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Companies Mentioned
- AdvisorEngine [17:05]
- Advizr [04:20]
- Advyzon [19:10]
- Altruist [16:05]
- Black Diamond [09:30]
- Brinker Capital [04:40]
- Envestnet [06:40]
- Franklin Templeton [17:05]
- Genstar Capital [04:35]
- HiddenLevers [05:10]
- Microsoft Dynamics [6:50]
- Practifi [17:55]
- RightCapital [16:15]
- Salentica [17:10]
- Salesforce [15:35]
- Starburst Labs [17:30]
- Wealthbox CRM [09:30]
Topics Covered
- Is It A Good Fit?
- What Does This Mean for Competitors?
- What Does the Deal Messaging Mean?
- Advisors Don’t Want to Change
- How Will Orion Competitors Respond?
- Integrations Need to Improve
Episode Transcript
Craig: Welcome to this emergency episode of the WealthTech Today podcast, I’m your host, Craig Iskowitz, and I am pleased to introduce our guest for this episode is Kristen Schmidt, founder of RIA Oasis. Hey Kristen.
Kristen: Hello. Emergency indeed, good emergency, right?
Craig: It’s an emergency, get the sirens going.
Kristen: I did not dress up for the occasion but I definitely want to talk about this, it’s exciting.
Craig: You do not have to dress up. It’s a podcast! So we’re here to talk about the news that just came out an hour ago, Orion to acquire Redtail Technology. Orion Advsior solutions, for those of you who didn’t hear this news, announced today a definitive agreement to acquire Redtail Technology. This acquisition presents a game changing opportunity for growth-focused independent advisors, this is form Eric Clarke, CEO and Founder of Orion, and will make our robust tech stack even more valuable.
Is It A Good Fit?
Craig: We are all about this, this is all we talk about is advisor technology. We did not expect this, so your thoughts off the top of your head, Kristen go.
I did not expect this, you’re absolutely right. First of all, very excited for Redtail and Orion, I think that it is a great fit. Didn’t see it coming but now that I’ve heard the news I’m thinking, well of course they did that. Right. So it does make sense. Couple of quick thoughts. Number one, and what I’m hearing with my clients and in my consulting business is, what does this mean to me? And I think that’s very valid for current users of either the Orion platform or the Redtail platform. I think there’s a lot to talk about, but I’m excited for all of them. I think now our wheels are spinning on what does it mean for now and what does it mean in the future?
Craig: I agree. Most of our clients are enterprise so it’s a slightly different tack than the independent advisors who you guys work with. But it’s certainly big news. It’s certainly a big change. I want to say based on Redtail’s motto and their logo like, Who let the dogs out in CRM, right? Orion’s got it. Orion brought the dogs in.
Kristen: Yeah, they did it they did it. I agree. I think that there’s a lot of moving parts here. Number one is, and I know we’ll share some data as well, you and I were just talking about some data that I think really solidified who is a Redtail user, but I think that the span of a Redtail user is so diverse in a sense of independent RIAs versus broker dealers, and the span from small to big from independent to enterprise, they span at all which makes it a huge opportunity for Orion.
Kristen: Orion has that same demographic as well, many enterprise opportunities and many integrated solutions but also serves to the small medium and large independent RIAs. So in that sense, it is a great match. Orion’s never had a CRM before and I think where my head goes looking at the entire tech stack is have they just completed their entire platform offering?
Kristen: You and I talked about a lot what is the platform offering mean? What are the boxes we want to check to consider a company a platform and Orion is listed as obviously their claim to fame is that wealthtech provider across an entire platform. But adding a CRM to the mix is a huge win.
Craig: It’s huge. It completes their platform. It checks all the boxes. It gives them everything as part of their acquisition spree that they’ve gone on since 2018. Let me just go through that real quickly. 2018 they bought FTJ Fund Choice which was a TAMP that was mainly in the broker dealer space. And that made Orion into a TAMP overnight and they integrated that. In 2019 Orion bought Advizr, a financial planning and portal technology which gives them financial planning and a new client portal. Which we can talk about. In June 2020, San Francisco based private equity firm Genstar Capital bought a stake in Orion and then merged it with Brinker Capital, one of the largest TAMPs that have $25 billion in AUM. It’s probably grown since then, that really put them on the TAMP map. Because Brinker, this technology was far superior. They’re really much they’re way bigger into UMAs and more complicated, higher net worth advisory firms more of the RIA side.
Kristen: It also brought great reputation and name recognition. A lot of times, that’s why these things are so big. And so I think yeah, that was a huge move. You’re absolutely right.
Craig: Then in 2021 last year, they made two acquisitions HiddenLevers, which is risk management, prop gen, and stress testing, and basis code compliance. Then this year Redtail. So now what do you think of that?
Kristen: It’s April, beginning of the year and they’re already looking at what’s been announced publicly through Redtail’s announcements to their clients and Orion’s to theirs is that this is a second quarter closed acquisition.
Kristen: You named a lot of pieces there, so let’s talk about those in a sense of the platform. Orion obviously having their core functionality of portfolio management, reconciliation, reporting and billing, which they always were. Add on to that they built their own trading and rebalancing tool, the Eclipse tool, and then all of these other pieces. You’re absolutely right Advizr, with a Z, was purchased obviously, as a lite financial planning tool, but then the biggest piece was that it could create a client experience and advisor portal that’s very valuable.
Kristen: And that with HiddenLevers right now, HiddenLevers is the only standalone tool that Orion offers. Anyone off the streets can go get HiddenLevers standalone without being affiliated with the platform at all using all other platform choices of your choosing. And you’re absolutely right, that’s a big one.
What Does This Mean for Competitors?
Kristen: If we were to look at other platforms out there, although it’s not apples to apples, nothing is let’s look at Tamarac and Envestnet, for example, the Tamarac platform for independent RIAs. They don’t have a risk tool. So they’re missing that but they have their own proprietary CRM built on the Microsoft Dynamics platform and have forever when Envestnet bought Tamarac years ago.
Kristen: So the Orion platform having CRM portfolio management, which includes reconciliation, performance, reporting and building, a trading and rebalancing tool, a client experience, financial planning, and not only risk assessment, but you’re right, prop gen, along with other pieces of Orion, because of those other acquisitions, like TAMP, it’s big. They’ve covered all of their bases with this acquisition. And I think we also need to talk a little bit about Redtail and a sense of, congratulations both to Eric Clarke and to Brian over at Redtail because they both built amazing companies that have a lot of the same synergies.
Kristen: One of the biggest integrations is Redtail and Orion from the beginning. And they’ve been doing it from the beginning. And in Brian’s, 19 year career of having rRedtail he’s built an entire industry level CRM. I think the numbers spoke for themselves, when we were looking at some recent surveys.
Craig: I think so.
Kristen: Redtail is very well highly adopted and we see that in the IBD space in the independent broker dealer space as well as in the RIA marketplace. And so, the idea that Redtail has a long longevity of clients success, user success and innovation. This is a great add for Orion. I’m happy for everybody.
Craig: It really puts Orion in play for a lot of clients that may not have had before. And also it kind of changes the marketplace. As you mentioned, Tamarac has had a CRM for many years, but it wasn’t highly adopted. Whereas this move might change the nature of how RIA platforms operate. If Orion can be successful, integrating Redtail to become Orion CRM if they rebrand it as Orion CRM, which makes sense, and the integration is really tight and seamless and feels good to advisors, and the adoption rate keeps increasing rather than decreasing, it could change how their competitors look at them and say, Well, hey, they’re doing this, we need to do the same.
Kristen: I agree but I also think that if I were an advisor today who has heavily adopted Redtail but uses Black Diamond, or uses some other portfolio management tool, I would wonder where this leaves me. I also think that Wealthbox is in a very strong position, although this is an acquisition and it’s very positive, happy for everybody, my agnostic sense comes out. But Wealthbox in my opinion is literally the only CRM out there that is independently owned, operated with the intention of being a CRM only. And there can be an opinion here and I’ll hear it from all my clients, which is well Redtail, now you’re not a CRM. Now you’re part of a bigger platform. So what about us? What about those CRM initiatives?
Kristen: I think I could speak on both sides of that coin, one being Redtail has such a large company and people and support behind it and all of that is coming with the company. So I think that that’s good for Orion where it can still stand alone, although it’s under the umbrella. But to that point, it does take away advisor choice at some level, you and I keep talking about how advisors want choice. And now you can make that choice at least we’re not sure actually if you’re going to be able to buy Redtail after close. Second quarter. We’re not sure if you’ll be able to read by Redtail independently that hasn’t been released yet. We’re an hour into the release, but it hasn’t been said yet.
What Does the Deal Messaging Mean?
Craig: We should know everything by now. Let’s look at the email that Redtail sent out just an hour ago. So wthere’s a section, there was the announcement part of the press release, but then a section of the email that came from Redtail signed by Brian McLaughlin, what does this mean for you? “While Redtail CRM’s capabilities we fully integrated into Orion’s comprehensive wealth tech platform post close, it’s important to note that Redtail will maintain all existing business relationships and continue to prioritize the enhancement service and support experience for both those using Orion platform as well as those who do not.” Next sentence, “Redtail’s existing client base will retain their current agreements to access its CRM as a standalone solution. However, post close Redtail clients who choose to adopt all that Orion has to offer will benefit from access to a full suite of leading edge wealthtech solutions.” What does that mean Kristen Schmidt?
Kristen: What does that mean? So what I’m hearing it say is all of those words were specifically chosen purposefully because the future is unclear. That means existing and current are the two words that my eyes latch on to existing clients of Redtail have opportunity if you’re not with Orion, existing clients Orion of opportunity if you’re not with Redtail. My question is, if I don’t use Orion and I don’t use Redtail today, can I buy Redtail in August?
Kristen: That was the question that I can’t answer. And my clients will ask me I have some that are interested in moving. We have a lot of conversions going on a lot of change in the industry, and that is something that we’ll have to clarify. Again, this is a brand new baby that just got born. But I do think that there’s going to be a question of what if I want to be new to you come fall, is that even an option? And that’s an Orion decision. I’m sure that’s being contemplated.
Craig: My thoughts are you’d want to keep it independent, at least allow people to buy it separately because it’s a foot in the door. Why take that away? You can still build your integration and make it tight. But leave the door open to firms coming in and say well, we use Black Diamond, we use Tamarac, we use something else let’s we still want to buy Redtail. Fine buy it, it’s an Orion product, you don’t have to. But look how much better it is and then you’ve got them you’re you’re in there now client of yours. They’ve got a contract. And you can say hey, by the way, if you want to switch over from Black Diamond, look how easy it is. So it seems to be this should keep it but who knows.
Kristen: I would agree. So within the list of acquisitions that you listed for Orion, HiddenLevers is the only stand alone. So they’ve done that with HiddenLevers where they are we’re able to garner the HiddenLevers client base during the acquisition and then say hey, by the way, guys, look at all this other cool stuff and HiddenLevers is now actually getting fully integrated into the Orion platform now, but it’s still standalone. You can still buy it off the street and just use it for its one standing purpose. So I agree with you. I think the question is, is it possible?
Kristen: And then also, I think there’s a piece of the CRM is such an integral part to the tech stack for independent RIAs and hybrids. So if you are part of a broker dealer, does this encourage broker dealers to highly adopt Orion if they haven’t already? You and I talk a lot about the broker dealer space and how some technology is approved versus required. So how does this leverage the Orion platform for a lot of the Redtail adoption? We can always flip that and say if you’re using Orion today, what an opportunity to use Redtail but I think the latter is actually not as impactful. I think how much does Redtail influence people to become Orion users which is obviously part of the leverage.
Advisors Don’t Want to Change
Craig: There’s no way to know I mean, the way advisors do wealth management, the way advisors do portfolio management can be very different. And the way the way they feel about it often decides which platform they go with. Tamarac does portfolio rebalancing, and management in a very different way than Orion’s Eclipse does, which is a very different way than Black Diamond’s rebalancer. Sometimes even though you’re there, you just can’t get them to switch because you don’t do things the way they do things. They don’t want change.
Kristen: That’s exactly right. And I also think that there are some firms who choose to have a Maserati of a portfolio management platform and more of a Volvo in a sense of a CRM. And then there’s other firms who choose to have the Maserati as the CRM, it’s a Salesforce, it’s something much larger, and then maybe not have much of a gusto of the portfolio management system. But I’ll tell you this, the portfolio management systems and all of these platforms are very well defined by are you financial planning centric, or are you investment centric? And a lot of that is driving platform decision. What does my financial planning tool look like? What do I outputs look like? You’re an icon and influencer on Twitter, you’ve seen it all one page reports and everybody’s talking about what’s being released. I do have to mention since we’re alive when this info just came out that Altruist and their integration with RightCapital got buried in this and they should get a lot of credit.
Craig: Poor RightCapital.
Kristen: And poor Jason, right, over at Altruist, because I think that was a great integration and one of the first over there that’s really impactful on the financial planning side for Altruist. So with that said, I think that there are a lot of these pieces and the unknowns can be impactful. A CRM, you need one no matter what to run your business, no matter if you’re investment centric, financial planning centric, or mixed. So is this going to drive higher adoption of the CRM? Absolutely. Absolutely it will, and it’s going to make some of the competitors probably wonder what’s next.
Kristen: Again, just to lay it out, Orion no has bought Redtail, Franklin Templeton owns AdvisorEngine aka what used to be Junxure CRM. SS&C Advent, which also is Black Diamond is underneath them owns the Salentica platform for CRM, which has a Microsoft Dynamics platform and the Salesforce platform Wealthbox owned by Starburst Labs, but I think that they just got some amazing influx of money to innovate, which I think is going to be impactful to see how they become competitive, but again, not owned by any larger platform. And it’s the only one out there besides the Salesforce overlay companies like Practifi, Accelerate.
Craig: Let’s do a quick rundown of market share. So according to the KItces AdvisorTech Survey, Redtail is the leader with 33% , Wealthbox 22.7%, Salesforce 13.3. And then I think the next one is other at 9%.
Kristen: That’s a little scary, especially for a CRM implementer like myself,
Craig: Other than Junxure, which is now AdvisorEngine CRM is 4%, Tamarac CRM 2.7%, Firm Proprietary 2.5%, Microsoft Dynamics 2.5% then it just falls off the map. So what does it mean for these companies? Oh, let me just switch over to a T3, T3 has way different numbers. They’ve got Redtail at 62%, almost 100% higher which could be because they get more broker dealer enterprise respondents to their survey. Envestnet’s number two at 16%, Wealthbox number three at 13%, Salesforce 11%, Junxure 4%, Advyzon 2%. So what do these numbers mean? Clearly Redtail’s the leader, Orion bought the leader in CRM, and it means a wealth as you said Wealthbox is the only major CRM available at that’s standalone.
Kristen: I want to be clear on that for a little bit. So number one if we’re listing adoption, and again, some of that survey, which we’ve reviewed and disclosed, I think does hit primarily that independent RIA market isn’t necessarily representing the IBD space in a large way. But that’s okay. We’ve gotten enough data and they’re doing a great job.
Kristen: Couple things to note though. Redtail was founded in 2003, which means they’re on year 19. Okay, and congratulations to Mr. Laughlin on that. So Wealthbox, if we were to look at the historical data from your from the T3 survey or others Wealthbox has made increasingly large jumps to get to that 23 in half the time. They’re eight years behind. Wealthbox was established by Starburst Labs in 2014. So sometimes when we look at data we also look at longevity and the same thing is happening with RightCapital. We’ve talked about that before where RightCapital is considered the newbie, but it’s the fastest growing adopted financial planning tool or market.
Kristen: So I think we need to give that a little bit of credit that Wealthbox, the climb is sometimes just as impactful as those final results. Now to Redtail’s credit, once you earn an A you’ve got to keep it, your numbers can always go down just as much as they can go up. So everybody in from Wealthbox and Redtail has been climbing predominantly. But I think those big step climbs from companies that are newer to the market is impactful and something to consider.
Kristen: There’s also been areas of the CRM market where certain companies are deciding to be or not be. I’ll give you an example, email. It’s a big one. Redtail currently has an outsourced solution for email hosting through a company named Zimbra, will that stay will that go with Orion? Remember, Redtail isn’t just a CRM. They are a document management system for storage. They also have their Speak component which is for texting and messaging and chatting. They have so many other components to the CRM that Orion has a lot to unravel as to how it all fits. And until I see otherwise, I’m guessing it’s all coming along for the ride. But how that all instrumentally fits into their platform will be interesting.
How Will Orion Competitors Respond?
Craig: Indeed, that’s something that all these competitors have to figure out what they’re gonna do. How are they going to respond to this? How is this moving the market, you know, it seems like it’s a good deal for Salesforce and SS&C because they’ve already made that move to integrate their CRMs with a broader platform so they are kind of ahead of the curve, although they don’t have anywhere near the market share that Redtail has.
Kristen: When you you utilize the systems like I take them as Salesforce overlays, right so you have the engine of Salesforce, but suddenly you’ve kind of made it a little bit more complicated by adding your overlay on top of it. And then depending upon your relationship with Salesforce, which means how much are you paying them to have the freedom to do what you want, how much leash do you have in what you create and what breaks based on what Salesforce updates.
Kristen: Ironically, it’s funny I was talking to a consultant friend of mine today when this all came out before you reached out to me, and I said, everybody got bought out by somebody in the CRM world except for Wealthbox, they made that statement. And she said, well, what about all the Salesforce platforms? And I said, well, they’re kind of underneath the mercy of Salesforce. Their entire latform can break based on what Salesforce decides gotten permission to be on Salesforce.
Craig: So you would lump Advyzon in that group?
Kristen: Yeah, that’s an interesting one. So I guess we should talk about it. Advyzon is a platform in fact, giving them the revenue recognition they deserve. I believe they just released their trading and rebalancing platform. What was that probably just last week if I’m correct. Now, that’s an interesting move.
Kristen: Advyzon initially had a CRM but it wasn’t fully built out to the capabilities they wish they had. So they had a strong integration with Redtail only. Then they beefed up their CRM changed their user interface, and then also built a proprietary workflow tool inside their system and cut off the integration with Redtail so that they could be a platform.
Kristen: I think advise on is serving a different type of smaller RIA platform currently, although they’re definitely working towards going up market. So the question is, is Advyzon a competitor to the Redtail’s and Wealthbox’s of the world? Could be but if we look at the survey information, again, going back to the facts of the case that we’re using in our conversation, correct me if I’m wrong, what there was a lower percentage of adoption with Advyzon for CRM?
Craig: 4%.
Kristen: Yeah. So again, they’ve stayed steady at that for at least the last two to three years where we’re seeing others climb. So that’s where I guess my point is that you’ve seen some really big climbers that are making impact, climbing quickly while also innovating their platform and standing their ground. It’s one of the most common questions I get from independent RIAs is what’s the difference between Redtail and Wealthbox? And the answer is, do you have 10 hours to sit on the phone?
Kristen: So even though there are a lot of things the same, there’s that much more that is different. But the fact that Orion now has the last piece of their puzzle for a full platform is very, very interesting. And that is going to make a mark not only on the CRM industry, but it’s going to make a mark in all the competitive spaces. Tamarac is talking. Black Diamond is talking. There’s a lot of different industry level platform tools that are probably having conversations just like you and I are today.
Integrations Need to Improve
Craig: Good. So let’s move on from that. Let’s talk about integrations. What does this mean for integrations? And this is something we talk with our clients about a lot. We work together on projects for large companies and they want to know how do these firms integrate? What’s the best way? Who has the best integrations? How can we put these together? Which way should they integrate? Should the data push pull, what’s your thoughts here?
Kristen: So you’re right. It’s an overused word, industry word that I’m not a fan of, because it doesn’t mean much until you define it. So the first integration that Orion is strong with in especially with CRMs and Redtail is the asset value integration. So your custodians are feeding into the Orion platform and then your account values, financial account values flow into the Redtail system and are there for you to view and you can use that data in many different ways. That’s one type of integration.
Kristen: The second type of integration is on the platform integration, meaning if I’m in Redtail, I would like to single sign on into Orion or possibly see Orion data inside my Redtail’s system meaning when I click on a button, a new square pops up on my screen that shows me the Orion reporting tool or the Eclipse tool or the new account wizard, whatever it might be.
Kristen: So they do have strong integrations already, that’s part of the genius of this is they don’t have much to build. The building for them will not so much the integrations but rather platform connectivity. I want to see Redtail in the same space I see Orion and vice versa. Now that it’s tucked under within Orion, you and I can assume that there are dashboard abilities like Orion has today or when I’m in Redtail maybe there’s a little bit more of a seamless connectivity to the Orion platform, yet to be determined.
Kristen: But I think when we talk about integrations, the ideas just because you can doesn’t mean you should. To quote one of my dear friends, Erin Kincheloe, who’s also a consultant in the space, I was talking with her today, that is her go-to saying, which means there will be a lot of integration buttons, but advisors need to decide if it’s even valuable to them. Does it save your time? Does it save you data entry? Does it save you fat fingering? What does it save you to use this button or is it just kind of pull the click?
Kristen: And so right now with Redtail, integrations are all or nothing. You get all the integration buttons or you turn it off and you get none. So another piece that I’m interested in learning about in the in the coming months is will anything change with functionality of integrations in a, for lack of a better term, buffet style choicing? I would like to be able to use the new account wizard but I don’t need the Eclipse tool to be turned on. So the ala carte model of integration features would be a huge win for Orion with the rRedtail integration at least
Craig: You’re saying keeping it ala carte as opposed to making you take certain integrations because now we’re in the Orion ecosystem, you got to have these?
Kristen: Yeah, I think that what we’re starting to see and what Orion has really capitalized on as a value add is a role based and permission based functionality. So my traders only need to see this, this and this, and they only need to do this, this and this. And so if they go along with kind of that theory of their structure of building, we talk about integrations of can I see the data? Can I do anything with the data and can I go anywhere with the data? I think that if they keep with that mantra, they they have the opportunity to allow integrations to be more customized, not the data to be customized. I was just on a call today where somebody said, Oh, does that data sync from the custodian? No. We’re still not there yet. So staying in the confines of same data being shared, but who sees it and what they can do with it based on your role in the firm is an important feature that advisors are craving.
Craig: Advisors want it all. Moving on from integrations let’s talk about pricing. What do you think’s gonna happen with the pricing? We know Redtail has had forever this $99/month 15 user pricing, what’s going to happen to that?
Kristen: I don’t know. In the evolution of Orion, if we look back when they first released their Eclipse trading tool that was an add on feature that was an added cost, and then they phased that out and now it is rolled up into the cost of everything. The only standalone pricing feature Orion has is HiddenLevers because it’s the only standalone tool.
Kristen: So if we look at historically, they have slowly but surely phased out subscription based pricing models and just rolled everything in. So there’s a question out there still will this be included in a model, will this be included in a package? You have the option of just buying the Orion platform, not with the CRM, or you can have the CRM plus platform? And does that increase? I think also to my point before, are they going to allow Redtail only new subscribers? I think that’s the biggest piece of the pricing model. So what does it cost for Orion users? What does it cost for Redtail users? And what if you’re new? Can you be a new Redtail user in August? That’s my biggest question. Yeah, I get that comment a lot. It’s one of the most affordable out of the box CRMs that are there, Redtail. $99/month for 15 users. I don’t know if that’ll stay within the Orion platform.
Craig: We do not know. We will find out very soon. Kristen, thanks so much for being here. I appreciate you jumping on the short notice. We’re gonna pump this episode out for everyone so they can hear our thoughts on this big change in the industry. Tell everyone where they can find more information about you, how can they contact you?
Kristen: Absolutely. I appreciate that. Of course, RIAOasis.com is where you can find me click Let’s Chat and you’re welcome to schedule a Calendly call with me so that we can talk more but I appreciate the opportunity to chat industry fun stuff. Thank you.
Craig: Always a pleasure, thanks Kristen.
