Ep. 107: August News Roundup

Come on in, sit back, relax and enjoy episode 107 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, the founder and CEO of Ezra Group Consulting. Over the past 16 years, we’ve worked with hundreds of FinTech vendors and enterprise wealth management firms to guide them towards making better business and technology decisions.

The WealthTech Today podcast features interviews news and analysis on the trends and best practices in technology for wealth management, asset management, and other areas of financial services.

This is our August News Roundup, and we are covering four stories. In the past we had covered more than that, but we’re going to go more in-depth on fewer stories. We are coordinating with our partners at Kitces.com, so please check out The Latest In Financial #AdvisorTech (August 2021) and their Advisor Tech Map, which we work with Michael Kitces to produce.

Click here and schedule a Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.

August News Stories

Companies Mentioned

Complete Episode Transcript

Altruist Expands its Portfolio Model Marketplace

First story in the news, Altruist Expands its Portfolio Model Marketplace. Altruist, an all in one technology plus custody solution for financial advisors has recently secured a $50 million round of venture capital funding, and added to their model marketplace with BlackRock, Redwood Investment Management and State Street Global Advisors. So that’s the news story, although the $50 million funding was really announced in May so not sure why that’s still just coming out now but I guess they want to re emphasize that they’ve got this $50 million.

The news have a little bit of trouble classifying what Altruist is, and it is a bit of an anomaly, compared to other solution providers, they are FinTech plus custody. They seem to be a lot like smaller players offering custody tech, tech packages like Shareholder Services Group, which resells Pershing custody. TradePMR which resells First Clearing, because of course Altruist resells Apex Clearing, but they are doing pretty well. Former Vanguard CEO Bill McNabb has also invested in Altruist and has joined their board. So they seem to be doing quite well, attracting us a steady stream of RIAs from other custodians and other tech platforms.

But it’s more than just the tech, and the custody, there’s really something more to Altruist’s message, and their business model. There is a lot of marketing there although they don’t spend a lot on marketing, more of a guerrilla marketing campaign. I think advisors see a bit of exclusivity with Altruist more than just the tech and custody package together, they see that as some sort of exclusive approach which for some advisors, see that as a nice differentiator. It’s also cheaper, they’ve got a great pricing model just $1 per account per month which is $12 a year per account, which can be a huge discount, compared to the bigger platforms like Orion or Tamarac. And even better pricing than Betterment for advisors, which I believe charges 15 basis points. So that’s really not scalable, $12 bucks a year is super scalable for advisors as they grow their assets the price does not go up.

So back to the the model marketplace and why they launched it and why are they expanding it, so that there’s a couple reasons why I see them having a model marketplace one is makes their platform stickier, keeps advisors there, it’s a more integrated solution, makes them happier that they keep everything in one place. Keep some assets from going to TAMPs and also more revenue growth via the asset based fees they can collect from their model marketplace, although they seem to be doing it at a much lower price than other firms so they’re not making as much money but I’m sure they see it as a scalable play, and they’re happy to play the long game there. There’s a lot they can do with custody, having the economics of those 15 to 25 basis points of the custody and clearing business, things like margin and securities based lending, they have access to all those custody based revenue streams that other FinTech players do not have.

So their marketplace launched in February of this year, with just DFA and Vanguard and their own models, which is nice to have as well. And now expanding that they really want to be able to attract advisors and give them more offering and more opportunities. We’re done a lot of research in this space when it comes to marketplaces and model marketplaces specifically. And it’s sort of up and down and we there’s really not a lot of hard data on how many advisors are using model marketplaces or what the assets are on the model marketplaces, it’s kind of mushed up with model portfolios in general.

I know the last hard data we saw was from Broadridge a couple years, I think two years ago, there was something like $3 trillion dollars on model portfolios in general, but model marketplaces like what like Altruist is offering similar to what Riskalyze offers, former company Oranj which went out of business was offering, TD Ameritrade had a model marketplace, Morningstar as a model marketplace. YCharts did put out some research that you could interpret in two different ways, in their survey of advisors, only 13% were currently using model marketplaces. But 39% said they’re not but they are interested, so you can look at that as some green field for model marketplaces. And also they saw that RIAs with less than $500 million in assets were more likely to use model marketplaces, which seems to fit with Altruist’s current sweet spot demographics.

So all in all I like the opportunity or the offering from Altruist in general, and having a model marketplace seems like something that they would only launch if they were getting some demand from their customers, and I’m really looking for other platforms to do the same, at least one other should come out doing something similar as Altruist with a tech and custody platform. Considering the squeeze on on tech platform fees that’s going on, and all the offerings of free tech, and especially some with this combination of custody there’s got to be some niche space, some area that firms can exploit. Now that you’ve got the Big Four custodian Schwabitrade, Fidelity, Pershing, and now Goldman, that you can differentiate and show some, some opportunities for advisors. So in summary, the $50 million in new capital, expect Altruist to continue expanding their product offering, and their software platform to the point where they can start attracting larger RIAs. Remember, to destroy your competition, you don’t have to steal all their clients, just the best ones.

Orion Launches New 3D Risk Tool as Risk Tolerance Moves From Compliance to Client Conversations

Story number two is actually two stories, and they’re both about risk assessment, risk tolerance. It is, “Orion Launches New 3D Risk Tool as Risk Tolerance Moves From Compliance to Client Conversations”, and “Morningstar Announces the Launch of Their New Morningstar Risk Ecosystem”. So let’s start with the Kitces Advisor Map, you can take a look at that at Kitces.com and the August version of his FinTech news. We’ve got three sections that fall into this area of school, we call them Risk Tolerance, Behavioral Assessment and Stress Testing. Those areas are sort of combining, they’re really linking up with each other, we may have enough to merge them together if things keep going this way, especially the way, at least Orion and Morningstar, as well Riskalyze, are really approaching the market and approaching the way they provide the software to advisors.

Starting with Orion and their tool. So, this is their way of leveraging on some of their acquisitions including Brinker Capital, and their behavioral finance resources, as well as what they purchased from Hidden Levers, so taking these two technology platforms and merging them, and building out a new tool which they’re calling a 3D risk profile. So it’s a questionnaire, designed to infuse academic research and behavioral psychology into Orion’s risk profiling and financial planning tools, which they got when they purchased Advizr a couple years back, at least according to the announcement. So again, merger Brinker Capital brings in the behavioral finance, especially with Daniel Crosby, a guy respect a lot, he’s got some really great books out and some good thinking about behavioral finance. So taking some of his thinking of things that he’s doing and merging it with what they got from Hidden Levers.

Now I’m a big fan of behavioral economics, especially research done by Daniel Kahneman and Amos Tversky, described his best selling book Thinking Fast and Slow. So I’m really interested in this kind of thing and how it’s moving into the advisory space and how tools are leveraging this research and turning it into algorithms really, and using it to deliver these behavioral finance, behavioral economic theories. Some stats point in the right direction to advisors who are using behavioral finance, according to one survey, advisors who use behavioral finance have gained clients at almost twice the rate of those who don’t. This is from Charles Schwab Investment Management.

Now let’s not confuse correlation with causation. It’s not the only factor when it comes to gaining clients, now they may have only measured that factor but that doesn’t mean it’s the only factor. Maybe just advisors who are more successful in general. Also use behavioral assessments, but not a bad stat to use and we’re seeing it thrown around a bit by the behavioral finance driven tools. Hidden Levers started portfolio stress testing, at least when I first saw them I think seven years ago or more, and they’ve since expanded they’re still doing stress testing so building out those tools but they’ve also built out a proposal generation tool, which has gained a lot of traction. In fact, when we saw the demo recently, they told us that 60% of advisors who are buying their software now buy it for proposal generation. That’s interesting. And of course, risk tolerance, risk assessment can be a part of your proposal process, part of the IPS for some advisors so it certainly makes a lot of sense to combine risk with the proposal.

So the 3D part of Orion’s tool name, 3D Risk Profile, aims to capture all three dimensions of risk tolerance, capacity, and risk composure. By assessing the client’s tendency to be concerned about volatility and help advisors identify which clients are most likely to be too excited in bull markets, or too stressed in bear markets. So I think the goal of Orion’s risk tools to help advisors better predict how a client will respond to volatility and help the advisor become a better coach for their clients. And of course, Orion also wants to make their platform stickier, offer more or more parts of the advisor workflow inside their tools so they don’t leave to do something else. Because every piece of the end to end wealth management process that a company can own and integrate tightly makes them more likely to stay, less likely for other vendors to come in. So it’s a good for Orion to do this.

Morningstar Announces the Launch of Their New Morningstar Risk Ecosystem

Now why is Morningstar launching their risk ecosystem? Well Morningstar has always been a strong player in the RIA technology market. I think when I reported from their conference I think two or three years ago, they had north of $400 million in revenue, just from technology, that’s out of their billion dollars in total. So if they were just a tech vendor, if they got rid of all their data, they’d be one of the largest tech vendors in the wealth management space at least. So that’s a little known fact, they really have a decent technology offering, and they’re making it stronger, they’re really investing a lot in their technology, spending a lot of time building it out, looking for opportunities to cross sell, looking for opportunities to cross integrate their own tools which they really haven’t done in the past. They’ve sort of let their tools run on their own and stay separate, and that’s changing which is a good thing, good thing for them, bad thing for their competitors because they’ve always been able to exploit those silos of data and technology.

One of the biggest, most popular products that Morningstar has is their Morningstar Advisor Workstation, which has tremendous market share. I’ve heard north of 150,000 advisors, have access to it. That’s not active users of course, that’s just advisors who have access to Advisor Workstation because they have a lot of enterprise deals. I don’t know exactly how many advisors are active users. They’re really just scratching the surface with integrations and adding new features to the platform, and one complaint we had heard from advisors in our analysis of the tool is that it’s very investment focused, and the industry is moving more towards goals based, so I see Morningstar changing that now, especially with this new Risk Ecosystem, and with some of their acquisitions.

Morningstar Advisor workstation up until now, primarily proposal generation, security research and screening, that’s really all it was. It did a good job at it, that’s all it did, but they’re making a number of acquisitions and they are attempting to integrate them all into this Risk Ecosystem. A new tool they built called Goalbridge, which I was referring to, it’s a lite financial planning tool, which they launched at T3 Enterprise, at the end of 2019, I believe, and they told us that Goalbridge is now a core component of the Risk Ecosystem, which addresses some concerns for advisors that they’re not goals oriented. And I thought that was a great idea for them and we’re seeing it slowly build out over time. They’re really connecting their investment management or advisor investment research security research and screening and moving it through the ecosystem, through your goal setting, through your portfolio construction implementation, they’re starting to connect the dots there. So that’s very good for them.

Some actual acquisitions was 2019 they acquired a company called Advisor Logic, which is based in Australia, and they offer financial planning software, so that gives them that tool. And then they also recently acquired PlanPlus Global, which owns FinaMetrica. So PlanPlus Global is Canadian based, also financial planning, so another financial planning tool purchased by Morningstar, and FinaMetrica, as you may or may not know, is one of the first software tools that came out that did risk tolerance, risk assessment, and FinaMetrica is also based in Australia just like Advisor Logic. Looking at the FinaMetrica website, they’re based in in Australia in the city of Barangaroo. It’s an area, right, like on the water, quite like nice.

So starting next week Morningstar’s new portfolio risk score will be available on Advisor Workstation, along with their new risk comfort range. So they’re looking to measure portfolios risk compared to their target allocations, and then apply to client portfolios model portfolios, you can link it to Morningstar’s model marketplace, another tool that could plug into this ecosystem at some point will be connected. Now, some have said that Morningstar is only offering one dimension of risk, as opposed to Orion’s three dimensions and those three dimensions are tolerance, capacity and risk composure, but they’ve got some time.

Now we saw a demo of the Morningstar risk ecosystem and they have room to grow, right, that’s a good base, they’re building it’s it’s a 1.0 version, there’s a lot of room to grow there, they’re still lagging behind both Hidden Levers, owned by Orion, and Riskalyze, the leader in risk profiling and assessment in terms of risk assessment scenario testing other capabilities, but clearly moving in the direction of combining financial planning and risk assessment. And according what they told us they see themselves as doubling and tripling down on planning and risk in their technology. So as mentioned earlier, we’re seeing a convergence of risk tolerance, behavioral assessment and stress testing and Orion and Morningstar and other firms are following suit in merging these.

Now, if you look at the Kitces AdvisorTech map you’ll see there’s almost 30 providers in these three spaces combined, and they’re all overlapping a little bit and more and more. And that doesn’t include, those 30, don’t include the other vendors, the RIA platforms and financial planning tools and proposal generation tools that also offer some type of risk assessment, risk profiling so there’s a lot of options for advisors, when it comes to measuring risk. This will be much more powerful for Morningstar if they can connect the risk ecosystem to Morningstar office and offer straight through processing from rescoring portfolio construction to implementation rebalancing trading and reporting, be a great end to end tool.

So back to risk, the question is, will these free risk offerings, I forgot to mention that Morningstar is offering these risk tools for free, you’ve got to talk about by Morningstar Advisor Workstation, but they’re not adding a fee to that. I believe Orion is charging for Hidden Levers, but they may offer for free at some point in the future like they did to Advizr. It’s possible, but still it’s gonna be part of the, of the overall Orion ecosystem.

So will this put any pressure on smaller providers like Tolerisk, Pocket Risk, Totum Risk, who don’t really have differentiated solutions, and they mainly compete on price. So we do see some impact coming to those, especially for broker dealers that have big Morningstar relationships, and also Orion is moving upstream, they’ve built a friend of a broker dealer and enterprise relationships and can offer a tightly integrated solution with Hidden Levers, and their proposal tool. That’s something that these other providers can’t match, so we do see some pressure on them. We see less impact on market leader Riskalyze, due to their positioning, as more of a client communications, lead gen platform that just happens to be built on a risk and compliance chassis. And the risk and compliance tools are very good, but they’re the market leaders, they’ve got a better brand awareness, the better market awareness, definitely the leaders when it comes to integrations and connectivity to other vendors. So, less direct impact on Riskalyze but more impact on the smaller risk vendors. So that’s where we see this happening, and we’re looking for more of this in the future.

Broadridge to Distribute The TIFIN GROUP’s Suite of Wealth Management Solutions, Accelerating Growth for Financial Advisors

The third story in this month’s news, “Broadridge to Distribute TIFIN’s Suite of Wealth Management Solutions, Accelerating Growth for Financial Advisors”. Broadridge Financial Solutions and TIFIN GROUP today announced that Broadridge will integrate and distribute a broad range, a broad range from Broadridge, will integrate and distribute a broad range of TIFIN’s FinTech wealth solutions that enable advisors to create hyper personalized solutions for their clients. That’s why I hate reading press releases, could they put any more industry jargon into these? If I have to read one more hyper personalized application that reduces friction on the screen.The distribution agreement follows Broadridge’s April 2021 strategic investment in TIFIN, along with JP Morgan Asset Management, and Morningstar.

Okay so, this is a big deal. TIFIN has grown pretty quickly since being founded in 2018. These firms don’t throw around money lightly, Broadridge, JP Morgan, Morningstar, they seem to know what they’re doing, they seem to make some very good acquisitions and very good investments at least for the most part, you can’t be perfect every time you’ll have some mess ups and you’re going to make some mistakes but for the most part, these firms seem to know what they’re doing so their investment is a vote of confidence in TIFIN’s management and their direction. So TIFIN is growing quickly as I mentioned, Broadridge will integrate with and provide distribution for TIFIN solutions including, but maybe not limited to Positivly, magnifi, LOUISE, and totum.

So these are all applications that TIFIN owns. Wait isn’t it called totum risk? They’re not calling it that anymore, just totum? Okay. Each of which addresses friction, oh there we go again, friction in the wealthtech industry. So the first product being distributed through Broadridge is Positivly, interesting product. They claim it’s an advice personalization platform, rather they describe it as an advice personalization platform that enables advisors to tailor proposals and portfolios to each client’s unique and holistic financial personality. That sounds to be like a portfolio construction tool, but it actually isn’t. When I was looking at this tool, this is more of a marketing lead gen questionnaire kind of tool, behavioral assessment is where I see this being positioned. And even if you look at the rest of the press release, Positivly will be that will be available alongside Broadridge’s premium digital marketing offerings, so yeah it’s a marketing tool. I’m not sure what they’re talking about enabling advisors to tailor for proposals and portfolios. Nothing wrong being a marketing tool, advisors need marketing.

Broadridge has made a number of acquisitions to bolster their wealth management offerings. In 2019 they acquired a company called Rockall, which is a market leader in securities based lending and collateral management. Also in 2019 they acquired RPM Technologies, a leading provider – is every vendor a leading provider, they can’t all be a leading provider – a provider of Canadian wealth management technology, again another Canadian company. 2021 June they acquired AdvisorStream that was a real good pickup for them. They’re going to make out like bandits on the AdvisorStream acquisition. They’ve got some great technology, great, great positioning of their business, what Kevin Mulhern and his team have done building out and setting up all these paywalls. They signed contracts with all the paywall providers, Barron’s, Wall Street Journal, New York Times, and then they offer that in one package solution to advisors, so they can distribute content and no paywalls. And they’ve already got all these contracts already done, so they’re ahead of the game to be hard for other vendors to catch up. Good pick up by Broadridge there, and also just last month Broadridge also acquired a company called Execution Compliance and Surveillance from Jordan and Jordan, which has regulatory compliance capabilities, surveillance and regulatory. Compliance is always big, it’s a driver of FinTech budgets, something you really can’t say no to. And we expect the current administration to increase compliance requirements, increase regulation so there’ll be more drivers of compliance software that’s good pickup for Broadridge.

So what are some of the TIFIN properties? Before I forget, some of the TIFIN portfolio companies were nominated for the 2021 Wealthie Awards from WealthManagement.com, and those include Positivly and magnifi, both nominated, so you can check them out. WealthManagement.com, and look for the Wealthies Circle 2021, and also clout, another company owned by TIFIN. What is clout do, growth marketing. So that’s content curation, for a marketing tool. So Positivly is the first application that Broadridge is going to distribute, back to our previous discussion on risk assessment behavioral assessment, Positivly is a behavioral assessment tool with a psychology based framework, they report.

Now I went through the process and took their whole quiz. Oh, interesting stuff. As I mentioned earlier, I’m really into behavioral psychology, behavioral assessments, I really love reading about psychology so interesting to see how different vendors deliver these tools and theories, and make them happen in practice. However I wasn’t really super happy with the output from Positivly, again I probably need to see a more in depth demo, but seems a little bit like horoscopes to me, and one of the outputs I got was, “you have a desire to express your worldview through your investments”, which is really not the case, so I’m not really sure where they got that. They popped up some investment ideas a bunch of ETFs, one of them is Ark Next Generation Internet which I do happen to own, so maybe they’re spot on with that. But they’re all sponsored, which I liked that they notified me that they’re sponsored, but why am I buying stuff that they’re being paid to present to me, seems like a bit of conflict.

On the website, they have a science section, but there’s no white papers, or research links to describe the science that’s what I’m really interested in, I want to know how did you make this stuff? How did you create these questions? Where is it coming from? What’s the academic research you’re basing this on? I want to see that. They do mention some stats that their software can increase retention in down markets by 43% and reduce acquisition costs by 50%. Again I want to see where they got that from. I need to see some pretty decent surveys to know that is the case.

Another question which I kind of chuckled at just because we happen to be doing risk tolerance risk assessment investigations at the moment, evaluations of all the risk platforms. So a bunch of advisors mentioned this kind of question, I’m not sure they were talking about Positivly, but they did mention it, it’s a question that starts out if your investments were like a car, which car would you be, or which part of the car would you be most concerned about. And I think three advisors, completely independently, all mentioned the question like that as something that they didn’t think made any sense. So I’m not saying that they’re right and Positivly is wrong, it was just a funny coincidence that Positivly has a question like that, and I happened to chuckle when I read it.

The bottom line is, can Broadridge connect this behavioral assessment into their broader wealth management platform? Can it enhance or replace risk tolerance questionnaires, can they link it to their home office models? And can they, as I said it looks more like a marketing tool lead gen tool, can they connect it to AdvisorStream somehow merge them, combine them to integrate them, to provide better solutions for advisors, and a better all around, integrated experience for them.

Onto the other tool, so just really quick the tool I mentioned totum risk earlier in the previous story. There’s another tool that we’re talking about called LOUISE, which could be a good or bad name it’s something you remember at least it’s different LOUISE, but it doesn’t relate to anything. It’s weird, the website’s one page only, no links no sub pages, looks at some sort of philanthropic application, not sure what it does or how it works but it’s on this list as being integrated with Broadridge. No clue what how it’s gonna work. But onto something that I do think I know how it works called magnifi. They claim it’s the world’s first semantic investment platform for finance, it helps financial advisors, portfolio managers, and everyday investors find, compare, and act on investment options.

So to me when I looked at this, this looks like an interesting search screener. Well I’m a techie so I like screens with lots of bells and whistles on them, that’s what I like. Not sure every advisor feels the same way that I do, that lots of graphs and charts and things popping around, and things to click on is what every advisor wants, they really want simplified solutions from what we hear and what we see selling well. But again, interesting dashboard, interesting search screener, lots of options at least on the independent investor side for selecting and searching for different ETFs, mutual funds based on thematic investing, which reminds me of Motif Investing. And again, also magnifi when I was doing some searching came up with Ark Next Gen Internet. So, owned by the same company, not surprised that they’re sponsored and pushing out on both platforms. Again, which is I’m not saying it’s a bad investment at all, just that they’re sponsored and being paid to present that to investors.

Basically a search screener pulling out ETFs or mutual funds and stocks, they claim it helps advisors or investors make smarter decisions. I’m not really sure about that because honestly investors don’t make smart decisions in general, and just giving them the ability to say well I want to invest in ESG or human rights stocks, that’s not going to make a smart investment or smart decision. What else are they invested in, what are their goals, what are their total assets, how old are they, where do they live, what’s their job, do they have any kids? There’s a lot of other things involved to decide whether investment is smart, although they do allow you to sort by fees. That’s smart. That’s one smart bit of it, but it’s only one factor, there’s a lot more involved.

I mean, I think it’s common knowledge that investors trail their benchmark when they pick their own investments mean in fact most advisor portfolios trailer benchmark. So, smartest decision an investor can make is put your money in a professionally managed model portfolio, leave it alone. But let’s say they don’t want to do that. This is a rudimentary investment search, not a lot of results that I think would be useful, but again this is early, I’m hoping they’re gonna keep building this out. They have a Pro feature for advisors that empowers comparison of investment solutions, constructional portfolios, portfolio enhancements, and the ability to instantly search client positions across a book of business. Okay, it sounds like advisor dashboard, every advisor dashboard worth their salt shows me the top 10 holdings across my book, so I’m not sure if that’s what they’re talking about.

But it sounds like a security screener and research tool looks like it’s competing with Morningstar Advisor Workstation, YCharts. You know it’s not anywhere near Morningstar Direct, but it’s gonna be a tough road to hoe, there’s a lot of tools in this space that are offering investment, screening, and research, they’ve got a long way to go. But maybe some money from Broadridge and Morningstar and JP Morgan can help them build this out. They can tie it into the larger enterprise applications, get some broker dealer deals, enterprise wide. Put this in front of a couple thousand advisors get some better feedback, and we’ll see how that plays out.

Fidelity Digital to Expand Staff by 70% on Strong Crypto Demand and Support for Bitcoin Lending

The fourth story in our News Roundup, “Fidelity Digital to Expand Staff by 70% on Strong Crypto Demand and Support for Bitcoin Lending”. The unit of Boston based asset manager Fidelity Investments plans to add about 100 workers in technology and operations in Dublin, Boston and Salt Lake City. According to Tom Jessup, President of Fidelity Digital Assets, the new employees will help the business develop new products and expand into cryptocurrencies, beyond just Bitcoin, Jessup said.

So Fidelity is pushing into crypto even more so than they had before. They’re one of the first institutional players in the crypto custody space. And they’re also not only expanding their staff, but looking to expand crypto trading to 24/7. Bitcoin and other cryptocurrencies trade basically around the clock, since it’s all computerized, there’s no centralized exchange. It doesn’t stop, ever. But the regular business world, the regular securities world is a 9-5, or 9-4 window every day, especially with custody required books and record update overnight with batch processing, so everything sort of stops while crypto keeps running. So they’re looking to build some sort of tools that gets real time custody said you can do trading of crypto outside of normal security trading hours.

Fidelity has been in this for a while, in 2018 they announced their custodial offering specifically targeting institutional investors and Fidelity is clearly doubling down on crypto boom this year. They even filed back in March of this year an application for a Bitcoin ETF, and it’s currently pending approval with the SEC, along with 20 or so other cryptocurrency ETFs. 7 in 10 institutional investors expect to buy or invest in digital assets in the future. According to some research by Fidelity, of course, and more than 90% of those interested in digital assets expect to have an allocation in their institutional or client portfolios within the next five years. All the data is pointing up, all the interest is pointing up. Now, of course, the US still lags a bit behind when it comes to digital assets, adoption in the US is around 33% of US institutions in the UK or the EU, it’s 56% and in Asia it’s over 70%. So we’ve got a bit of catch up to do when it comes to digital assets.

Some interesting stats, of course it’s easy to go check the price, the price of Bitcoin has jumped up a bit from touching the 29,000 mark. I believe it’s around 43,000 today, but it’s more than just the price, there’s a lot of assets flowing into the space. In fact, stable coins have seen more capital inflows than US municipal bonds so far this year. The top three stable coins which are basically cryptocurrencies that are pegged to the dollar, so the price of these cryptos are always $1, the amount of assets flowing into stable coins has almost quadrupled this year, from $21 billion to $102 billion in assets versus last year. So this $75 billion increase in assets into stable coins is greater than the $73 billion in assets that investors have added to municipal bond funds and extreme and ETFs, this year.

Now I would be remiss if I didn’t talk about the infrastructure bill currently winding its way through the Senate, and its impact on crypto. I’m going to read a bit from an article written by Fred Wilson, who’s a well known cryptocurrency expert and advocate. So this is what Fred says on his website and I’ll post a link to this in the show notes. So Fred says:

“As I mentioned in the post last week, there is language in the initial draft of the bill requiring crypto “brokers” to report gains and losses to the IRS. The Treasury expects this provision to produce upwards of $30bn in new tax revenues over the next ten years.
I personally have no issue with crypto gains and losses being treated the same as stock gains and losses and we have been doing that at USV for quite a while now. But I do have concerns that the way “brokers” are defined in the context of crypto is very different than how it is defined in the traditional financial sector. The language in the initial draft is overly broad, infringing on privacy, and technically unworkable. Crypto industry participants like miners, wallets, smart contracts, and other kinds of hardware and software cannot carry the same obligations as “brokers” like Coinbase and Square Cash.
It is also the case that when a government decides that a sector is an important producer of revenues, that is a sign that it has arrived. Many out there think these new regulations are bad for crypto but I think they are a bullish sign. Crypto is here to stay and is a mainstream industry now.
For these reasons, I think this is a watershed moment for crypto in the US. The industry has come together like never before and is acting in concert, professionally and productively. It is on message and effective. And the government is getting in business with the crypto sector to finance it’s own needs. That sounds like a win to me.”

So back to Craig here, I agree completely with what Fred said there. First of all why they stuck this crypto language in this bill at the last moment, just speaks to how corrupt and how messed up things are in Washington, how broken the system is. But hopefully they’ll be able to change the language with some pressure to make it more reasonable and let the bill move forward or not move forward but without impacting the cryptocurrency markets.

Now before I finish up with the crypto section I want to tell you to take a ride over to Blockchange.ai, and this is a company that has a digital asset network where they connect money managers who have cryptocurrency portfolios and models with advisors, and they do all the work they do all the connections they provide all the training, all the rebalancing allocations, they have a single interface for client accounts, you can adapt different strategies across a wide range of digital assets, and it’s Blockchange.ai.

Click here and schedule a Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.



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