Ep. 151: July WealthTech News

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Companies Mentioned

• Adelia Risk [29:45]
• Advisor360 [27:10]
• AdvisorCash [32:50]
• AdvisorGroup [22:05]
• AdvisorStream [9:45]
• American Century 24:40
• Beacon Point [19:25]
• Bento Engine [06:40]
• Broadridge [09:45]
• Carson Group [17:50]
• Catchlight [12:00]
• Commonwealth Financial Network [27:30]
• Corvee [30:15]
• Creative Planning [19:25]
• DocuPace [22:00]
• Dropbox [10:47]
• Dynasty Financial [17:00]
• Echelon Partners [19:30]
• Envestnet [01:40]
• Fidelity [12:30]
• Financial Services Network [15:50]
• Flourish [32:50]
• Goldman [17:50]
• Hearsay [32:00]
• HSBC [27:00]
• Interactive Brokers [31:00]
• LPL Financial [16:00]
• Mariner Wealth Advisors [15:50]
• Marstone [24:40]
• MaxMyInterest [32:50]
• Mercer Advisors [19:25]
• Microsoft Dynamics [10:47]
• Onramp Investing [30:00]
• Practifi [10:47]
• Redi2 Technologies [01:40]
• Redtail Technologies [10:47]
• Salesforce [10:47]
• Schwab [05:45]
• TD Ameritrade [23:30]
• United Capital [17:50]
• Unitifi [29:40]

Topics Covered

1. Envestnet Acquires Redi2 Technology
2. Bento Engine Raises $1.1M in Seed Funding from WM Industry Leaders
3. Mariner Wealth Advisors Agrees to Acquire the Financial Services Network
4. Digital Onboarding
5. AdvisorTech Map Updates

Complete Transcript

Come on in, sit back, relax and listen to episode 151 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group consulting, and this podcast features interviews, news analysis on the trends, updates and best practices all around Wealth Management Technology. And this episode is our July news update. So you’re going to get mainly news and some analysis from me about the news. Then we have eight or nine stories, so it’s a lot. I’m going to try to squeeze it all in under the amount of time I’m allotted. But before I do that, I want to remind everyone to please go to our website, EzraGroupllc.com. And read about some of our offerings, specifically, our competitive analysis offering. If you are a fintech firm, you need to know what your competitors are doing. You should call Ezra Group to help you. We do a detailed competitive analysis on your category. Or area of your selling your software in providing a high level overview of the market and drilling down into much more detail level features, functionality, pricing, service support clients, segmentation, and more. So you need to be able to EzraGroupllc.com You can get a free consultation anytime by filling out the form on the homepage.

Couple of quick housekeeping notes before we continue. Please subscribe to the show wherever you listen to podcasts so you don’t miss an episode. Make sure to check out our sponsor the Invest in Others Charitable Foundation, at InvestInOthers.org and now let’s jump right into July’s wealthtech news.

Envestnet Acquires Redi2 Technology

Our first story in the July news is Envestnet acquires Redi2 Technology. This is an interesting one of the only m&a stories this month, it’s summertime so we expected to be a little slow, but it’s a big one for us. Since this is one of our areas of expertise. We know a lot about billing software and billing systems and Redi2 is one of the leaders in the industry when it comes to fee billing and wealth management. So Envestnet that buying them is a major coup for Envestnet. It definitely advances them up to one of the leaders if not the leader in billing on the on the billing side when it comes to the different areas that Redi2 has available and Redi2 has, of course fee calculation invoice creation payouts and accounting and billing compliance is cloud based single sign on.

They’ve got three main products. One is called revenue manager which is an asset manager billing tool. The second one’s called wealth manager, which is broker dealers, TAMPs, and other wealth management firms. And then third is BillFin, which is for RIAs, so three different product lines, which gives Envestnet, some wide latitude to use these tools around their, their different platform capability. So I would see Envestnet’s got a very good footprint in the asset manager space, mainly through their model marketplace, where they are the largest model marketplace in the industry, bringing an asset managers and connecting them with advisors, broker dealers, RIAs to deliver their models, and they’ve got some tools and technology there for asset managers around the model delivery management reporting and such. But they don’t have a lot of asset management, specific software. So this is one piece for them. The revenue manager tool of Redi2 that allows us to managers to do billing, institutional grade billing.

Of course, there’s a lot of complexities around all these different buildings. Having the software is incredibly important for any wealth management firm. We’ve done a number of RFPs and deployments of billing software. It is complex. It sounds easy, hey, just look at the assets and bill it but there’s so many different levels. There’s so many What if there’s also so many different ways to bill as firms grow and expand and as mergers, they tend to grandfather in old billing rules. So the new system that you’re using has to support all these old grandfathered in rules. So you want to get in different tiers. You can tier your billing isn’t assets, of course, you can also tear it based on number of accounts, you can change the billing based on the types of securities they’re holding, you have to be able to to avoid building certain things, which is called below the line. So all these different what ifs and exceptions to the rules make the billing pretty complicated.

We see the wealth manager tool of Redi2 being used in conjunction with Envestnet’s ENV2 platform, their enterprise software now that already has billing, but it’s not as good as what Redi2 has. So whether they will replace it. I don’t know. I would imagine they will replace it at some point, you really just can’t merge these tools. We’re not going to be able to merge wealth manager into Envestnet’s billing, they’re going to have to replace it. So but the good news is billing isn’t really tightly integrated. There’s no was no real time billing. Almost all billing systems work off of a batch file that comes to the custodian and other files that come from elsewhere, that they run overnight to do the bills or quarterly monthly, so they can easily plug in wealth manager into the platform. I know a lot of Envestnet clients are already using wealth manager for their billing. So it’s something that won’t be very difficult to integrate and it will give them a much higher level of capabilities, better sales for their enterprise platform.

The third piece is BillFin which has been really growing fast in the RIA space, especially in breakaway advisors, startup RIAs, which is an area that Envestnet doesn’t have a huge footprint in although they did buy Portfolio Center from Schwab, which had a lot of small RIAs. So this could be part of a solution where they’re building something for smaller RIAs.

It will be a great tool for that, BillFin has got some great support. It’s got some great, we really liked the interface and the user workflows around BillFin. So it’s used by RIAs, small wealth managers, financial planners, great tool for that. So we really liked this acquisition. We see it helping Envestnet a little bit to it. Again, there’s lots of decisions when you’re buying a new platform isn’t just about billing. But billing is an important part. And you don’t want that to to mess things up when when you’re doing sales. So great move by Envestnet acquiring Redi2, congrats you guys.

Bento Engine Raises $1.1M in Seed Funding from WM Industry Leaders

Next story is Bento Engine raises $1.1 million in seed funding from wealth management industry leaders. You can read the story on Business Wire, or Barron’s. Alright, that’s their technology that Bento Engine identifies opportunities for advisor involvement and combines that with relevant content and alerts that are sent to the CRM for advisors review. I really liked what wrote in RIABiz in his intro, none of the better known RIA influencers are betting a combined $1 million on to JP Morgan breakaway executives who hatched an idea inside the giant bank they hope will attract RIAs as chief clients.

So this seed round funding is was an impressive list of successful RIA builders, tech leaders and consultants, including Marty Bicknell, Greg Friedman. Doug Fritz, Jen Goldman, Anton Honikman, Andy Putterman, Gavin Spitzner and Kelly Waltrich. Quite an impressive list. I always see a lot of firms announcing all of their industries like this so interesting marketing campaigns hear from Bento Engine certainly puts a note of confidence in their technology with all these people who I know I respect everyone on this list is willing to put their own money in to support them. So interesting announcement.

So what is Bento Engine? We’ve got them on the Kitces/Ezra Group advisortech solutions map, which you can find at Kitces.com We have Bento Engine in the Advice Engagement category. Now the technology identifies opportunities for advisors, involvement, I’m not sure exactly how it does that but it must use some sort of algorithm to look through the existing clients and prospects in the advisors CRM, and then highlight the relevant content in their content library. So it’s kind of a combination of a number of different services that we have in the map. Mainly IT seems more like digital marketing to me, and some prospecting optimization as well. So that’s why it falls under Advice Engagement, but it could also be a digital marketing category.

Now Bento Engine claims they help three main groups of clients, existing clients, prospects and the children of existing clients which are basically just prospects, future prospects. Vestorly is a product that the executives at Bento Engine compare their product to, which was actually an unsuccessful venture they’ve since they were doing content marketing, pushing out content to clients, using some sort of algorithms that were supposed to generate better responses but it didn’t work so well. They wound up pivoting after raising about $14 million into managing advertising dollars for firms, and I think they’re doing better with that. They also I would call so compare that to AdvisorStream which was a successful company based in Toronto. They were sold to Broadridge last year, also built out an interesting content marketing content library that will push out content to clients and track the interaction with the content, say which content worked better.

And that was a successful product. I liked that Bento Engine talks a lot about their API integrations. At Ezra Group, we’re all about API’s integrations with our applications, and we’d love to hear vendors talking about how they’re building integrations. Speaking of integrations, the Ezra Group Integration Score, which is coming out next month, for Bento Engine, we have them ranked scoring 7.2 out of 10 which is good. It was an 8 or more will be excellent. But there are seven which is good, perfectly fine, which actually puts them at the top of the advice engagement category. So that’s good engine. Their platform integrates with a number of CRMs including Salesforce, Microsoft Dynamics, Practifi, Redtail and Dropbox. Pretty much got the entire market covered there.

They were founded in 2021 and launched the platform at the end of the year. So founded in May 2021 and they claim they launched the platform October 21. That’s pretty fast turnaround. Currently they report about 30 firms with 150 advisors use it they don’t say how many of those are paying. It’s not unusual to kind of fudge that a bit. You’re just starting out, want to get some people’s trying to get some free trials, given your grandfathered in with cheap when she pricing private companies in the process of updating its pricing, but they say the new price of less than $100 per advisor per month, I would advise it to be less than that. Yeah, that’s sort of a decent starting point for pricing, especially for a startup in the digital marketing category.

And in advice engagement we’re seeing in general a lot more firms popping up with interesting innovative ideas on how to help advisors in different aspects. So we kind of put them into the advice engagement category. It’s kind of a catch all for a number of different types of products. One of the other products that probably would be in that category as well just checking the list here, but it’s close to that category that we have them in digital marketing. It’s called Catchlight. It’s similar in that it goes through your CRM looks through all your existing clients and prospects and organizes them based on a proprietary catch light score. To help the advisor decide which prospective clients to talk to first. Now they are funded by Fidelity. They were part of the Fidelity accelerator program, and they have recently launched at T3 just this year, so just in May Catchlight launched. And they do a little bit different than they’ve Bento Engine, so Catchlight’s more about organizing prospects and also integrating well using CRM. API’s to be able to deliver their scoring into the CRM and organize prospects that way. They don’t have the content engine or the content curation that mental engine has. But they do do the prospecting which is I think, pretty important for a lot of advisors. So if you want to find out more information about either of these firms, you can check out catch light at Catchlight.ai and Bento Engine, at BentoEngine.com.

Mariner Wealth Advisors Agrees to Acquire the Financial Services Network

The next story in the July news Mariner Wealth Advisors agrees to acquire the Financial Services Network, a hybrid IRA with 400 advisors and 26 billion in client assets. This was in InvestmentNews written by Jeff Benjamin. The Financial Services Network is currently an OSJ under LPL Financial with $6 billion of their own AUM and the other $20 billion in assets are held by their independent advisors. So what’s really interesting about this deal, we don’t normally talk about RIAs acquisitions, but this is very technology related for a number of reasons and there’s a number of levels to this technology play.

The first one is Mariner Advisors, which is one of the largest RIA aggregators in the country. They’re nationwide. They launched in 2020, something called Mariner platform solutions, which was their own back office technology play to have RIAs join them and use that technology to attract them. And it was based on a partnership with Dynasty Financial, so they launched that together. So the Dynasty is providing the services and being white labeled under Mariner platform solutions, which are Mariners and their own special sauce and their own processes to that and the next layer down is Envestnet invested in Dynasty Financial in January of 2020. And they also offer an advisor they call the Advisor Services exchange, powered by Dynasty.

So there’s a lot going on here. We’re seeing a shift in this offering of technology to IRAs. It used to be mainly broker dealers that would offer technology platforms to independent broker dealers offering to independent RIAs with an affiliate with a broker dealer. Use compliance from them and back office services and technology platform. And then we started seeing more RIAs offering larger orders growing like Carson Group, United Capital, which was acquired by Goldman. We’re also building out these platforms and networks, advisor networks offering technology and other other services. It’s really becoming very popular. These firms some of these firms are PE backed firms like beacon point, and others that are acquiring a tremendous rate firms RIAs and bringing them on to their platforms, or offering them to stay stay independent was just affiliating with them. And using their platform.

There’s a lot of technology going on in here Mariner platform solutions has had 40 independent advisors with only 2.6 billion so they were they basically bought a company it was 10 times their size. So that’s a huge deal for Marty Bicknell, says a lot about where he’s going and how he’s managed to build his Mariner platform. And how impressive it is that a $26 billion RIA would look to to join them rather than staying under LPL. LPL has got a great platform as well ClientWorks is a fantastic solution. They’ve got tremendous integrations over 70 different applications integrate with with ClientWorks. They built that a lot of their own technology, but they were still attracted to the Mariner solution which can deploy the Dynasty solutions / Envestnet underneath. So there’s a lot of competition for these firms.

The quarter of 2022 Mariner announced at least seven different deals. We’re seeing a lot of activity, RIA acquisitions or affiliations. So they were fourth in volume behind Creative Planning, Mercer Advisors and Beacon Point which I mentioned earlier. According to investment bank and consultant from Echelon Partners. And these acquisitions I think in 2022. This year in first half of the year, there were 182 total deals just in the first half of 2022 and multiple acquirers are firms that bought at least, it was two deals. They were responsible for 120 of the 180 it was a two thirds. So you’re seeing that the multiple acquires snapping up most of these deals. These firms have business models centered around scale and use m&a to drive growth, each of them relying on private equity backup to do so. According to Echelon Partners second quarter deal report.

We’re seeing the same thing here at Ezra Group. We work with a lot of these firms, helping them with technology strategy, solutions, operational improvements. Also on the other side, we work with PE firms who are looking to fund these these RIAs in their acquisitions. So PE firms come to us at Ezra Group, my company and say, hey, you know, we’re looking to buy X, whatever from this is, and they’re doing a lot of acquisitions. How is their tech stack? How’s your platform? Can it scale, there are 10 billion, 20 billion, 30 billion now, can they go to 60 billion or 100 billion on the current tech stack, or are we going to have to put in a lot of money.

We do a lot of looking at these these platforms, and a lot of them are solid. They’ve really done a very good job building out stable, scalable platform using off the shelf solutions. There isn’t a lot of custom development going on. Fair amount of custom integrations, which we always say requires a lot of effort. If the vendors’ integrations work half as well as they said they did, we’d be out of a job!

Firm really need to have some strong tech staff if they’re going to be building a best of breed platform like some of these companies have. So we’re looking for a lot more of these deals being announced. We still have another half of 2022 to go. But congrats to Mariner Wealth Advisors on the acquisition of the Financial Services Network.

Digital Onboarding

Moving into the digital onboarding section of the news, I have three stories to tell you about. First one, Schwab updates their digital onboarding to support multiple account openings. You can read this in InvestmentNews by my good friend Ryan Neal. Schwab Advisor Services announced updates to their digital onboarding platform that enables advisors to open and fund up to 10 new client accounts in one digital envelope. Now, this is great news for Schwab customers, although they are a bit behind the times. Other vendors have offered this option for many years, Docupace and others. Even other broker dealers have had this AdvisorGroup built out their onboarding platform called Equipt that can open up multiple accounts in one digital envelope. So Schwab is catching up.

This release enables clients to authorize the accounts with fewer clicks on their computers or mobile devices because rather than doing it one for each account, you just do it once and you get 10 accounts. This was built the top their digital account opening tool that was first launched in 2018. And took about three years for them to roll it out, you know how big Schwab is so it takes them a long time to do anything. Now they’re just enhancing that capability that are already there. For advisors using the Schwab digital onboarding, the percentage of documents found to be not in good order or NIGO has dropped to 4% from nearly 30%, which is huge and 30% NIGO, that’s a lot of errors. It’s a lot of unhappy clients and unhappy advisors and also unhappy operations people so glad they’re finally getting that together.

Other improvements include the ability for advisor to upload as many as 16 commonly used Schwab documents such as welcome letters, advisor agreements and regulatory disclosures for new clients to view edit, acknowledged and approved. Again, everyone’s got that every document management new account opening workflow process has the ability to upload from documents, not that big a deal. But as Schwab completes their integration with TD Ameritrade, which they acquired back in November 2019. They are investing more, they are tripling the amount they’re investing in advisor technology compared to before the deal. That’s important because they got a lot to work on there.

Now why here? From talking to advisors, ones who use Schwab’s digital onboarding, when they rolled out in 2018 really like it. And now it’s even better, with more enhancements but still has some work to do. They noted on their roadmap they’re going to be adding support for different account types such as SMAs, so you cannot open an SMA digitally now at Schwab as well as a wide range of asset transfers, which would be ACATs which says to me they’ve got some problems there and it’s difficult to do ACAT into a digital account, which also limits what advisors can move through they got to liquidate rather than just open the kind of with existing assets which could be a problem and the ability to add IRA beneficiaries so that’s the the lowdown on what Schwab is doing in the digital advice world.

Next up in our digital onboarding section is American Century selects Marstone to provide digital wealth management platform for new and existing clients. American Century is rolling out with digital vice platform you can read this one financialadvisoriq.com They are a relationship with American Century which the $230 billion asset manager they are launching this new platform, which is going to be so it’s the they’re calling it the current clients will be able to access the platform, but eventually they’re going to open up to other clients. So right now only existing clients can access this digital platform but sooner or more. At the same time this new platform, according to American Century, is supposed to be cheaper than their current Private Client Group services. I would hope so if it’s a Private Client Group, they should be able to probably look expensive as that group of described as the company’s premier Advice Service as a $50k account minimum with an annual fee of 90 basis points. This digital advice I imagine is for smaller accounts, so they gotta lower that fee and lower that minimum if they expect this to work. This is a big win for Marstone and their CEO Margaret Hartigan. Congrats you guys. Marstone’s digital wealth manager approach will provide American Century’s advisors with a number of key features according to the press release. Fully customizable investor assessment and risk tolerance questionnaire, Client Onboarding, personalized client dashboard, money movement, including funding one time recurring contributions and withdrawals, making new trading and rebalancing services and goals based financial planning.

We’re seeing a lot of these types of services being rolled into the digital onboarding digital advice category, especially the goals based planning and some basic money movement. It’s really moving up the value chain for these firms, giving them more and more capabilities for self directed onboarding, self directed activities. And then hopefully, they can when these accounts grow larger, they can slide them into advisor business they can do recommendations to advisors, hey, this digital account, just hit 200,000 or whatever the minimum was for advisors, as transfers over to you since a great way to handle small accounts and try to prospect for them to grow into bigger accounts.

So congrats to Marstone and Marstone has a couple of deals they’ve announced as a growing as one of the leading providers of digital platforms. They announced the deal with HSBC bank back in October 2018. So great news for that.

Third story in digital onboarding is Advisor360 launches digital onboarding for its flagship wealth management software. Advisors can open client accounts faster than before and as little as 90 seconds, according to Advisor360. Now this company was spun out from Commonwealth Financial Network into a standalone tech vendor after they basically they were the in house tech team. Very large team that built out Commonwealth proprietary wealth management platform, which they called Advisor360, it’s still called Advisor360, but they are spun off into its own company offering enterprise wealth management techniques. Their digital onboarding is supposed to transform how advisors do business or reducing the time it takes for their clients to start using new products and services. In Advisor360’s digital onboarding there will be enhanced pre filling of forms and data collection, RegBI recommendations disclosure questions, and type the head address functionality. The visors can also bundle and send all accounts for when performed together to clients through DocuSign for unified and seamless the sign of course DocuSign is most popular esign program in the world. So we’ve got that the rounds out our document, digital onboarding tools and technology. You can see on the Kitces/Ezra group map, the digital onboarding category, you can check out all those vendors anytime you like. We’ve got a bunch of them there, let’s say in digital onboarding, 11 vendors and digital onboarding, please check them out, click on any of the icons in the financial advisor tech solutions map which you can find on Kitces.com.

Advicetech Map Changes

Next up in the July news is the Kitces/Ezra Group advicetech map changes, what are the changes that are coming in the July rather, August so this is July news, but these changes, updates the map are going to be in the August advicetech map. Right so the we do this every month. Michael Kitces like it together and we go through all the new vendors or vendors that want to be changed or new vendors are coming in that want to be on the map. Review them decide which ones are going which ones are not going so just give you a quick rundown of who they are and what categories are going in. First vendor is called Unitifi, which provides behavior based advising assessment and investor snapshot. They’re going into behavioral assessment category as you Unitifi. Next company is called Adelia Risk, they are a cybersecurity firm. They’re going under Managed Services.

Next one is Onramp Investing is which is a cryptocurrency company, helping advisors manage and buy cryptocurrencies for their clients. We don’t have a cryptocurrency category yet on the advisortech solutions map, so they’re going under specialized planning other. Next vendor is called Corvee. Specialized tax planning is where they go under you can check them out. And then we’re also looking at a couple of firms that we didn’t have on the platform. We’re including Microsoft Dynamics under CRM, even though they are a generic product. We don’t want to have too many generic products on the map. But since so many firms are using them as a CRM, we put them on there. And then Interactive Brokers is being added to custodial platforms. So if you are a vendor and you’d like to be on the map, please send an email to send to me Craig@ezragroupllc.com or Adam@kitces.com might get a faster response time to the when we review you in the next month’s map.

Some other changes we are so that we don’t have a crypto category yet is going to other where we’re actually thinking about splitting up digital marketing into infrastructure and content because digital marketing firms tend to self divide different categories. Some of these firms really purely focused on the infrastructure of digital marketing, whereas others are more content generation like we were talking earlier about Bento Engine. They’re really more of a content company, they really got their own content which they create, and they push it out to to clients based on some proprietary methodologies. Whereas other firms don’t have content. They’re more just delivery of content. So from like Hearsay as an example, they have their own engine but it’s designed for broker dealers to plug in their content into the platform, that then gets pushed out to clients. So we’re thinking was putting it hasn’t explained yet we still digital marking category, but we are thinking of splitting it into infrastructure and content.

And we’re also looking at specialized planning category is huge. There’s a lot of firms I can account for in there, broken out into retirements to like see tax to loan and the other others we don’t like catch halls, the others are getting too big. And then we’re looking to split out in the from the other specialized planning and make a cash management category now be firms like Flourish, AdvisorCash, MaxMyInterest, and so on. Those firms would be under cash management. And that’s really all we have for the advicetech map.

Thanks for listening, a couple things to talk about before we go. One of them is conferences. There aren’t really many conferences going on right now. But if you’re looking to connect with me and you are going to be going to conferences this year if you’re going to be at the following conferences we can get together grab a drink coffee, I’m going to be Future Proof so you guys can be in September 2. So the Future Proof conference, September 11-14, 2022 in Huntington Beach California. AdviceTech Live, which is a one day virtual conference is on September 29. You will check them out at AdviceTech.live and Future Proof is FutureProof.advisorcircle.com. I will be the XYPN conference in October 8-11 in Denver and then I will be at the Riskalyze fearless investing Summit, which is the Salt Lake City, October 19-21, there you go. So you can go to riskalyze.com to learn more about that. That’s the end of the news for July. Thanks for listening. I’m glad you made it here. Please go to our website EzraGroupllc.com scroll to the bottom of the homepage and sign up for our newsletter. Once a month you’ll receive an email chock full of wealth management goodness, news, analysis, updates, you will not be disappointed. Thanks for listening and talk to you again soon.