebody to support them and their workflows that we said a change of pace, a capital infusion the ability to engage in future M&A was going to help us best serve our market. So that’s how we got there, and I’m just thrilled with with the partner we’ve found ourselves married to for a long, long time.
Craig: Good to hear. You want to be happy, at least this is still the honeymoon phase.
Sean: Yeah. Yeah. But you know what, if you do your homework upfront, I found that with my own marriage, if you take the time to get to know the person you end up going on a honeymoon with, when you come out of the honeymoon stage, it still feels like you’re in honeymoon. And yeah, we’re in the honeymoon stage with LLR, but I sure do feel good about the things we learned about them over the past three to six months that says, this is going to be a really nice marriage.
Craig: A couple of things, you use the word “shared” a number of times when you were talking about the transaction shared vision of the future, shared accountability, shared execution. Is that something you would recommend to other CEOs of firms looking for funding? To focus on that shared everything being shared between the target and the acquirer, or are there other tips and recommendations you’d give to CEOs who haven’t been through this before?
Sean: I think my biggest thing is, not all checks, and those are physical checks, not all checks are equal. You can go get funding from somebody who will give you a check and no more than that. Or, you can get funding and a check and a partner in a journey that will inspire you, support you, push you, challenge you. Look for the ladder. It’s easy to get checks, but that’s no big success. There’s so much capital being poured into our space right now. The check is the easy part. The success story after the check is what’s really important and just never lose sight of that. And, you know, if you’re thinking of raising around a venture capital, or you’re thinking of taking on some angel investors, don’t limit your scope to, Wow, I got a check, say, What am I getting in addition to that check?
Craig: Are they going to be a partner, or are they just going to be someone who’s expecting their money back in a certain amount of time?
Sean: At least know what you’re getting yourself into. And for the second phase in the YCharts journey, we had some terrific funding partners, on our first phase, players like Morningstar, and Hyde Park Angels, and Reed Elsevier Ventures, etc. We had some terrific partners and it helped us get where we got to. And, you know, thrilled for the partner with a single partner we’ve got for this next phase of our journey.
Craig: Sean, we are out of time. I really appreciate it, everything you’ve told us has been super understanding. I had 10 more questions I wanted to ask you, we didn’t even get to them. But tell us where anyone who’s listening can find out more about YCharts.
Sean: Well, come to our website YCharts.com. We’d love to talk to you. We’d love to chat with you. We’re not one of those places you’re not going to find the phone number. So first and foremost, come to us at YCharts.com, have a conversation take a free trial, and let’s see if there’s a fit between what we love to do and what you need.
Craig: Excellent. Sean, thanks so much for being here.
Sean: Thank you for having me, Craig. I really appreciate it.
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