Come on in, sit back, relax and enjoy episode 114 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 October 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 (October 2021) and their Advisor Tech Map, which we work with Michael Kitces to produce.
October News Stories
- Riskalyze Bucks the Trend with a Blowout In-Person Conference
- Docupace Acquires Client Data Gathering Software Vendor PreciseFP
- MassMutual Launches Crypto Subsidiary for RIAs
- Envestnet Launches an Alternatives Exchange Powered by iCapital
- Advyzon Adds FIDx Integration for Managing Held Away Assets
- Morningstar Partnering with TIFIN’s Magnifi on Direct Indexing
- Kitces Advisor FinTech Map (October)
- Advyzon [31:49]
- Asset Map [14:06]
- Docupace [11:57]
- Envestnet [24:22]
- eMoney Advisor [14:06]
- FeeX [31:49]
- Females in Finance [04:37]
- FIX Flyer [10:18]
- FIDx [24:51]
- Flourish Financial [17:35]
- FP Alpha [30:17]
- Holistiplan [30:23]
- iCapital Network [24:25]
- jaccomo [12:13]
- MoneyGuidePro [14:05]
- Morningstar [07:35]
- Orion Advisor Solutions [09:19]
- Paxos Trust Company [17:42]
- PreciseFP [12:48]
- Redtail Technology [14:02]
- Riskalyze [04:08]
- TIFIN Group [25:27]
- Trucendent [25:08]
- Vanilla [29:49]
- Wealthbox CRM [14:03]
Complete Episode Transcript
Craig: Come on in and sit back, relax and enjoy episode 114 of the WealthTech Today podcast. This is our October wealthtech news episode, and I’ll be covering these seven stories. Number one, Riskalyze bucks the trend with a blowout in-person conference. Two, Docupace acquires client data gathering software vendor PreciseFP. Three, Flourish launches Flourish Crypto service. Four, Envestnet launches an alternatives exchange powered by iCapital, Advyzon adds FIDx integration. Number six, TIFIN portfolio company Magnifi integrates Morningstar research for direct indexing. And finally the Kitces advisor FinTech map updates for October. A couple of quick housekeeping tasks before I forget a quick shout out to our sponsor, the Invest in Others Foundation, go to investinothers.org and be sure to subscribe to the show wherever you listen to podcasts so you don’t miss future episodes. Now let’s get this episode started.
Riskalyze Bucks the Trend with a Blowout In-Person Conference
Our first story in the October News is the Riskalyze conference. Boy, it was good to get out, get on a plane, fly somewhere, see some people, there’s nothing like it. For going from, I think I was doing 10 conferences a year or more to none, it’s quite a change. It was nice to be home, still nice to get out. And this was a blowout of all blowouts. I think there were over 800 people. I think I saw 880 as a number at this conference out in Palm Springs, California never been there before. Riskalyze bucking the trend as a number of other organizations postpone conferences, including FPA, Informa’s Inside ETFs, or the Invest in Others Foundation, which is one of our sponsors charitable foundation, they postponed their annual gala. T3, Joel Bruckenstein’s T3 Conference postponed until next year and Wealth Stack.
Now Wealth Stack and T3 were also supposed to be the same week. The last week of September, with Riskalyze. I know some people, my good friend. Gavin Spitzner for example, was going to all three. He’s a little crazy if you ask me, but he was going to be in Florida for Wealth Stack on Monday, then go to T3 on Tuesday, then off to Palm Springs for Riskalyze on Wednesday. Now I was doing two, I was doing T3 and Riskalyze, which was enough, two conferences in a week is enough, but since it was postponed, I had some free time, and just headed out to Palm Springs, a leisurely trip out to Palm Springs. Some other conferences that did go in person as well, Morningstar, Orion Advisor, and of course Riskalyze.
So what did I do at this conference? I was running a panel, which they call the Experts Panel on advisor technology. We had some great panelists, which made my job a whole lot easier, Rene Nourse, Shannon Saccocia, and Mike Messenger. We talked about onboarding software, workflow, automation, marketing software, lots of stuff. There’ll be a blog post on that coming out very soon.
Also a shout out to Sheryl Hickerson and Darrell who run Females in Finance, it was a great end of the conference. They had this sort of mini event, Females in Finance, which I’m a member of. And a shout out to Ruth Raftery, Tony Stoyer, Ryan Pinney, who I met there for the first time.
Now I’m going to try to do something here that no one’s ever done before, is list off all the people that I know that I saw in person at the conference or either that I know and saw or that I met and saw. So let’s go through this real quick list. Adam Antoniades, Justin Boatman, Stephanie Bogan, Daniel Bolton, Jason Borgmann, Diana Cabrices, Justin Castelli, Marguerita Cheng, Jamie Cox, Charlotte Geletka, Ryan George, Patrick Hannon, Jeff Hoenle, Michael Kitces, Aaron Klein, David Knoch, Jason Lahita, Brian Leitner, Mike McDaniels, Brian McLaughlin, Cheryl Nash, Derek Notman, Nina O’neal, Penny Phillips, Kerry Pierce, Michael Pinsker, Ricky Redtail, Tyrone Ross, Beth Rubinoff, Abby Salameh, Johnny Sandquist, Lacey Shrum, Ryan Shanks, Gavin Spitzner, Tony Stich, Alison Susko, and last but not least, Doug Wardley. That’s a long list, if I missed you, I apologize. I was racking my brain and make sure I didn’t miss anybody.
So there was some news at the conference and the story up is one of the news stories that was announced Docupace + Riskalyze, but we’re going to talk about some of the things Riskalyze announced at the conference, which I’m pretty excited about. And this is all I think, part and parcel of them expanding the platform, continuing to expand, continuing to build out offer new functionality and really, the land and expand strategy of getting in through risk and then moving on to other things.
They’ve built a home office platform that they’re really moving into the enterprise space pretty well. One of the things they announced at the conference was a new dashboard which I think was sorely missing cause they had a lot of different tools and a lot of different options and software, especially the new Reg BI software. They have other compliance software as well that is selling pretty well from what I hear. But this dashboard is supposed to bring it all together, at least from the screenshots we saw, it looks really good. And a lot of enterprise clients need that. A lot of our enterprise clients require these types of things, they’re not even gonna bring on software if it doesn’t have a form of a dashboard or at least some sort of widgets that can plug into their other dashboards, operational tools.
This was announced at the Institutional Partners round table where I got to see the extent of their enterprise business. When you look at all the firms that were attending you really see how how well they’re doing. Riskalyze also announced that they call Discovery, which they’re calling a quantitative engine to defined securities, which looks like basically a really advanced screening tool. It’s a great idea, they’re sort of following the Morningstar script. They built out of course their risk number, which is their proprietary algorithm to come up with that risk tolerance number. They also launched what they’re calling the Riskalyze GPA, which is a portfolio analytics number. So one number to represent your portfolio risk. And now, since those are proprietary, they have built that into their screener, so now you can screen for those, those particular things, which no one else can do.
So by launching this, they’re leveraging their proprietary analysis and analytics, similar to how Morningstar leverages their Star ratings and their x-ray and their style boxes. Portfolios, so they’ve announced there was a lot of emphasis on speed, which says to me that they had a lot of problems with the slowness of the product which is not unexpected considering how fast they grew. Some people told me they went from 22,000 users to 35,000 users during the pandemic, which is a huge increase. And they saw some decreases in speed and response time. So it built out a new engine to run their portfolio analytics tools and they gave us a demo, of course it looks infinitely faster. They did a kind of fun thing where they showed, they’ve named the engines P6 and P7 and had one person running P6, a good friend, Mike Stern, who I left out of the list, sorry, Mike, Mike Stern was P6 running the old software then P7 was running next to him and you could see P7 came up right away and P6 took about 30 seconds to load a portfolio with 500 positions, so obviously much faster.
They’re building out their stress testing tool, and that lends itself to their competition with Orion who now owns Hidden Levers. So Riskalyze’s stress testing was a little weak in the past. They’ve added some tools, a lot of scenarios, historical data for new events that should help them going head to head with firms looking at Hidden Levers. And let’s see, finally, they added some trading functionality to what they’re calling Riskalyze trading, which I think used to be called Autopilot. Now it’s called Riskalyze trading, they added an accounts dashboard. Again, I love dashboards. You gotta have them. The more visualizations we can see across accounts, across different pieces of software is important. They added tax optimization and tax loss harvesting, just another step in their method of building out, basically a full featured RIA platform, starting with risk, adding more tools and features now building out more and more. So the tax optimization was another piece that was missing from their portfolio rebalancing and trading tools. They’ve also integrated with FIX Flyer, one of the industry’s leading trade order management systems that gives them a nice connectivity to FIX networks.
Overall, I like what they’ve announced, like what risks causes done as they’re expanding their tools slowly, methodically building out their technology. It seems like they’re really taking aim at Morningstar Advisor Workstation users, which is by the way, one of the most popular pieces of software in our industry, according to Morningstar, they have over 185,000 users, which I can’t confirm, but they are in every broker dealer I work with. They may not necessarily have all those users active every month, but they’ve got those licenses out there. It’s a very popular tool. And looking at what Riskalyze has put together with the portfolio analytics, stress testing that their screening and other other tools, it looks like they’re looking to gather that from the bottom up Morningstar Advisor Workstation users and bring them over to the Riskalyze platform.
Docupace Acquires Client Data Gathering Software Provider PreciseFP
Back office efficiency has taken on renewed focus as increased client demands and accompanying assets has spurred wealth management firms to sign up for new operational technology at a record pace. The problem is connecting all this new technology with the legacy systems that are already in place to route data between them, automate key processes, and ensure that best practices are followed.
One company that’s been providing back office operational software for over 20 years, is Docupace and in April, 2020 FTV took a majority stake in the company and named former first global president David Knoch as a new CEO. Since then in one acquisition, acquired compliance and reporting software from jaccomo, which I think fits nicely with their growing software suite, which includes document management, workflow automation, advisor transitions, and new account opening. Now jaccomo was under the radar for most of the industry, but they quietly built some solid technology, especially around data cleansing and integration. Of course, compliance and surveillance. They also have advisor compensation software, which are crucial aspects for most firms, especially larger broker dealers, and when the auditors come knocking, you want your data to be crystal clear, especially when compliance and surveillance.
Now at the Riskalyze conference, Docupace announced another acquisition of PreciseFP, one of the leaders in client data gathering software. And there were only two products on the Kitces Map and PreciseFP was founded in 2007. A lot their their main software is sending out digital forms that are then self-directed client data entry for clients and prospects. They have a whole load of templates, which they call fact-finders that you can use for lead generation or risk tolerance surveys, they even have them for a goals-based planning, IPS and others. Very nice template library that advisors can use to send out the self-directed surveys and self-directed data entry.
Now Docupace’s market research shows that PreciseFP user firms have 40% larger average account size and have grown their firm AUM at a 5% faster rate on average than the overall RIA universal of past five years. So good reason to acquire them. You can check out the demo, which you can see on the PreciseFP site. One of the things I like about their financial fact-finder is already pre-integrated with some of the technology that many advisory firms use such as Redtail CRM, Wealthbox CRM, MoneyGuidePro, eMoney, Asset Map, etc. So things like goals, budgeting, as I mentioned before, IPS for the household structure, end of year tax planning, lots of different templates already prebuilt, and pre-integrated they just be sent out to the client base or new clients or prospects and all that data is gathered and automatically exported into the right applications.
Another thing I like about PreciseFP as a consultant is their integrations page. They’ve got a lot of integrations as we mentioned, but the page provides a lot of details. Our research staff and our implementation staff love that MoneyGuidePro and eMoney are also firms that have these types of well-documented integration pages that show you what data is coming in, what data’s going out at a pretty decent level so it’s very helpful.
This is really continuing a long string of M&A transactions we’ve seen over the past 12 months, including what’s the FMG Suite buying TwentyOverTen, Seismic buying Grapevine6, which is a social media automation company, content company for advisors. Refinitiv bought ASI portfolio rebalancing software, private equity firm TCV bought WealthSimple, which is a Canadian robo advisor. Vanguard bought direct indexing from JustInvest. And JP Morgan went on a spending spree buying 55ip, which was a TIFIN portfolio company, which we’re going to talk about them later. They let a $50 million round for Aumni financial analytics tool for private market investments. Again, this is JP Morgan bought ESG direct indexing firm Open Invest and finally another robo-advisor, Nutmeg based in London. So another acquisition, I’m sure we’ll see more. It’s only the beginning of the fourth quarter. I expect a lot more acquisitions to be announced this year.
Flourish Launches Crypto Product for RIAs
Next up on October news, our third story is crypto, crypto news. Blockchain companies hit $30 billion in total funding, which is a 44% year over year increase, and it’s only the third quarter. So there’s still a quarter left of new funding for blockchain companies. Some of them are coming into the wealth management space and this week Bank of America, the second largest bank in the US by assets launched a new analysis of the digital asset markets. The report stated that Bitcoin and crypto markets are simply too large to ignore. Bitcoin is important, but the digital asset ecosystem is so much more, said the banks head of cryptocurrency and digital assets strategy. Another story, Grayscale CEO, all the firms products could convert to ETFs. Now Grayscale Bitcoin trust, Ethereum trust and others are the only way that most US investors can purchase Bitcoin in their IRAs rather.
And they are working on getting them converted to ETFs if they can get approval from the SEC, which I’ve heard may not happen, but they clearly seem optimistic about it. Now Grayscale Bitcoin trust is the largest digital currency asset manager with about $42 billion in AUM as of October 1st. So they’re looking to get those converted over to an ETF.
Our other story on crypto is called Flourish Crypto, a new product launched by Flourish. Now Flourish’s service name is being launched a partnership with Paxos, the infrastructure provider that connects traditional payment services to cryptocurrency markets. And Paxos completed a $300 million funding round in April and also has deals with PayPal and interactive brokers. Ben Cruikshank, head of Flourish, said the move is a result of rapidly growing demand by institutional investors and their clients for exposure to digital assets.
I’m not going to talk a lot about this because we’re actually going to have head of product for Flourish and Flourish crypto on the podcast. We just recorded the episode yesterday or the other day, and it’s going to drop I think, at the end of this week or maybe next week. So I’m not going to go too much into this, just to give you a quick overview, this product called as I said, Flourish Crypto will allow is built on the Flourish platform, which is a running another product called Flourish cash. And that’s in use by over 400 RIAs managing, I think it’s got a billion dollars on that platform. It’s designed to help advisors and their clients earn a competitive interest rate on cash while providing access to increased FDIC insurance coverage through their bank network. Any money to transfer it into Flourish cash is automatically deposited at select FDIC member banks, and then it gets swept back and forth. So you always have insurance coverage and you’re earning the highest possible interest rate. That’s what the software does, is it locates those banks and moves the money in between different accounts to keep your clients earning the highest interest rate.
So the Flourish crypto product will allow advisors secure and compliant access to cryptocurrency through a what they’re calling a simple, easy to use platform complete with reporting and planning, integrations, trading, transfer, flexibility, and advisor specific compliance resources. Currently Bitcoin only, but they plan to have Ethereum. Now one thing we do like about that, there’s a saying in the cryptocurrency world called not your keys, not your crypto. Unless you own the private keys that identify your cryptocurrency on the Bitcoin network, you don’t really own it. It’s being custodied by someone else. So you’re trusting that other firm to be safe with your keys. But the way Flourish crypto is designed the actual investors still own their own keys, they could move them away at any time.
This is compared to firms like PayPal. For example, if you buy crypto on PayPal, you can not move the crypto off of PayPal. You have to sell it, turn it back into dollars, and then you can go buy somewhere else, but you can’t just transfer your Bitcoin away from PayPal, they’re not allowing that. But with the Flourish cash product, you still own your keys and clients can move it around, or the clients can move it around as well. They deeply embedding into the RIA ecosystem. They’ve announced four big integrations, eMoney Advisor, or Orrion Tamarac and Black Diamond. So three of the biggest RIA portfolio management platforms, as well as one of the biggest financial planning softwares, eMoney Advisor. But these are only reporting integrations, there’s no trading rebalancing yet that’s coming. Of course we want to see what these integrations look like there will be more coming next week or the week after when we drop the episode with the head of product for Flourish Cash. But I just wanted to give you that overview, because I think it’s a really interesting product. You can check them out at Flourish.com.
Envestnet Launches an Alternatives Exchange Powered by iCapital
According to data provider Statista, 81% of ultra high net worth clients hold alternative investments versus 85% who want to invest in them in the future, which is a 4% gap. With very high net worth investors, it’s 55% currently hold versus 68% that want to hold in the future. So there’s a 13% gap. And with high net worth investors, it’s 29% hold now, 46% want to hold in the future, a 17% gap. To try to fill these gaps is Envestnet partnering with UBS and iCapital on a platform called the Alternatives Exchange where high net worth clients will be able to browse, purchase, and sell private investments such as real estate, hedge funds and private equity.
Now this exchange comes along after three other exchanges have been launched by Envestnet. One is an insurance exchange, which is currently selling annuities and it’s partnering. They’re partnering with FIDx on that. Envestnet launched the credit exchange, which is offering real estate, residential real estate and unsecured lending products. They partnered with Advisor Credit Exchange. And the third exchange is the trust services exchange where they partner with a firm called Trucendent. The trust services exchange provides a network of attorneys and trust administrators that work behind the scenes with advisors to handle trust account documentation, asset transfers, and regulatory compliance navigation. I look at it as sort of an Angie’s list for estate planning, where it links advisors up with all the different key personnel and experts you need to handle complex estates.
So back to the alternatives exchange another great idea from Envestnet you know, we’re seeing them as the largest provider of technology, especially in managed accounts, in the industry with the largest market share in broker dealers, banks, and high net worth RIAs. On the enterprise side is through their ENV2 enterprise platform and the RIAs are through their Tamarac platform.
Once you hit a certain level of market share, it’s difficult to grow. Every extra point percentage of market share is harder and harder to add because you’re squeezing your competitors down, and they’ll be fighting harder and harder to retain that market share. And also you’re running out of clients who are your opportune, or your target market, and you’re spreading out into firms that may be less optimal for you. So offering more products that they can sell to their existing clients will increase their wallet share and help them grow as a public company, their quarterly earnings reports, and they have to keep growing. So these different exchanges will allow them to push more and have more of a transactional business model through providing services.
Now they’ve got a methodology here and a strategy, which is always partnering. They’re not building anything themselves. They’re always partnering with another firm that’s got the core technology, which helps them get up and running much quicker. They’ve got most of the software, the plumbing already built, especially around the annuities exchange with FIDx, they built all the plumbing and actually they handle the paper. All the insurance paper is handled by the FIDx desk. So that takes that off of Envestnet’s plate, makes it much easier and the, the alternatives exchange is going to work the same way I believe, using iCapital’s turnkey network solution and UBS, and UBS says they’re seeking to expand access to these assets. Typically offered to the wealthiest investors and push it down to the lower net worth tiers. So Envestnet will provide access to a select group of alternative investments provided by UBS and iCapital network through the new alternatives exchange.
So here’s a quote, if you’re a wealthy person with $5 million, you couldn’t previously think of investing in a private equity fund or a hedge fund. Actually that’s the chairman and CEO of iCapital. But now through the low minimums afforded by this platform, you’re able to put half a million or 10% of your portfolio to work across many different investments to achieve diversification, which will be great.
Morningstar came out with a report just last month, or in August called The Role of Technology and Managing Alternative Investments. A couple key points from their survey, 54% of respondents spend at least 10 hours a week managing documents for alternative investments. Firms with AUM of a billion or more are likely to have 10 or more employees devoted to client reporting and or managing alternative investment workflows and 65% of the respondents to this Morningstar survey plan to move away from manual processes to solve alternative investment data challenges.
The reason why I wanted to read those statistics is another key part of this alternative exchange is software that’s going to automate processes to more quickly compile and analyze documents needed to list such investments. And with all these liquid investments, there’s always lots of documentation that comes along, lots of complex contracts and other information that you need high price lawyers and accountants to review. This exchange is coming with this AI tool that’s going to process these documents and build them out for you and save a lot of time. They also have increased scale. If you’re pushing out these products to more clients, more wealth tiers with lower minimums, you need to scale, you can’t put the same sort of white glove service for all these smaller clients. You need to scale it. So these tools claim they’re going to automate the process and automate the processing of the documents for these alternative investments.
And this sounds to me a lot like Vanilla, the Steve Lockshin product, which is for estate planning, but a big portion of Vanilla’s functionality is cranking out the documents, reviewing the documents, processing them, making sure all the data is correct across all these, it could be dozens and dozens of documents. That’s a big part of Vanilla and their value add. So I see the alternative exchange for Envestnet doing something similar. This also is sort of like what FP Alpha is doing for trust and other documents, again, on a much, much lower end. Holistiplan, another company that’s reviewing documents, but they’re just reviewing 1040s and other tax documents.
But all these companies are sort of seeing this gap in the market where instead of having manually people, whether they’re lawyers or state attorneys or CPAs manually go through these documents, filling them out, making sure that all the paperwork is correct, all the I’s are dotted and the T’s are crossed, the software is going to do it. Scan it all in, uses OCR, making sure everything’s matching the client names matc everything spelled correctly, knowing which types of investments require which forms, which have to be signed and what order, and even sending them out to be signed through DocuSign and other tools.
The advisor community has rapidly adopted alternative investments in recent years, due to shrinking returns in traditional asset classes, pressure to differentiate and increase client demand tools like the Envestnet alternative exchange should help their clients offer these investments to a wider range of wealth tiers with lower minimums, but without the pain points that are normally accompany these illiquid and complex securities.
Advyzon Adds FIDx Integration for Managing Held Away Assets
We’re running out of time on the news. I’m going to hit a couple of other stories, squeeze them in here before I get to the updates and the advisor FinTech map. So just two more stories. One is Advyzon adds FeeX integration. And this story comes from wealthmanagement.com and Sam Steinberger. In my opinion, data aggregation has kind of stagnated. We haven’t really seen any new technology or new feature functionality from data aggregation in while, it’s the same vendors providing the same held away asset services, but FeeX seems to have a different take on things. In the past, any held away assets were view only. And there were advisors, we did see a trend of advisors charging for managing held away assets, but the management was always at arms length. It was always delivered to the client verbally or through email. And the client was responsible for making the changes in the held way accounts, whether they were a 401k account or other type of retirement vehicle.
But that’s all changing with FeeX. We like this platform. We’ve seen demos of it and spoken to the executive team a number of times, what they’re doing with this account aggregation and trading platform is enabling advisors to directly manage these held away retirement or health savings or college savings accounts. What FeeX has done is built out pipes to a lot of the major providers of these types of accounts, enabling them to directly send trades to them so that the advisors can basically use FeeX’s order management system in effect to link accounts on the platform. It acts as what they call a secure information bridge with an audit trail. So all the trades that go in are tracked and they can see exactly when they were done, they pass the information back and forth from the advisor to the external custodians and other other platforms. And when the advisor takes action then gets transmitted.
So advise on is the latest one to partner with FeeX previous partners were Orion Advisor was probably the biggest name we’ve heard partnering with FeeX. On Advyzon’s pilot, hey have between 30 and 40 RIA firms partnering and they saw their services were, were growing and they were using it differently than just another aggregation tool and Advyzon calls at the game changer, and I would agree. Because unlike simple account aggregation FeeX offers the advisor, the ability to actually manage these accounts. Some of the things that Advyzon is doing they’ve integrated with Onramp Invest to bring crypto holdings visibility to advisors. They’ve launched a prospect portal and they’re starting to develop their own portfolio rebalancing software all within the last 12 months. Now I’m interested in that last little piece of news, because that might change where we put Advyzon, on the Kitces FinTech advice, tech advisor techniques that Michael I work on right now, we have Adyzon in two categories, one is CRM because that’s really why most firms buy them is for the CRM. And they also have performance reporting. So they’re in two categories. If they were to finish building out their portfolio rebalancing tool and have trading, then we probably would consolidate. We’d move them off of CRM and performance reporting and put them into all in one. That’s just a heads up there of what we would probably do when we hear about their rebalancing tools.
Morningstar Partnering with TIFIN’s Magnifi on Direct Indexing
Next up again in the quick hitter stories here, TIFIN’S Maginifi gets Morningstar research for direct indexing. This story is also from wealth management.com and Davis Janesky. TIFIN Group announced that their Magnifi subsidiary will now begin offering portfolios of innovation stocks to end investors based on indexes designed by Morningstar. It’s been a big year for TIFIN Group, they’ve made two acquisitions, one of Totem Risk, and one of myFinancialAnswers in March. They announced the $22 million Series B round in April, and they also added Cathie Wood, Head of ARK Investment to their board back in July.
Now through this new offering end investors can access what they’re calling fanatic bundles of equities without ETF or mutual fund wrappers directly through Magnifi. It also offers direct indexing solutions for individuals. To me, it sounds like Motif investing the company, that was one of the first direct indexing providers, which eventually went out of business. And I think their assets were bought by Schwab. Oh, sorry. The accounts were transferred to Folio Institutional, which was acquired by Goldman. And then the technology was purchased by Schwab, but the TIFIN people say, oh, no, it’s not like Motif because we’re using institutional portfolios. It’s not peer portfolios created by regular investors.
So they’re really trying to target end investors, which seems like a big uphill battle for Magnifi. Magnifi isn’t really well known in the industry. They really start trying to get traction. They’ve been pivoting a bit across some different ideas. And if they’re moving into direct indexing for end investors or the fanatic investing partnered with direct indexing for end investors, there’s a lot of competition in that space. You’ve got the biggest firms in the industry, the biggest asset managers, BlackRock, Fidelity, JP Morgan, even E-Trade has fanatic investing options. So I don’t know how Magnifi is going to do it. Although they’ve got some pretty smart people there, they’ve managed again, managed to attract Cathie Wood from ARK Investment Management, who’s very well respected. They’ve also got Tricia Rothschild, a former Head of Product at Morningstar, the former President of APEX Clearing, who is also, I believe, on the board of Magnifi. Probably couldn’t hurt with their partnership with Morningstar on these managed portfolios.
These managed portfolios at Magnifi were designed curated and the stock selection has been made by industry experts, not peer curated or picked by amateurs. So this is part of their overall view of democratizing intelligence and not just products. Yeah, I’m not really sure I understand that statement there. There’s lots of firms offering curated investments and curated portfolios. That’s not new. I’ve also worked through their product offering. There’s lots of sponsored offerings when you go through their platform, it asks a lot of questions and claims to deliver a personalized investment portfolio. Doesn’t look very personalized to me. It looks really like filling out a bunch of sponsored investments, sponsored ETFs and things. Now they’ve made it clear that this is only the first partnership into fanatic investing. And while the first offering was with Morningstar, they have subsequent offerings that are planned with those direct asset managers themselves, maybe with ARK now that Cathie Wood’s on board or with other ones that are on the platform, you can check them out at Magnifi.com
Kitces Advisor FinTech Map (October)
And finally wrapping up the news for October, the Kitces Advisor FinTech Map. This is something I work on with Michael Kitces every month, you can find it at Kitces.com. The October version of the advisortech solutions map is now available, and I want to talk about some of the changes that were made that we made this month. So Michael and I have a zoom call every month, and we go through the map and talk about what’s going to be changing. Whether it’s mergers and acquisitions or new companies that are starting, or just moving around the categories based on new features and functionality or things that are changing. The industry’s always changing, always new stuff coming in, my email, my inbox is flooded, Michael’s is flooded with requests from vendors. We try to keep up as best we can.
This month, so the biggest changes were in the portfolio management category and the all in one category. What we did was we moved Black Diamond, Intelliflo, InvestCloud, MyVest from portfolio management into all in one. The reason we did that was we’re defining the all in one category as having portfolio management, which means you have not only portfolio management, portfolio accounting and portfolio rebalancing. So you’ve got to have rebalancing to be in the portfolio management category, but again, to all in one, you also have to have performance reporting. That’s what we agreed on. So all the firms, I just mentioned, Black Diamond Intelliflo, InvestCloud, and MyVest all have performance reporting capabilities. So they should go into the all-in-one platform category.
Then another change we made this month was Riskalyze was moved from the rebalance only category into portfolio management. Since they’ve expanded Autopilot now called Riskalyze trading tool, to be more than just rebalancing, to also include more portfolio management features that is now moved into the portfolio management category. It’s also got trading with their integration with FIX Flyer. Just so you know, last month, which was September, we added CircleBlack into portfolio management as well since they’ve got some portfolio management functionality. CircleBlack is also in client portal, as you will notice. And the final changes to the FinTech map were around the custodial platform category, which is right underneath all in one, sort of to the left of the middle there. We added Schwab, I don’t know how we missed them, but now Schwab is under custodial platforms. And we also added Shareholders’ Services Group, SSG right in the middle there as well, since they’re another custodial platform. And we also moved Altruist away from all-in-one back into portfolio management.
The reason we did that was they’ve announced they’re multi custodial. So since they’re not a purely a single custody platform, like the other custodian platforms in the custodial platform category, they now appear to be more like the multi custodial portfolio management tools, even though I’m sure they’re heavily relying on APEX as a custodian, that’s their preferred custody partner. But since technically they’re multicultural now we moved them just to the generic portfolio management category.
There you go. That’s the inside baseball on the advisor tech solutions map. You have any questions, please shoot me an email or you can shoot Michael email although I’m much more likely to respond he’s way busier than I am. We’ll be happy to get back to you with any questions or concerns you have about net. And that’s a wrap for this month news. Please go to EzraGroupLLC.com and sign up for our newsletter. Every month you’ll receive one email with lots of information, news updates and reviews and trends across the industry. And you will not be disappointed. Thanks for listening. And I’ll talk to everyone again. Next time.