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“If you think about platform consolidation, maybe you think about platform consolidation in terms of the abstraction layer. So you can still keep the trust accounting platform and the agency platform intact and use the managed accounts program, unified technology as a means of spanning those. And that is hard again, but it does provide the potential to reach the holy grail of the unified managed household.”
— Anton Honikman, CEO, MyVest
The WealthTech Today podcast features interviews, news, and analysis on the trends and best practices in wealth and technology for wealth management, asset management, and related areas. This episode is part of our January focus on platform consolidation. We’re talking to influential industry leaders who can provide technology solutions that help advisors build stronger relationships, improve outcomes, and enrich their clients’ lives. A quick shoutout to our sponsor, the Invest in Others Foundation, please go to InvestInOthers.org, and be sure to subscribe to our show wherever you listen to podcasts so you don’t miss future episodes.
Companies Mentioned
- CAIS [03:13]
- Carson Wealth [13:40]
- Cerulli Associates [06:53]
- FIDx [03:18]
- iCapital [03:14]
- LPL Financial [23:53]
- Onramp Invest [03:29]
- TIAA [28:21]
- United Capital [13:41]
- Vanilla [05:35]
- Wealth Enhancement Group [13:41]
- YieldX [03:21]
Topics Mentioned
- What is Platform Consolidation?
- What Is Not Platform Consolidation?
- The Holy Grail of an All-in-One Platform
- Dealing with Project Execution Risk
- Integrations that the New Platform Must Have
Episode Transcript:
Craig: I’m very excited to introduce our next guest on the program is Anton Honikman, CEO of MyVest. Anton, welcome.
Anton: Thanks Craig. Good to be here, I always enjoy talking about our industry with you.
Craig: It’s always fun. We should record all of our conversations. So where are you calling it?
Anton: I am calling in from my home office in San Francisco.
Craig: That’s a beautiful place. My home office in New Jersey, but I’m actually at the Market Council conference in Miami Beach. So actually got some nice weather in November.
Anton: I think I’d rather be there, but you know.
Craig: All of you can’t go to all of them. So let’s just right in. Can you give us the 30 second elevator pitch for MyVest?
Anton: MyVest is an enterprise wealth management technology vendor, and what we offer is a unified platform for managed investment solutions to medium to large financial enterprises. That can range all the way from sophisticated complex Rep-as-PM or bank trust type solutions, all the way to retail, ETF rep programs offered through digital channels and everything in between. We wrapped that with services, operational services and professional services, as well.
What is Platform Consolidation?
Craig: I’m trying to remember how long we’ve known each other, because I’ve been following your company for a long time and it’s been a while. I mean, you guys have been been in the industry a long time. You’ve got a good track record, which is why we wanted to to bring you on for this topic, which is platform consolidation. We work with our broker deal clients, but I wanted to hear from the vendor’s point of view, so from your opinion, how would you define platform consolidation?
Anton: Well, I would start by saying what it’s not, and what I mean by that is I don’t think platform consolidation is an actionable path towards a utopian ideal of a single platform that does everything. Platform consolidation, we’ll talk about what it is in a minute, still leaves scope for specialists in particular fields to integrate with a core platform. Even in the RIA space where the firm generally does not have a technology team or a large technology team or large technology budget, the service providers offer more off the shelf, all in one type solutions to that marketplace. You think of the Orion’s and the Envestnets of the world, but even them, they have partnerships with financial planning providers or, CAIS, or iCapital for alternatives or FIDx for insurance and annuities or YieldX. Now the Envestnet partnership with YieldX for fixed income portfolio construction, and an exciting new vendor is Onramp, which provides access to crypto before high net worth portfolios.
So this is still it’s not mutually exclusive, you can have platform consolidation and you can have integrations with specialists coexisting. At the larger financial institutions, they typically have their own technology budgets and their own technology teams, and they weave together best of breed solutions through API style integration. In all of these circumstances, platform consolidation does not mean one platform to do everything. Instead, what it does mean, I think in the context of this question for our industry is a unified chassis for managed investment solutions. A single platform from which managed accounts can be operated irrespective of the managed account program at these firms.
Craig: That’s a good definition. That’s pretty comprehensive.
Anton: And again, you can still layer in financial planning solutions and access to alternative products and customer reporting solutions and other specialist third party vendors into the mix, but the core operating platform for managed investment solutions gets consolidated.
Craig: You were mentioning a bunch of specialist firms and we’ve had CAIS, the CEO of CIAS, Matt Brown, on the program talking about their platform and how a lot of the biggest broker dealers are using it so they’ve got to integrate it. As you mentioned, weaving together APIs to plug these marketplaces and tools into their existing infrastructure.
Anton: Exactly. And I think it’s important for all of us to recognize that, of course, a financial advisor has a broader responsibility than investments. So estate planning, for example, is another area where there are firms like Vanilla and that have emerged as specialist offerings that can be integrated into a broker dealer or an advisor’s platform.
Craig: When you’re working with larger firms, you mentioned that they’re weaving together solutions with APIs. Are they successful or is it just window dressing, it’s really a big mess behind the scenes?
Anton: Both. I know that’s a bit of a cop-out as an answer. I absolutely think there are elements of success and evidence of success, and yet it’s hard. There are successful integrations that have not yielded high degrees of adoption. You see plenty of that. You also see when firms consolidate, you see resistance from advisors that came from consolidated firms who do not wish to migrate to target platforms at their acquiring parent.
Craig: Sure.
Anton: So absolutely there are technology challenges, there are change management challenges, there’s legacy challenges. But nevertheless, Cerulli did a survey recently, platform consolidation, however you define it is high on the list of priorities. It’s just hard, it takes time, but it’s happening.
Craig: Yeah. It’s an endless cycle because there’s this consolidation and there’s aversion and they start bringing other apps, other tools start coming in and their one monolith system gets split off. So you talked about what, how you define platform consolidation. Did you talk about what isn’t platform consolidation? Do you have a separate answer for that?
What Is Not Platform Consolidation?
Anton: What isn’t platform consolidation, certainly as I mentioned, this integration with specialist solutions that doesn’t negate the definition of platform consolidation. I think when you asked me today to talk about platform consolidation, I was thinking more about consolidating managed investment solution platforms.
Craig: Yes. That’s exactly what we’re talking about.
Anton: That ranges, you have the spectrum from prop gen through to model management, through to portfolio management and rebalancing tax optimization, personalization of portfolios, to order management and sending up to trading. Then you have all this dimension of reporting and analytics at the kernel of all of that is the model management, rebalancing and trading. Traditionally those have been in separate silos for separate managed account programs. And I think there is an opportunity to consolidate those so that you can remove redundancy and hopefully move along the path towards householding the UMH, being able to address clients’ needs holistically.
We’ve spoken to a regional broker dealer recently that has a trust offering and a brokerage offering. And they have a number of clients who have both a trust solution and a brokerage solution from the same broker dealer, but it felt as if they were completely distinct customer relationships. So not only is the investor getting an inferior experience and engagement with the firm, but you could argue that the advice is also inferior if it’s not holistic by nature.
Craig: Absolutely. And usually because the trust platform is on a different accounting platform and the trust accounting platform, the brokerage is on the agency platform and never the two shall meet.
Anton: If you think about platform consolidation, maybe you think about platform consolidation in terms of the abstraction layer. So you can still keep the trust accounting platform and the agency platform intact and use the managed accounts program, unified technology as a means of spanning those. And that is hard again, but it does provide the potential to reach the holy grail of the unified managed household.
The Holy Grail of an All-in-One Platform
Craig: That’s where we’re all going to the holy grail, a unified chassis for everything. So speaking of that, what do you see as the challenges ahead towards reaching the holy grail?
Anton: So there’s many, I alluded to some of them, but first of all, there’s just the execution risk challenge. There’s a lot of wiring and rewiring complexity, legacy displacement, onboarding of new tools and that’s hard. So there’s execution risk. More fundamentally than that though, is I think there’s a sort of almost an existential misalignment of horizons and incentives in that these projects can take multiple years to reach that holy grail and the horizons and the evaluation periods of most of the executives involved are much shorter than that. So to mitigate that or to address that you have hopefully a team that breaks up the larger goal into smaller addressable milestones and achieves them over time. But you often find, and Cerulli wrote about this too, you often find that competing priorities come up along the way, which can sort of divert the attention away from the longer term goal.
Craig: I was going to ask about the project timeline, you said that the project timeline is often longer than the executive’s career at the firm.
Anton: Or their evaluation periods.
Craig: We see that a lot as well that people will leave halfway, they’ll sign off on a project and it’s a multiyear project and they leave in the middle and then the people left with it don’t even know why they bought the system and that’s a recipe for disaster.
Anton: That’s right. And they’re not necessarily bought in, they promote alternative priorities, budgets get diverted, and so the path is fraught. I would always recommend that firms consider this in stages. You don’t do a big bang, for example, you set up the target platform before you switch off the legacy platform. You build internal proponents so that they can support adoption internally because that sort of is a segue to another challenge, another headwind with this, which is the change management challenges. There’s training, there’s buy-in, there’s adoption, there’s vested interests sometimes in legacy platforms, all of which have to be overcome. And I don’t take that lightly. This is not always evaluated simply by objective criteria.
Craig: I always like to say inertia is a very powerful force in our industry when legacy platforms. I’m sure you’ve seen that.
Anton: Absolutely. So then we have to think about what are the drivers, what are the sort of catalytic conditions which would initiate this change towards a new platform that they could consolidate the firm around? I think you’ve seen at some of the large enterprise RIAs that want to establish a firm view. I think there are Carson, United Capital, now Goldman, Wealth Enhancement Group, where they’ve said there is a way of doing business the Carson way or the Wealth Enhancement Group way or the United Capital way. So there’s a single platform that’s going to manifest that, and advisors who join those firms are self-selecting into that program, and establishing that firm view is the catalyst for that change.
Another catalyst for that change could be if the legacy platforms are not supporting more modern business models, that the firm is just still engaging. And there I think do they support tax optimization and personalization, which as you know, are mega trends that we’re experiencing now. Or do they want to move to a householding type framework, which would involve multi account portfolios, potentially a multi custodial setting if their legacy platforms are single custodian or don’t support personalization and tax optimization, may not be supportive of their future business models. So that would be a catalyst for change, but you’ve still gotta overcome all of that inertia and you need forward thinking executives who can sell this concept internally,
Craig: Are you seeing problems, going back to the project timelines and executives, also the ROI? We’ve gone into firms and suggested platform consolidation and show them a price tag and they just say no, because there’s no revenue generation directly from that. It’s just cost reduction, improvements in operation, improvements in client experience, but they don’t have a direct increase in revenue. There should be an increase in revenue overall over the long term because your company’s running better, people have what’s time to do things right, but they don’t see the direct ROI. They usually say, we’re not spending that money. I’ll just keep throwing bodies at it. How do you get over that?
Anton: Well, I think you partially get over that by demonstrating the avoidance of the downside. So if you don’t do this platform consolidation, are you risking attrition of clients or advisors and are you risk obsolescence in terms of your business model? And if you can quantify some sort of expectation of reduction of their business in the absence of this new platform consolidation that might help with the ROI story. But you’re right. I think it’s, it’s not easy. Typically, the ROI story has always helped, you can talk about an enhancement of advisor capacity.
Craig: That’s a good one.
Anton: Yeah, but you don’t get that automatically with platform consolidation. So that, that always comes down to what are the characteristics of the target platform that you would be consolidating on? And I think something that can do more to enhance advisor capacity has a greater chance of overcoming inertia, overcoming the ROI hurdles, and even potentially some of the change management concerns about advisors who don’t want to move. It helps to at least tell them a story that they have an opportunity to grow their book.
Craig: And again, it’s, you’re talking about change management. There’s a lot involved with just understanding the process. A lot of times don’t even understand all the integrations they’ve set up with their legacy system until they start trying to change it. Then they find out, oh, it’s plugged into this. And it’s plugged into that. And this downstream system using data, and then they wound having to change the proposal or do all these statements of work, change orders. We forgot, we didn’t realize this. They signed a contract with the new vendor and they need all these other things which winds up delaying these projects for years sometimes.
Anton: Right. That’s right. There’s a lot of spaghetti in the background when the initial sponsor of the project may not have even been the aware of it. And so absolutely again, that reinforces how long some of these projects take and also the need for professional services to really do discovery. Map not just their target state platform, but map their current state so that you can chart a course.
Dealing with Project Execution Risk
Craig: Yeah. We call that target operating model. You need to know your current state and then your future state, and then what the execution plan is to get there. That’s what we do with a lot of broker dealers, but you did make execution risk as the first challenge, can you talk a little more about that?
Anton: It speaks to what you’ve been talking about now, which is, first of all, the current state is often more complex with their legacy and their existing integrations than the people involved are generally aware of, number one. Number two, this is complex stuff. It’s not just software, but it’s data and it’s live data flowing through a system. It’s data that needs to be accurate to the penny, so we are talking about reconciliation. We’re talking out regression testing, we’re talking about switching on all sorts of integrations back to custodians, through model management, through order management, out to the street, and then back into the platform. There’s a number of different opportunities for error, and if you’re replacing a whole lot of systems with a whole lot of new systems, each one of those needs to be designed in advance, implemented, tested, and you’re dealing not with a single vendor, even though, as we are talking about it’s platform consolidation, hopefully you’re dealing with fewer vendors.
Craig: That should be definition, fewer things, right. A different project.
Anton: That’s right. We’re not just replatforming. We’re hopefully removing redundancy. And hopefully, actually, there’s a real point that we haven’t touched on here, which is these medium to large financial institutions have strategic sourcing groups, management groups, and and in various forms of vendor cyber review and compliance review. And those are potentially made far more complex or their complexities amplified by sort of a plethora vendors. If you can reduce the number of vendors, it streamlines their processes, reduces costs and reduces risk to the firm too. So that’s another reason to do it is not just, there’s a target operating model that might future-proof your business through household and multi custodial nature, but is also the opportunity to reduce costs, reduce complexity and reduce risk.
Craig: That covers not only execution risk, but operational risk, and compliance risk, or regulatory
Anton: That’s right. So I think it’s a worthwhile objective. It’s just, it’s fraught with all these challenges that we’ve mentioned, like inertia, execution risk, change management risk, and the mismatch of horizons, which I think is the fundamental underpinnig of the challenge.
Craig: Right. So let’s go onto your third area, which is talking about the target platform What are some of the characteristics of a target platform that you can consolidate onto?
Anton: Well, if we’re talking about consolidating in the managed investment solution space, I think the target platform at its core should be multi custodial. We see this everywhere where particularly medium to large institutions have multiple custodians, they have different programs that are siloed. If you want to have a chance of spanning the silos, offering householding, you want to be able to have multiple custodians feeding into it. Other elements are sort of target characteristics should be what we call at MyVest, what we call shared discretion. So this is back to the managed investments programs themselves. Traditionally you’ve seen things like a mutual fund wrap program or UMA program, or even a Rep-as-PM program as having kind of well defined boundary conditions. I think what we are seeing now is that those boundary conditions are starting to dissipate. You’re seeing more, for example, a Rep-as-PM program, starting to use models, and sometimes models look like a UMA model structure, but they’re implemented over multiple accounts. And so what does that mean? A UMA by definition is a single custodial account, but if, if you can have a UMA model structure implemented over multiple tax registrations with asset location, is that a UMA anymore?
Craig: It’s UMH.
Anton: Yeah, that would be UMH. And basically what my contention is, all of these programs are actually on a common spectrum where what you’ve varying is the level of advisor discretion along the spectrum. And the target platform for platform consolidation should be something that not only is multi custodial, but allows the configuration of discretion for different programs or different groups of advisors. And so you can have this balance between home office control and oversight and delivery of home office IP through their own asset allocations, for example, but you have advisor level discretion that’s configurable, depending on the type of advisor, the type of program, etc. We’ve seen a couple of years ago, for example, that LPL launched the advisor sleeve. It’s been a very successful program for them. I see that as an example of shared discretion, sort of where you have centralized investment strategies, where a portion of it can actually be managed by the advisor themselves.
Craig: It’s a very interesting program. We helped them with part of that implementation, it’s incredibly complicated, but it’s done really well because it’s a combination of a vendor they brought in and also their own tools they built in the front end to improve, to make the LPL version of client experience.
Anton: Of course, client experience at a large firm like LPL is built by them in the front end. But you’re right, it’s a complex set of parameters that have to be combined to offer an advisor sleeve inside of a home office delivered investment strategy. But that’s where the future of managed investment solutions is headed. As I said earlier on, I think it’s all about configuring discretion between the home office and the advisor and having the knobs and dials to alter that. I think if you’re thinking about future proofing your business and consolidating platforms, having a single platform that can support multiple custodians simultaneously and multiple different managed account programs through configuration of discretion, that is the future state, the target state that is worth consolidating on.
Integrations that the New Platform Must Have
Craig: Would you say that the target platform should also have a number of preset integrations with all the top vendors and other categories?
Anton: Ideally. I think at a minimum it should have a robust API interface so that it can support multiple integrations over time. Sure, pre-integration would be great. The vendor landscape is changing. We spoke earlier on, on this podcast about newer vendors like Onramp and YieldX,m and so it’s more important to look at the API infrastructure, in my mind, as enabling integration in a modern, scalable, and low cost way, rather than the library of preexisting integrations. Certainly in the RIA space, in the RIA space, preexisting integration is obviously more important because of the general absence of large technology teams, but in the medium to large broker dealers and banks and large enterprise RIAs, it’s really the API infrastructure.
Craig: Yeah. When we talk to firms that’s what we’re talking about, that there’s a big difference between prebuilt integrations that are static and open robust, well documented and supported APIs.
Anton: Exactly. And so the technology matters. Another element of the technology matters is sort of the cloud support. I think our industry is getting over their security or cyber concerns about cloud deployment. Now, ideally there would be cloud native solutions, but we all know that most sort of mature managed investment solution technology is not necessarily cloud native, but you want something that plays well in the cloud so that it can scale more elastically with your business as it grows. So in summary, I think those are the four key characteristics in my mind of the target platform for managed account technology platform consolidation. Multi custodial, the ability to configure discretion and share discretion between the home office and the advisor, robust API infrastructure and cloud compatibility.
Craig: And those are all good. That’s a good list. Can you talk about a specific scenario where a firm you know had do consolidation and some of the issues that they ran into?
Anton: We have deployed a multi custodial solution at our parent company TIAA, in their wealth management division. They launched a brand new UMA program in 2009 on our platform and grew that it was a very, very successful program per the Cerulli rankings. It grew very, very well, and we refined it with them. After demonstrating that success they made the decision to consolidate their bank trust solution, their high net worth Rep-as-PM style bank trust solution onto a common platform, which was us. And so that meant adding features to our platform and then diffusing their legacy solutions that they had and migrating those accounts over to this new platform. Those were two different custodians, their brokerage platform and their bank trust, were on leading well known custodians in that, in each of those respective spaces, and so they needed a multi custodial platform to consolidate on.
So not only did we support both custodians, but we’re doing it on a single instance, and we are just configuring their bank trust workflow differently from how we are configuring their UMA workflow. The one is far more decentralized portfolio manager centric, and the UMA is far more of a centralized home office solution. Fast forward a few years, they launched a robo solution on the same stack. The user experience is all delivered through their own homegrown investor experience UI, but pulling data and instructions from our system through our APIs. So three completely different programs on different custodians, on a common stack configured differently,
Craig: That’s pretty good. That’s impressive. Now that took them multiple years to consolidate though.
Anton: That did, that did. And they have had executives who have been there throughout that whole journey. And I think that’s to our earlier discussion being a key element of the success there.
Craig: Consistency.
Anton: Consistency, exactly. They also adequately capitalize the projects, they’ve mitigated risk by not doing a big bang. Even when the target platform was ready they took about six months to migrate groups of advisors over to the new platform. This is when the bank trusts consolidated, after it was ready. So they built early success, They built internal proponents who trained others and in so doing built demand, built adoption and built a self fulfilling cycle.
Craig: So you mentioned something that you forgot when you were talking about challenges and headwinds, you forgot that they need to get the proper program capitalization. Without that that’s it becomes a headwind.
Anton: Oh, for sure. For sure. You’re either squeezing your internal project management infrastructure or the vendors, and it’s just not a recipe for success.
Craig: Budget issues always wind up screwing things over when the firm doesn’t budget enough where they were told one price and it winds up being double or triple because either the requirements were wrong or they just didn’t ask the right questions. They didn’t didn’t know what to and discovered things later, or the vendor didn’t do a good job, specing it out. Then that’s another headwind for platform consolidation.
Anton: I know this is not meant to be an advertorial, but I know that’s why they need firms like yours to help them navigate that, help them design that target state.
Craig: Thank you. I’m always open to advertise my own firm on my podcast, but yes, always available for that. So we’re getting close to the end of the time here, so I just want to ask you one more question. How is it with TIAA being your biggest client and a parent company, how do you manage that? You walk that tightrope.
Anton: Well, the acquisition was five years ago now, and we have learnt and evolved over that period. I think the key success factor to that navigation has been maintaining MyVest as an autonomous subsidiary. So we have our own brand. We have our own third party customers, and our employees are MyVest employees, employees of a technology company, not a financial institution. That has established sort of a culture of autonomy, which helps implicitly people understand that we’re a vendor to TIAA as well as a subsidiary. Then beyond that we have different people, the people to which we report as a subsidiary are different from the customer. They have taken greatw pains to separate those so that they’re no to all conflicts. And I think that works well.
Craig: I never thought of that. You don’t want same people, your boss and your clients, that’s a bit of a conflict.
Anton: And to their credit, TIAA’s credit, that’s how it’s been from the beginning. And sometimes when I’m on a call with TIAA I have to remind myself, am I talking to my parent company or my customer, but generally it’s operating very well. I think it’s one of the rare examples and there are others, but it’s one of the rare examples of an autonomous tech subsidiary of a financial institution continuing to operate autonomously five years after the acquisition. So we are doing something right. We are growing our third party business outside of TIAA. They’re still a very large, important customer to us, but they recognize the value that third party customers brings to MyVest and in so doing to them. It brings a vibrancy, it brings a flow of innovation. It helps us attract and retain talent. And that’s what we’ve been doing since the acquisition.
Craig: Anton, I’m so happy you came on the program and shared all this. We covered everything we wanted to cover and more. So do the little plug at the end here, where can people find out more about MyVest and your product suite and services?
Anton: Go to MyVest.com or contact me directly, many people who listen to this podcast know me as well, and I’d love to chat more about MyVest to anyone.
Craig: Fantastic. Anton thanks much for being on the program, I really appreciate your time.
Anton: Thanks Craig. You too, I always enjoy it. Go back to the conference.
Craig:Back to the conference.
