Ep. 153: When to Switch Technology Vendors with Natalie Wolfson, AssetMark

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Come on in and sit back and relax, listen to episode 153 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group consulting. And this podcast features interviews, news, and analysis on the trends and best practices around wealth management technology.
Our topic for this month is TAMPs, turnkey asset management platforms. We chose this topic because the TAMP market is one of Ezra Group’s core areas of expertise. We conduct research on the TAMP market as well as provide technology and strategy consulting to TAMPs, as well as wealth management firms that outsource to TAMPs. We are a full service provider to the entire ecosystem. If you are a CXO for a TAMP, broker-dealer, enterprise RIA, or fintech provider and need some advice or guidance on wealth management technology, check out our website, EzraGroupllc.com and fill out the Contact Us form on the homepage. Our experienced team can help with RFPs, software implementations, evaluations of your current platform, and more. You can take advantage of our free consultations by going to EzraGroupllc.com.
Today’s guest Natalie Wolfson, took over as CEO of AssetMark last year when they has about $75 billion in AUM. Since Natalie’s been in charge, they’ve grown their assets under management to over $100 billion, and made a number of acquisitions including the TAMP, Adhesion Wealth, that they purchased from Vestmark which we covered in our interview.
Make sure to check out our sponsor, the Invest in Others charitable foundation at InvestinOthers.org.

Companies Mentioned

Topics Covered

  • The Importance of a Tech Stack
  • Curated Models vs a Supermarket
  • Why We Needed a Model Supermarket
  • Vestmark Relationship
  • When to Switch Technology Vendors
  • Internal Marketing Key to Successful Technology Conversion

Episode Transcript

Craig: I’m pleased to introduce our guest for this episode, Natalie Wolfson, CEO of AssetMark. Natalie, welcome to the program.

Natalie: Thanks for having me. It’s great to be here.

Craig: I’m so happy you could make it we had to do some scheduling gymnastics to get you here, I know you’re a busy person. Got a lot going on. So again, thank you for for being here. Where are you calling in?

Natalie: I am calling in from Northern California. AssetMark is headquartered in Concord, California and I live about 20 minutes away.

Craig: So it’s a beautiful area. I love that. That area I live in New Jersey, but whenever I get a chance I like to go south Florida, California.

Natalie: What part of New Jersey, I used to live there?

Craig: I’m in Cherry Hill, New Jersey, near Philadelphia.

Natalie: All right, I used to live in Montclair.

Craig: Oh up north but it’s also nice area. It is from like anytime you’re welcome. New Jersey. Alright, so let’s let’s let us jump right in. Can you please give us a 30-second elevator pitch Natalie on AssetMark.

Natalie: So AssetMark is a outsourced provider for investment advisors, independent fee based investment advisors, we provide technology business consulting, asset management, curated asset management, and other resources to help advisors of all size compete. In a nutshell, if an advisor has a need, or spends their time on activities that are to the benefit of investors, AssetMark invest in those activities so that advisors can redeploy that time to serve investors. As a result we have a technology platform that’s built for purpose for investment advisors to save them time and create great conversations with our clients. We have a set of investments that have been heavily diligent and curated so advisors can rely on that diligence and spend that time with their clients. And we have a broad array of service and support and consulting so that advisors know that they can have confidence in what we provide to them and spend their time with their clients.

Craig: Technology’s always been a big part of AssetMark’s service and AssetMark’s value proposition and you actually led development team before you became CEO. We talked a little bit about that.

Natalie: Yeah, before I became CEO, I was in charge of all product development, including technology and also investments, product development and consulting, product development, as well as a array of other things including strategy. So I love technology and really almost from the beginning of my career have worked in technology product development, starting the sales effectiveness, moving towards trading and wireless trading at Schwab, then building investment platforms at Pershing and then finally with AssetMark, making sure that our e-wealth manager platform met the needs of advisors. And during my time leading product development, obviously in partnership with our CIO Muk Mehta, we added portfolio analytics services to our site we streamlined a lot of our processes. We integrated investment analytics with purchase, as well as research and now we have a technology platform that really forms the basis of how advisors who use AssetMark interact with their clients.

The Importance of a Tech Stack

Craig: It’s really an interesting transition, how you guys have built out the platform over time the e-wealth manager platform and watching it take shape over the years. So in your tech stack, you’re very purposeful about how you build it. So can you talk a little bit more about the specific components like before you launched the portfolio construction portfolio engine tool, what made you think feel that that was important thing you needed to own rather than outsourcing other companies?turnkey asset management platforms

Natalie: It’s interesting. We determine what it is we need to focus on our own based on two categories. The first category is we feel like we can help save advisors time and help them scale. And then the second is we can create a great conversation between the advisor and the investor so that the investor knows that their portfolios that their financial plan, meet their needs over the long term, so that in markets like the one we’re in now, where things are a little choppy and uncertain, the investor isn’t as frightened about the environment and understands exactly why the portfolio is in place.

Natalie: Over time, what we’ve done is we’ve taken a look at advisors use of technology, which is quite high versus their faith, and their belief that the technology is adding value or saving them time, which is actually really level. 50 full points below 90% feel like 90% use or leverage technology and only 40% feel like the technology has any benefit to them. So what we try to do is we try to erase that 50 points and the way we do it is we engage with advisors who use AssetMark and don’t and we ask them you know what technology could we deliver that would support great conversations with clients and save you time.

Natalie: And over time, as you know, we build out the AssetMark platform you move from one project to the other, but a couple of things are really clear when we launched portfolio engine the reason we chose to own it rather than buy it is it was clear to us that most portfolio analytics tools only gave a surface understanding and at the holdings level. We needed to have the our advisors needed the ability to build portfolios that have strategies and models. And they needed to be able to do that in a way that was interactive with a client where the advisor could show the implications of choices that clients were making in terms of taking on more risk or taking on less risk over the long term. And there just wasn’t a tool in the marketplace at the time that we felt did this for portfolios like ours. One of the toughest conversations an advisor needs to have with their client is when building portfolios, if you take less risk because humans tend to be risk averse. We feel the impact of loss twice as much as we do of gain, you have to be able to show them that by being so risk averse, they’re impairing their ability to succeed over the long term or they can succeed over the long term.

Natalie: And so that’s what portfolio engine does. It shows max drawdown, it shows overall implications for the performance of the portfolio over time. It shows how long the drawdown persists, so that investors and advisors can have real conversations about choices they need to make to achieve their goals. Now, we also wanted to make sure that investors could interact with that type of analysis and so we have to build an investor portal which showed portfolios and showed drawdowns and showed other things over time to make sure that investors could check in and advisors had a digital venue to have conversations with their clients. In addition to that, we need to make sure that advisors had the ability to select investments so we built out our investment selection. Again, each of these areas of our site represented areas of lot of time and effort for the advisors, and areas where we could add to their conversation with their investor.

Curated Models vs a Supermarket

Craig: And AssetMark of course you’re both the supermarket providers have managers and models as well as your own models that you provide. So you offer both through your portfolio construction tool.turnkey asset management platforms

Natalie: Yeah, so at AssetMark, you’re half right, at AssetMark we absolutely have a blend of third party and proprietary we believe in competition. And so we want to make sure that, you know, our advisors always have choice. They you know, and we don’t advantage or proprietary investment solutions in any way to third party investment solutions. That’s really a decision between the advisor and the investor. And we’ll only develop our own proprietary investment solutions. If we feel we can. We have insights into the adviser relationship because of what we know about them because of our broader relationship. Or we feel like we can do it less expensively, but competition is a good thing. And we don’t advantage our solutions one way or another. So in that way, you’re right mix of third party and proprietary.

Natalie: We are however, not a supermarket. Again, one of the benefits of working with AssetMark is we diligence, the investment solutions to make sure that we have any investment area that an advisor needs to serve their client needs. But within each area we have say two to four options, so that the advisor spends less time kind of curating each investment category and instead starts from a place where we feel like we have the best view.

Craig: I was going to use the word curated as well. So you’ve curated off the options available for advisors.

Natalie: That’s right.

Craig: Excellent.

Natalie: One thing I will I will note that is some advisors don’t need or want the curation and we just announced an acquisition of Adhesion Wealth. It has not closed yet, but Adhesion is more of a supermarket. And so for those advisors who feel that part of their value proposition for part of client portfolios is to do that, to do that curation on their own or to build from a broader set. If and when the adhesion deal closes. We’ll have that option for advisors as well.

Craig: Will you be leaving Adhesion Wealth standalone or you’re gonna be integrating it into your existing platform?

Natalie: A little bit of both. Adhesion will be standalone because they serve a different need than core AssetMark does. Even so we feel that there’s a tremendous amount of power and bringing the AssetMark and Adhesion solutions together. And so for those advisors who want part of their portfolios to be managed by themselves and part of the portfolios to be curated, we’ll make sure that that experience is a unified one, but from an operations and from an operating perspective, they will stand alone.

Craig: That’s always a difficulty trying to keep the advisor experience seamless, but make sure the backend is unified and if you’re keeping things at work, letting them run independently, so they don’t lose the magic that had been gaining scale in the backend.

Natalie: And it’s interesting to me that the best way to do that is to keep your eye on the client and there’s no question that there is a type of client that Adhesion serves that has no need for curation, just like there is a type of client that Voyant or financial planning system serves that has absolutely nothing to do with US fee-based financial advisors. They have clients in the UK and Canada and Australia. And so when you’re focused on the client, it makes a lot of sense internally and externally to keep these business units separate because their client needs are separate. At the same time, that doesn’t mean that in the US fee based financial advisors wouldn’t benefit from Voyant’s financial planning expertise, and then in a robust integrated experience, and the same thing is true of Adhesion. So just focus on the client, and my view is it all works out.

Why We Needed a Model Supermarket

Craig: So is that one of the reasons why you acquired Adhesion because you saw the need for a supermarket?

Natalie: We want to serve RIAs with outsourced solutions that help them improve the quality of service and investors as well as grow and compete. We believe in independent fee-based advice delivered in local communities, we think that’s to the advantage of investors. We also think that more and more advisors are valuing independence and so we want to be able to serve those advisors and if your goal is to meet advisors where they are and where they’re going, which is the first pillar actually, of AssetMark strategy, then to have to adjust accordingly. And just because you have a history of curated investment solutions, and we really believe that that saves advisors time and effort doesn’t mean that we can force advisors to come to us, we have to come to them. And this is one way we’re going to do that.

Vestmark Relationship

Craig: So Vestmark owned Adhesion Wealth. Before they bought them, Adhesion Wealth ran on the Vestmark platform already, so they were a customer of Vestmark so it made sense to buy them, they don’t need to change the back end. You’re buying Adhesion Wealth now running on Vestmark. Can you talk a little about your relationship with Vestmark, anything having to do with that acquisition?

Natalie: We have a relationship with Vestmark at AssetMark as well. And there’s components of what Vestmark offers in terms of their incredible trading rebalancing engine that we already had planned to integrate into AssetMark. So Vestmark was already on our roadmap, we already have a relationship with them. As it relates to Adhesion, they already as you said, have used Vestmark for years, they have a long standing relationship with Vestmark. And so we believe that in working with Adhesion, it’ll only accelerate our move to Vestmark because they have years and years of expertise with a system that we’d already planned on integrating.

Natalie: And in addition to that, Adhesion is a service provider, much like AssetMark. There’s a lot of cultural alignment between AssetMark and Adhesion. Because both firms only exist to help advisors succeed only exist to help advisors serve clients. So we really believe that not only their experience with Vestmark, but also their cultural overlap with AssetMark is a winning combination.

When to Switch Technology Vendors

Craig: We have a lot of vendors who listen to our program that we work with, half our clients are firms like AssetMark and TAMPs or broker dealers, and a half our clients are FinTech firms. So one thing we talk a lot about is buying decisions and why executives make decisions. Can you talk maybe one or two of the reasons why you saw Vestmark as a better solution than the outsourced provider you have now for trading and rebalancing?

Natalie: Yeah, so a couple of things. We have a great relationship with our current outsource provider. And our plan is not to transition overnight from one to the other. However, we’re an outsourced provider to and we expect our advisors to be evaluating us all the time and evaluating us based on their needs today, not their needs four years, four years ago, three years ago. And there were some gaps in the offering of our current provider as it relates to flexibility within accounts, flexibility within trading, in a world that’s moving towards more enterprise wide trading decisions whether people are trading Model Management, UMH, UMA, the type of flexibility account flexibility and trading flexibility that system has become more and more important, very big difference between a trading and rebalancing system for individual models and where the industry is going.

Natalie: And so we needed to make sure that we were going in the direction of the industry and in client needs and in the direction of where our client needs were going and in order to do that, for certain parts of our platform, we needed to re-platform and that’s what we’re doing. And clearly, you don’t have to do that all at once. In fact, if you do do it all at once, chances are you’ll shock your client relationships.

Natalie: But even if you have a great relationship with a provider that you’ve had a lot of great experience with, if they don’t have the capabilities you need to move to the future you need to move on in those parts of your offering and that’s what we’re doing at AssetMark. And again, Adhesion and AssetMark, we need a change too, we need to be just as pragmatic and we need to be just as aggressive about our own platform. And we are so we hold our our providers to the same standards that we hold ourselves to.

Craig: That is good to hear. And you made a couple of interesting comments there. So not an overnight transition. That’s such a great statement because some firms we work with think we’ll just turn one off and turn the other one on and it’ll just work. And we’ve worked with some broker dealers, converting from your current vendor to Vestmark and it’s nothing against your current vendor, and nothing against Vestmark, it’s just a big shift. It’s a big lift. It’s a huge undertaking, because of the size of your business. Because of the the amount of trading you do everyday, and the number of people you have. It’s not easy to shift that over to another platform no matter how good it is or how bad the problem is. It still requires a lot of work, a lot of coordination among stakeholders, a lot of analysis reviewing your processes, we always had don’t move their processes to the new system. And so that’s a good opportunity. So it seems like you’re in the right mindset for this conversion.

Natalie: And the other thing I just want to say about this is, it’s tempting, it’s tempting to port over your old processes to your new systems, because your old processes have years and years of operational experience that go along with them. And so anytime you’re transforming or re platforming, you have to have honest conversations about whether or not this process is necessary or familiar. And it’s hard and that’s one of the reasons not to do it all at once.

Natalie: I mean, sometimes you have to do things all at once because the system is aged or it’s not scaling or big risk areas. But if you if you are fortunate enough to have the flexibility, and you’re fortunate enough that you’re ahead of those risk areas, doing things in a thoughtful way can can lead to better outcomes for you and for your clients.

Natalie: The other thing I’ll say is even if change is awesome, even if there’s nothing but benefits in terms of performance accuracy, client experience process, even in those situations, change is extremely hard for users. It means you need to relearn everything. And you know if you’ve been using a system and we’re very fortunate to have 25 year plus relationships of our clients and if you’ve used a system over the course of 25 plus years, any change is hard. And so you know giving your clients the time and training that you would want to benefit from is extremely important.

Internal Marketing Key to Successful Technology Conversion

Craig: Absolutely. One thing we’ve talked about a lot is we divide up the user base, whether it’s advisors or you’ve got a number of different stakeholders, your advisors are a stakeholder, their clients are stakeholders, your internal staff are stakeholders. And we always divided into thirds, there’s always a third of the people that are gung ho about the change. Yeah, we love it. We can’t wait to get this going. There’s another third that hate the change. We like the old system why are you changing and there’s a further on the fence, and you really need an internal marketing campaign to get those third on the fence over to your side that way it’s two against one that way you can start chipping away at the naysayers move them over. So we’ve found everyone’s very good at marketing to their clients, your advisors telling them what the change is but internal marketing to your internal staff, here’s why we’re doing this, here’s how it’s gonna help you. Here’s what you need to do, it’s also important.

Natalie: Yeah, your internal team when you change is just as hard for them. They’re they’re used to being an experts, I mean, they should be experts on the platform that they’re selling or supporting. And if you change it and overnight, they’re no more expert than the folks that they’re trying to serve. And so taking the time to make sure that you allow them to build their expertise before you transition to clients is incredibly important.

Natalie: The other thing I’ll just say is taking taking the time with your early adopters or your tech savvy clients to build metrics that help you sell externally and internally so people are actually saying, oh my gosh, I saved two hours a day because this is so much faster, or there’s so much more flexibility built in the system I can I can do things with a couple clicks that used to take me an afternoon to do or Wow, I’ve got insights into my clients that helped me win a new piece of business or capture share wallet, people are much more likely to change if there’s hard benefits that you can refer them to. And then other clients that are your, in many ways advocating for the solution that you’ve just put in place, and that just takes a little time.

Natalie: And also you know having training be as fun and interactive and community building is possible. That also takes time putting together venues where people can spend dedicated time with the new system and get used to it is also extremely important. And look, we all make mistakes, there’s no perfect transition. Gosh, I wish it I wish it was possible to be perfect every time but my experience is that if it’s an honest mistake or you react quickly and change, clients are very supportive.

Craig: It’s not whether or not you’re going to stumble, because there’s always going to be issues and things you didn’t know about unforeseen errors or mistakes. It’s how you recover how you respond to it that people going to remember. I was going to ask you for advice you have for other CEOs CXOs who are changing this size platform, but you already gave a couple. We talked about gathering the hard benefits, building the use cases for the early adopters to show the next group of people, users coming out here’s how it’s going to help. That’s a great recommendation for other firms. We have a lot of clients we’re working with now that are looking at the same kind of transition. They’re always looking for best practices, how they can smooth things out. Do you have any other advice for when you know it’s time to change? Like obviously you had some issues you can use your current provider for over 20 years. How do you know that it’s gone on too long and hey, this is not working?

Natalie: Two or two or three things. One is features that are necessary for you to be competitive in the future aren’t part of your providers roadmap or capabilities. Sometimes because of the way a system was built years and years ago, a particular change is more difficult for that system than it is for other systems. And it doesn’t mean that that system isn’t amazing and awesome. It just means that it was constructed in such a way that entire replatforming is necessary for the system to meet the client needs. And if you believe that those parts of the client experience are extremely important, and I mentioned you know flexibility to customize flexibility to engage with client accounts in a cross client way. I talked about trading capabilities. You know, if you get to a situation where your provider is inhibiting your ability to serve client needs that you think are fundamental, well, then you need to change the provider you work with entirely or change the provider you work with for those components of your offering where those changes are necessary. So that’s one thing.

Natalie: Second thing is if you see your provider not investing in the platform, even if you can’t see any gaps now if they haven’t invested in the platform for a period of time, then you know it’s not a priority for them and if if it’s your system or fundamental to your system, gosh, you need to you need to change because that means that over time, you’re going to drift away from competitiveness and over time, you might just see in availability productivity, performance, big, big gaps. And then the last thing I’ll just say is if the providers servicing of you changes, so they don’t pick up the phone within seconds or they aren’t responsive to your queries or you find yourself relying on three or four people within a broader firm. That’s an indication that something’s up.

Craig: All good warning signs that firms should be looking out for. Excellent. Well, Natalie, this time has gone by so quickly, I think we are out of time. Can you tell people where they can find more information about AssetMark?

Natalie: You can find more information about AssetMark at AssetMark.com. If you’re interested in speaking to a salesperson or somebody you can learn more from there’s contact information there and we’ll make sure that someone follows up with you quickly.

Craig: It’s been fantastic Natalie, thanks so much for taking time to speak to me.

Natalie: Thank you so much. It’s really nice spending time with Craig.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com

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