Ep 184: May WealthTech News

Come on in, sit back and relax. You’re listening to episode 184 of the WeathTech 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 all around wealth management technology. And this is our main news roundup, and there’s so much to cover. There’s a lot of news this month.

But before we do, let me ask, if you are an executive at an enterprise RIA, TAMP, broker dealer, or asset manager, and you need advice and guidance on your technology infrastructure, you should run, not walk to our website, ezragroupllc.com and fill out the contact us form on the homepage. Our experience team can help with evaluations of your current technology platform, optimizing that platform, running RFPs, performing software implementations, conducting operational improvements and more. You can sign up for a free consultation by going to our website, EzraGroupllc.com.

Now a few quick household notes or housekeeping notes before we continue. This episode is sponsored by the Invest in Others Foundation. Go to investinothers.org for more information, and please subscribe to the show wherever you listen to podcasts so you don’t miss an episode. Now let’s kick this thing off!

Companies Mentioned

Topics Covered

  1. Riskalyze Rebrands as Nitrogen
  2. Nitrogen and Orion Expand Integrations
  3. Acorns Acquires European Robos to Expand Their Footprint Overseas
  4. Advice Engagement
  5. Altruist raises $112M Series D to take on Schwab and Fidelity in $128 trillion RIA market
  6. Dynasty Financial
  7. GeoWealth buys TAMP First Ascent
  8. AdviceTech Map
  9. Ezra Group WealthTech Integration Score Updates

1. Riskalyze Rebrands as Nitrogen

Our first story is Riskalyze’s Rebrand as Nitrogen, a growth platform. Some of the best marketing in the FinTech space and WealthTech space has been from Riskalyze. I’ve said this many times, I’ve told their team. I think their marketing’s fantastic and they outdid themselves on this rebrand. I’m sure you saw it. It was all over social media, whether it was Twitter or LinkedIn, you couldn’t get away from it. They did a very good job and it’s a meta move to make your marketing task, a marketing event, into this live stream and this whole event and excitement around it that did a great job building it up. Not too much, but just enough having a great cast of clients and other supporting people talk about it. What went on behind the scenes during the event, and I thought they executed it well and even executed the brand change right in the middle of the live stream with the website, all the marketing materials, even the course software, all switching over to the new branding while they were doing the event. Kudos to the team.

I’m going to pat myself on the back. I’m reaching over to my back, to pat myself because back in February of 2017, six years ago, I wrote an article called Riskalyze Expands Beyond Profiling to Become a TAMP Supermarket. And in that article, I predicted they would have to change their name one day. I was just a little bit ahead of the curve, six years to be precise, but they finally did it. Good job guys. Better late than never. And also thank you for picking a name that means growth but without the word advisor, smart or vest in your name. Thank you so much.

Now, one of the things I liked about Aaron Klein, the CEO some of the things he did during the whole livestream event. Afterwards he posted answers to some questions that advisors had asked him. One of them stood out to me. Some of the advisors were asking how they present to their clients because they used the word Riskalyze in terms of, I’m going to analyze your portfolio using Riskalyze, or I’m going to have you take a risk questionnaire. What do they do? Do they now call it the Nitrogen questionnaire? And Aaron answered it very well. He said, in all candor, “we didn’t design either the Riskalyze or Nitrogen brands with your clients in mind”. Boom, yes, that’s it. This is an advisor brand. It’s targeted towards advisors.

Now that said, the risk number brand, which is still an integral part of the Nitrogen wealth platform as Aaron said, was designed from day one with advisors, clients as the primary audience. And their logo is never involved that way the advisors could white label it and present themselves. This is part of their delivery, which is a great way we recommend most of our clients to do that, to offer a white label option. That way the advisor’s brand is front and center because the clients and clients don’t care about the brand of report or you know, client statement or risk tolerance that the advisor’s using. They just want to see the advisor’s brand. So again big props to Aaron Klein and Riskalyze team.

Couple of other things I liked about the rebrand was all the little behind the scenes vignettes they were dropping during the week, and then a big video at the end which was kind of fun. To watch all the kind of the behind the scenes things that were going on. It was silly, but still fun. And finally, welcome Riskalyze to The Purple Gang. You’ve joined the Club of the Purple Brand. We had this purple brand at Ezra Group for 18 years, but welcome. Come on in. Now, of course you’re not Mr. Purple, like Tony Stich. But you are now in the Purple Gang. So welcome.

2.  Nitrogen and Orion Expand Integrations

Next up we’re sticking with the theme, Nitrogen, the Growth Platform and Orion expand their integrations. These two companies are some of the biggest in the space with the large number of advisory firms, thousands and thousands of advisory firms using their software. They have always had in some form of integration, at least as far back as 2014 was the earliest I could find. And advisors can now do things like include risk analytics in Orion’s client portal. They have a dedicated sub report in Orion’s Report Builder. These are available now and there’s other integrations back and forth between the two applications.

They announced new integration, adds more capabilities between them. They’re able to seamlessly bring accounts and models directly into the risk proposal that is accounts and models from Orion into Nitrogen. I keep saying it, this is going to take a while, sorry guys, into the Nitrogen proposal process. In the Nitrogen growth platform.

Also, what I think is a key part of this delivery is Orion’s portfolio groups are also now reflected as account groups in nitrogen. That’s cool and useful. Because it was a pain and some of our clients moving back and forth not having those linkages to be able to group up accounts. So it’s good to have that. And then some of the things we liked that the — it’s from Orion to Riskalyze. You can send information such as households, account groups, accounts, holdings and models.

And then from Riskalyze back to Orion, you can regularly sync household risk number, account risk number, model risk number and a couple other reports. Now in the future, the firm said they plan to deliver another integration this year that will bring Orion’s aggregated account feeds into nitrogen’s compliance analytics to drive growth and alignment visibility across the entire firm. Great. So we love this more integrations, everyone. Please, more integrations! We’re a big fan of integrations between all the applications.

Don’t forget to check our website, ezragroupllc.com and look at our integration WealthTech integration score. You can check out the integration scores for both of these firms and for every other firm. Pretty much on the Kitces Ezra Group Advisortech Map.

3. Acorns Acquires European Robos to Expand Their Footprint Overseas

I’ve written many times that Acorns, in my opinion, will be the first Robo Advisor to be worth a billion dollars. Now, I think they’ve bypassed, they’ve gone right past that number and a funding round last year, they were worth $2 billion in a $300 million Series F and their previous funding ground was 2019. They’re worth $860 million. So sometime between January, 2019 and March, 2022, they hit a billion. I’m pretty sure that was before any of the other firms, although there were some deals. Personal capital deal when they were required by M-power claimed to be a billion, but I believe it was only like $770 million plus incentives. So technically not a billion. And the wealth front deal with UBS was claimed to be a billion, although also had significant incentives and that deal fell through anyway, so it doesn’t even count. Although Betterment did hit a billion-dollar valuation, $1.3 in September, 2021. However, I’m still holding by my claim that Acorns was the first actual billion dollars, though they’re so close. Let’s make another claim. I’m going to claim that Acorns will be the first roboadvisor worth $10 billion.

Now, why? Why do you say? How’s that possible? Well, partly from their just massive user base with this acquisition where they acquired two firms. One was called Go Henry based in the UK, another one called PixPay based in France, they had 6 million users. That’s a lot of users considering that Wealthfront has about 500,000, Betterment, 900,000. So which one of these firms is more likely to monetize that user base and generate a lot more revenue? I’d say it’s Acorns. You’re 5X or 6X or more than number of users. It’s just natural that you’re going to be able to generate more revenue from them, and especially considering Acorn’s business model.

Acorns has a number of products. One is Roundup, smart money or their micro savings, which was how they started out invest your spare change linking to your credit cards, which is also unique, If you’re a regular Robo-Advisor, you just say, give me your savings. We’ll start investing it for you for retirement. But Acorns started differently. They said, let us connect to your credit card account. That gives them a ton of data about investors, about their consumer’s expenses and their spending habits that they can use to sell them other stuff. So they do a micro savings app, rounding up your transactions. You spend $1.27 on something, it rounds up to $2 and so on.

That doesn’t generate a lot of money. Their average account size is $3,600 and they charge $36 a year, $3 a month. Very simple flat subscription fee. Easy for consumers to understand and easy for them to fall into a sense of, Hey, this is cheap when it’s not. It’s very expensive. If they charge $3 a month times 12, $36 with an average account size of $3,600, that’s a hundred basis points. Quite expensive for a robo-advisor. And that’s just the average. Of course, half are more than that. And as their client base ages, their assets will grow. And of course some will leave and go to the Merrill Lynch, Morgan Stanley’s, larger RIAs, Mariner Wealth and others. But a significant portion I believe are going to stay.

These accounts are going to be sticky because of the other products. Because they have — so they’ve got their micro savings, they’ve got their IRA which I believe is also $3 a month. They have their affinity program, which is like a cash back, but the money goes into your savings account. They’ve got hundreds of products and retail partners where if you buy something from Adidas as an example, you get $20 or $30 into your savings account. So it’s just like a cash back program. And that also creates more loyalty that no other company has. At least not in our space. There’s no other roboadvisor that does what Acorns does to build a community and build this type of affinity. Now, the companies they bought Go Henry’s the most interesting in that they focus on educating children about finance. They have a spending card that they sell to the parents, that they can give to their children between 6-18 years of age and give them a budget basically. 

So I think that’s great. We don’t spend enough education on finance for children about budgeting, about credit cards, auto loans, how to get a mortgage even the simple things about what’s a checking account? There isn’t enough. I know where my daughters went to school, they had one semester of financial literacy. That’s not enough. Your kids need that. You take your financial literacy class and you’re done. You forget it, right? You need something every year on a regular basis to get that information to stick in their brains. So I like that they’re buying Go Henry, again, a low cost provider. Although Acorns also has a product called Acorns Early that they launched in 2020, which is an investment account that parents can set up for their children.

We know Acorns makes money via subscriptions. I think the business model is great. Now, once a consumer’s on boarded into the Acorn’s ecosystem, I believe they’re very unlikely to churn. As I mentioned the average consumer in the US sticks with their primary checking account as an example for at least 16 years. So I think the same holds true for their investment accounts that people just want to stick its inertia. Once they have an account, they’re going to keep it. And this recurring subscription model that is also going to be sticky. And they’ve got oh, another thing that Acorns has. They launched a debit card with a checking account, which became tremendously successful. And also by knowing what their customers are spending money on, they can offer them more tailored products that meet differential needs later.

We’re going to see more new products come out. Based on this data, it’s going to make it more sticky. And we’re going to see Acorns grow their assets from $16 billion now, probably to $100 billion in a few years, and they’ll be considered more serious player in the wealth management space.

4. Advice Engagement

Growth makes operations more complex, say 75% of RIAs. Schwab’s 16th annual independent advisor outlook study polled 862 RIAs. We love this kind of data. I love seeing what’s going on in the industry, what advisors are thinking.

A couple interesting things right off the bat. Of course, growth makes operations more complex. That’s sort of a no-brainer. I’m surprised only 75% said that it should be a hundred percent! Growth always makes things more complex. And one interesting part was the average age of the 862 advisors survey was only 52 years, which is less than I thought it would be. And checking some of the surveys, I didn’t do an exhaustive check. But a 2019 JD Power Study found the average age of financial advisors was 55 years old.

So is the average age of advisors going down? Maybe somebody can fact check me on that. Maybe these are just two snapshots from a unique cohort. So though Schwab’s a pretty big company with the most RIAs are custody with them. So you’d think their data would be pretty accurate of the industry as a whole. So could be that the average age of advisors is trending down as advisors retire and new ones come in. And the average age of the average age, the average of these advisors was 400 million. As far as how they differentiate themselves, 87% of respondents said it has to do with offering personalized portfolios. But is this a true differentiation? I’ve been saying this for a number of years. There are some advisors a minority of advisors out there that are terrific investment managers. They have a knack for it. They’ve been doing it for a long time, and they have a strong track record of success. But most do not most trail the market by a wide margin.

Certainly they trail home office portfolios, asset manager portfolios, and yet many advisors still believe that they need to be out there picking stocks and building models. And the advice engagement category on the Kitces-Ezra Group Map is full of innovative products that are helping advisors move away from the investment performance and investment management value proposition. So I’ve got a couple stories that lead into that around that particular narrative. One is absolute engagement. Launches a software platform to capture real-time client feedback. Absolute Engagement is a company found about Julie Littlechild in 2014, and they empower advisors to drive personalized engagement at scale. They had been known for managing and running client surveys point in time snapshots on Client surveys, and what they found was advisors wanted more real-time information about their clients.

They found the surveys were helpful, but they were just run once a year on average. And they were getting a snapshot. Well, they needed more real-time data to help make more meaningful interactions. So Absolute Engagement and Julie Littlechild launched a new software product, which they’re calling the absolute engagement engine to drive more meaningful interactions with leads, prospects, and clients, while helping advisors learn more about those interactions over time. The engine plugs into the firm’s existing workflow integrates with tools like the CRM and venture planning software so that it doesn’t interrupt the advisor’s workflow or the client’s workflow as well. So the engagement engine technology is rooted in what’s called Reveal and Respond framework developed by Littlechild and the team at Absolute Engagement.

They have deep experience developing, as I mentioned, one too many surveys that take a snapshot of client sentiments. But these engine software allows advisor to capture one-to-one input at each stage in the client journey. What it can do is capture things, of course, nothing about investment management per se. It captures all the soft aspects of building a relationship with another human being. Captures perceptions, preferences, expectations of advisors, prospects, and clients, and goes deeper to reveal needs, feelings and priorities. And I think these are all very helpful for advisors to move away from just assets and get into more of life coaching, getting to more of a full holistic wealth planning that that involves understanding more about your clients. There was one of the RIA clients of advice engagement, I think it’s a $2 billion RIA says that there are early beta testers of the engine, and they said it helped them prepare for client reviews more effectively since their client profile data is always up to date rather than being out of date. So having this one-on-one referral tool, others one-on-one data capture tool, helped them. On a separate note about absolute engagement, they recently added a new member to their advisory board that’s Matt Brinker from Merchant Investment Management. So kudos to Absolute Engagement. Congrats for bringing Matt onto Advisory Board. And if you want more information about Absolute Engagement, you can go to AbsoluteEngagement.com.

The next advice engagement story I wanted to talk about was advice engagement platform. Lumiant announced a $3.5 million seed funding round. And another story, they have two stories for Lumiant. They made their first acquisition and they acquired longevity and health planning FinTech Genivity. Now Lumiant is in the advice engagement category. And I forgot to mention Absolute Engagement is in the workflow support category because they have some strong workflow tools built into the engine, but it could just as easily have been in the advice engagement category as well.

That’s what gets a little tricky sometimes, is applications out of multiple capabilities, what category you put them in. Lumiant is in advice engagement, and they offer client discovery and lead capture tools that advisors use to engage with clients on both financial and non-financial goals. So you can see the trend here, get away from just financial goals. Look at non-financial information around the client’s life. Lumiant has a number of tools in inside their suite of software. Three of them, they’re called Your life, Your values, Your goals. They all rely on surveys to gather information about the clients, such as what life outcomes the clients would deem to be successful, what their values are, understanding what the value in life, which the firm believes increases referrals.

And they have a goals tool, which sort of overlaps with financial planning software. However, they believe their methodology is better. And they say in their data, it shows that traditional financial planning software users, advisors using traditional French blank software average less than two goals per household. However, advisors who are using Lumiant average 7.6 goals per household. So that’s got to be better. You’re learning more about clients and more about what their life is about where they want to be in life. So that can only help advisors build strong relationships and other things around that are more focused on advisor’s revenue, growing wallet share, and reducing churning. And for example, Blake Wood CEO of the US version of Lumiant. Because Lumiant was founded in Australia and launched in the US last year. Blake Wood formerly invested in its director of product. Shared a story where he brand his own mother went through the process and he discovered something about his mother’s needs and his mother’s goals. That she was worried about being a financial burden to her family, even though she wasn’t. All of all of her children are very successful, but she was still worried.

So she didn’t spend any money on herself. She saved way more than she needed to in retirement. Instead of enjoying her money, maybe traveling a bit. She just put it away cause she was just so nervous about that. And maybe if her advisor had known that he or she maybe could have counseled her to say, Hey, you don’t need this much in retirement. Here’s things we can do to help you. Supporting the theory of advice engagement soon to be a critical part of most advisors. Tech Stacks was a Fidelity survey, which came out at the T3 conference that they found in their survey, 40% of advised investors want their advisor to provide support beyond investment management.

So there you go. There’s a backup stat that you got a significant number of investors who want more information. And even more surprising to me was they found some other results that 33% of investors surveyed said they want their advisor to help them make healthcare decisions. That’s something that came out of left field, but something advisors can help them with, whether it’s how to save for healthcare, what kind of insurance to buy for healthcare. There’s a lot of tools out there. You can check Kitces-Ezra Group Advice tech map. There’s a healthcare planning section of tools that can help advisors with healthcare decisions. And a couple other things we like about Lumiant one, they’re mobile first. So most of the clients access their software on their mobile phones. This founding round, this three and a half million dollars in funding brings their total funding to 9 million dollars.

And if you want to hear to learn more about Lumiant, oh, before I forgot Genivity. So Lumiant acquired a FinTech firm called Genivity. It was just announced at the Envestnet conference, which was in Denver a couple weeks ago. And speaking about the Envestnet Conference, I remember first meeting founder and CEO, Heather Holmes of Genivity back at the 2017 Envestnet Advisor Summit when they were chosen as the best FinTech innovation out of the Envestnet Yodlee Tech Incubator. And just very quickly one of the things I like about Genivity is they have a healthcare survey rather a life events and health survey where clients or prospects walk through it to talk about their history of healthcare issues in their family. And the survey’s designed so well and gamified so well that they find that for every prospect or client that fills out this survey, they send it to 12 of their relatives to get more information about their family’s health issues and health history. Well, that’s just an incredible bonus in terms of lead gen or advisors. And they’ve got love of the tools. You can go check them out at Genivity.com. You can check out Lumiant lumiant.io. 

5. Altruist raises $112M Series D to take on Schwab and Fidelity in $128 trillion RIA market

Next up we have a triple news story, all from Altruist. They simultaneously raised $112 million in a Series D round, they launched their own self clearing unit called Altruist Clearing, and they acquired brokerage and custodial platform. What a month or a series of weeks for altruist. First off their 112 million Series D led by Inside Partners and Adam Street that brings their total funding to around $290 million. And that announcement came on the heels of their acquisition of shareholder services group. Now SS&C had around 1600 advisors at the time of the acquisition but still I think Jason posted this on Twitter that they brought in record assets in Q1 2023 before the SS&C acquisition. So even though that doubled the number of advisors, or more than doubled, they still are growing very fast.

In addition to the firms mentioned in the funding round, they also got some noted industry luminaries joining in on the investment, including Bill McNabb, former chairman and CEO of Vanguard, Ron Carson, founder and CEO of Carson Group. And Marty Bicknell, CEO and President of Mariner Wealth Advisors. Now with 3,300 either advisors or RIA firms, I think that’s advisors, 3,300 advisors on their platform, Altruist is now the third largest custodian by number of firms, but that’s not how we measure custodians. It’s usually by AUM. So I’m assuming they’re much farther behind Pershing, which is the number three by AUM since that’s how advisors — that’s how custodians make money, is on AUM not on the number of clients, but still it’s impressive that they’re growing so quickly. The $112 million, what’s that money for? They are using it to broaden their market reach.

So up until now they’ve been targeting RIAs under a hundred million and been very successful bringing in, again, 1500 advisors from those smaller firms. But now they wanna move upstream to the 100 million to 1 billion size. And those mid-size advisory firms have different needs such as account access and credentialing and other support. So they think that’s what that money will be used for. The SS&C based in San Diego is a much older company than Altruist. They were founded in 2002, and they are not a custodian themselves. They are an introducing broker dealer, and which means they are reselling another vendor’s custody, which is Pershing. So they have BNY Mellon Pershing’s custody for their client assets and clearing. And that according to the articles, they are going to be sticking with purging, but I think strongly encouraging their clients to switch to Altruist.

Sure there’ll be some savings mentioned, better service, better support different, of course different technology. So I think there’ll be a while they’re not claiming they’re not going to do a mass conversion, they are going to be strongly encouraging those firms to switch over. Now, the SS&C acquisition, I believe, would not have occurred if they hadn’t been going self-clearing. And the question is why. Why do you want to be self-clearing? Why not just continue the way you were working? Which is also as an independent, or rather an introducing broker dealer, which was how Altruist has been operating since they were founded. And they started with, I believe, drive wealth as the custodian, but ran to some problems such as DriveWealth is designed for robos, not for RIA servicing.

So then they switched to Apex Clearing and they’ve been on Apex for a while now they’re as an interesting broker deal at two Apex reselling, basically reselling their custody and now they are going self-clearing. So one of the reasons that from what I heard from Jason they posted an office hour basically a webinar internally that was talking about some of the reasons why they went self-clearing. One of the things he was saying was his front end software and the clearing and custody of Apex were not always in sync, which caused some problems. And that they believe being a full stack custodian, being the custodian of all cash and securities of their client accounts gives them more flexibility. They say it also improves the speed of deployment because they’re no longer tied down by whoever the custodian is, their product roadmap and their services support.

So they can take that on themselves. Jason Wenk the CEO and founder, they’re going to have lightning quick account opening now one to one and a half minutes to open an account, which is lightning vest. Just a few clicks to initiate ACATs with the transfers, the actual transfers of securities happening in less than a week, which is all due to their communications being entirely digital. There were other — there were some of the limitations in the introducing BD model, such as account types. They couldn’t support, I guess that was limited by what Apex had cash management issues and other things trade order management, they weren’t happy with. So now they will do it all themselves and now they have to convert from Apex to Altruist Clearing. So there is a conversion going on.

Although they claim there’ll be no repapering because they’re using negative consent. So all that’ll will happen automatically when clients log in, I guess it’s happening this month. They’ll just get a popup saying, here’s what’s happening. Click here to approve, boom. And they’re done as long as they click the button. And negative consent is definitely the way to go if you can do that when you’re converting custodians, because you don’t need to read paper. Of course, there’s a regulatory difference between broker dealers, interest broker dealers and banks, how they handle a custody of, there was an issue about a lot of talk about the SVB crisis and how that would impact custodians such as Schwab or now New Altruist Clearing. And they believe that due to the regulatory differences, they’re okay in terms of their stability. A couple of the benefits they’re getting from going so clearing, they’re eliminating the reliance and overnight batch processing, which is such a bane of our existence when it comes to dealing with custodians.

Basically everything you’re doing, all the reporting, all the trading is based on yesterday’s data. So if you can move everything faster, if you are the custodian, you have access to your data in real time for trading cash management there’s no more recon, right? You’re not reconciling it to the custodian because you are the custodian. You are the system of record, the Golden Source. All benefits of going south clearing and we don’t see many new RIA custodians entering the market, if you look at the Kitces-Ezra Group Advisor tech map, we have lots of other things coming in. Lots of other tools and technologies, but not a lot of custodians because it’s a non-trivial task to build out a custodian. I believe this took a number of years for Altruist to do this.

They probably started building this custodian as soon as they switched to Apex, it seems because I think it took them at least three years. They said there were 300 and 350 team members working on this. A lot of work, a lot of effort. It’s a big lift. So that’s why we don’t see a lot of new RIA custodians coming out. Interesting comment I read in the article on wealthmanagement.com, it was a comment from Alan Moore, the CEO and co-founder of XY Planning Network, who said, “In the end, custodians make their money not in the billions, but in the trillions of AUM.” So he is interested to see if they can be successful in they being Altruist can be successful in scaling operations to a point where they can remain a standalone custodian. My opinion is that Jason, Wink and his team are in this for the long haul. With that series D, they’ve got enough dry powder to keep building out their technology and capabilities and support. And they’ve already been doing a great job. So I’m putting my money on Jason that they’re going to be in this for the long haul. If you want more information about Altruist, please go visit them on the website at Altruist.com.

6. Dynasty Financial

And next we have two stories about Dynasty Financial. First up, Smart RIA announces a second strategic investment round from Dynasty Financial Partners and Market Council. Now, financial advisors are required to navigate increasingly complex waters when it comes to regulatory compliance. And Joes who choose to ignore the rules can find themselves in hot water with federal and or state regulators. They may also face punishment or suspension by boards of standards that govern any professional designations that they might hold. So it’s not surprising to us that the use of RegTech software has grown across the industry. And this trend is driving investment in those software providers. So Dynasty which is a service provider themselves to more than 50 independent RIAs and Market Council, a regulatory consultancy, and also the publisher and publishers. The managers of the market Council Conference first invested together in Smart RIA back in 2021, way back in 2021.

Now this deal closed three months ago, and Dynasty had already begun onboarding RIAs in its network to onto the smart RIA platform. And, oh wait, I think that’s from the previous article. Yeah, that’s from 2021. So they closed the first deal in 2021, and they were already onboarding RIAs onto the smart RIA platform. So it makes a lot of sense. Why not invest in your service provider? You get a seat on their board, you get a lot more say in their platform and features and functionality. I think Brian Hamburger, founder of Market Council is going to be on the board of Smart RIA. And earlier this year, dynasty said it was going to begin using its own balance sheet to purchase minority stakes in members of its network, rounding out the capital solutions it already offers. And Shirl Penny also talked about this at the T3 conference.

If you read my summary of the conference, which is on Kitces.com, I talked about Shirl’s presentation, which by the way was with — was a fireside chat with Brian Hamburger. Some useful information about RIA M&A. Now, the smart RIA pro platform has a number of capabilities. They pitch it as an all-in-one compliance platform for RIAs. It has compliance calendar and dashboard, which eliminates all the spreadsheets you normally have to manage. They have an encrypted file storage library oversight reporting with compliance alerts, CRM integrations, and we love integrations, trade monitoring and data governance. Related to Smart RIA they had another something last year came out that they partnered with kitces.com to offer IAR continuing education. So smart RIA is from their dashboard advisors who are using their tools can access CE content provided by kitces.com. So that’s a nice integration there. If you want more information about Smart RIA, go to Smart-ria.com.

The second dynasty story is their selection of BridgeFT as their primary data aggregation provider. BridgeFT is an interesting story. They started out, I don’t know the exact year, I don’t have that, but it’s been at least 10 years. They started as a full platform RIA platform that was built on top of the old Fiserv of APL system. So they had their own interface to it, their own, they were white labeling Fiserv APLs, full managed account platform for RIAs. That went on for a while and eventually, think they were trying to become a lower cost provider competing with Orion and Morningstar office on Black Diamond and such. And I don’t think they got a lot of traction in that market. So they pivoted. They hired Joe Stenson, who would be the new CEO, and he pivoted the company through more of a data provider, basically a custodial data aggregator, which is a great idea since they already had all those capabilities built.

And now they’re offering that to other vendors and wealth management firms who want to build their own technology such as Dynasty. They have the capability to build their own tools and technologies, and this way they can own the multi custodial data coming in, then feed that to Envestnet, Orion or whatever tools they happen to be using. So it’s a good idea. I mean, we’re big proponents of wealth management firms doing whatever they can to protect themselves and own more of the data and more of the technology and don’t be as beholden to vendors. For example, you bring in an RIA platform and end to end platform. They basically own your data. It’s very difficult to switch platforms in that time because you’ve gotta convert everything. You’ve gotta of course retrain everybody. But also that moving that data from one platform to another can be a huge pain.

And we’ve done a lot of research on moving portfolio management systems. If you bring in a provider like BridgeFT and you own the custodial data, that gives you an advantage. A bit more of an advantage when, if you wanted to switch out your portfolio management system because then you just send the data to the new vendor, right? You control that rather than the vendor controlling it. It’s not complete. I’d rather have the clients own the data as well. So build a data lake data warehouses to hold the portfolio management data and then feed it to the portfolio management system for rebalancing and other and performance reporting and such. That way you own the data in your format. But that’s a much bigger lift that requires much more capabilities. However, this selection of BridgeFT as their data aggregation provider also comes with an investment. I’m looking at the story right now. This is written by my friend Ryan Neal on Investment news. Dynasty Financial Selects BridgeFT as primary data aggregation provider. There was an investment, that Dynasty made. Again, you can see the pattern. They’re finding good technology providers and they are not only signing up with them, but they’re investing in them. So that gives them a lot more leverage. So you can go, if you wanna find out more information about Dynasty, you can go to the website and if you want to find more information about BridgeFT, it is Bridgeft.com.

7. GeoWealth buys TAMP First Ascent

We first met the GeoWealth team way back in 2017. I was impressed by their platform. The tech was a bit lightweight. They were still, you know, building out their tools and technology but impressed that they built it all themselves a bit clunky some major gaps like advisors can only create models through spreadsheet uploads. But we had another demo last year and looks a lot better. It’s a full platform now. Very impressive. They described themselves as a hybrid between a SaaS platform and we see them more as a back office outsourcer until this acquisition of first ascent. So in the past, GeoWealth was less focused on the investment process. The majority of their RIA clients, about a hundred or so, built their own models and their largest RIA was about 2.6 billion with 135,000 accounts. 135,000 accounts in the platform.

That’s a lot of accounts. That’s a decent sized product. The total AUM now is around $21 billion and they built all their tech, their core portfolio accounting, PropGen, order management, rebalancing model center. We like their service center, which is a trade communications portal for advisors to communicate with their trading team. This acquisition is the first they’ve made since GeoWealth’s 19 million funding round last January, although they did have done a bit of poaching of executives from their competitors. Now, first Ascent is an asset manager and they will continue to operate as a standalone subsidiary. Again, I mentioned 21 billion in total assets, 180 clients of which 90% are RIAs of the total of the combined firms. They’re keeping First Ascents, Denver and Chicago offices and operation and First Ascent builds and sells their own portfolios and investment products.

Whereas GeoWealth relied on third party providers. So I believe the intention is to use First Ascent as the full service GeoWealth tamp for advisors that want to purchase models and have the company build manage it all for them, all the back office and administrative services. So they’ll have two brands running simultaneously for advisors, depending on what their needs are. According to the CEO Colin Falls, this is not an asset purchase where you rip out the tech and fire everyone. The only proprietary software that First Ascent was using was their onboarding technology. There won’t be any layoffs. This is a growth story. Love that message. Hope they stay true to that. And it was interesting that First Ascent bought some technology last year. They bought one of their providers similar to what Dynasty was doing. First Ascent bought their provider of onboarding

Technology. It was called Forward Financial Technology. I’d never heard of them before. Risk Tolerance, PropGen Account Opening Technology. And they bought that. Not sure if they’re keeping it or not. But they are planning to move onto the GeoWealth platform, which makes sense. They’ve got a full feature capabilities be able to just keep the onboarding, which makes sense cause that’s the only parts that clients or advisors would ever see. Everything else is in the backend. Now, what they will be changing is First Ascent have built their tamp technology on top of Orion for performance reporting, billing, and other parts of the application. So that’s going to go away. So Orion can’t be happy about that, and that’s going to be a significant cost savings. Because Orion is not cheap. And it’ll give First Ascent an immediate bump in cash flow just to tell you how much it costs to run Orion’s Tech. It’s going to make them break even, right?

So they were losing money all this time. Now they’re going to break even since they don’t need to pay Orion anymore. That’s a longer term business benefit of cost, of course. First Ascent was known in the industry for their flat fee or its services, which they were the first one to come out with that about six years ago. They charged $1,400 per household with an additional $500 charge for every 1 million over $3 million. So it’s very scalable for advisors and their clients versus Ascent grew their assets by a thousand percent from 2019 through 2021. Do I have that right? And they’re now 1.8 billion at the time of the sale. I am super excited for this deal, or especially for Scott MacKillop the CEO of First Ascent, Scott, I’m impressed by him and envious of what he can do.

He shows that just age is just a number. He started First Ascent when he was 63 and now eight years later sold it at 71. And he’s not going anywhere anytime soon. You know, he’s the oldest seven — he’s the youngest 71-year-old you’ll ever meet. The guy is hiking and riding and skiing. I’m jealous of what I’m seeing when I see his stuff on, on LinkedIn. I’m like, wow, I wanna be there. So Colin and the GeoWealth team have a fantastic partner to continue their growth. All the best to them. You can check out these firms @geowealth.com and firstascentam.com.

8. AdvisorTech Map Updates

Now it’s time for our review of the AdvisorTech map changes for the month. As you know, Michael Kitces and I partner on the AdvisorTech map, which you can find on Kitces.com/fintechmap. And every month we go through all the new vendor’s new products that want to be added to the map, as well as other changes, adjustments reconfigurations that are needed. Now, this month, I think this is probably the most applications we have added, at least in a couple of years. There are 18 new products that are appearing on the May map that weren’t here before. I’m just going to do a quick rundown of them names of the product and what category they’re in. Before I start, there’s a new category added this month. Yes, we managed to squeeze in a whole another category. It’s called Investment not investment, Insurance data and analytics for products that do insurance data analytics which is different than investment data analytics because these do it for insurance policies.

So running down the list, an alphabetical order, we have AdviAlly, which is a new CRM tool. We haven’t seen a new CRM in quite some time, so welcome AdviAlly. Advisor Armor is a managed service provider, mainly a provider of cybersecurity. And I think we’re creating, do we create a subcategory? I need to bring up the map while I’m talking here. We didn’t do it. Oh, we did. So cybersecurity managed service providers, which is in the middle top of the map. We added a subcategory for cybersecurity Advisor Armor and FCI are in there. Advisor Finder is next under lead gen, another category that’s getting crowded. So we’re thinking about a new product and you wanna do lead gen, just remember there’s a lot of stuff in there. Okay, I was Advisor Finder.

Amplify, this is portfolio management, and of course you can always get to these websites from the map. Just click on their logo if you don’t realize it that the PDF is live. And each one of the logos has a link, a hyperlink, which you can click on. So I’m not going to give you all the URLs on the podcast. All right, that was Amplify is a portfolio management application. Next is Arch, account aggregation for alternative investments, Canoe intelligence, Investment Data Analytics, Caravel Compass, and it’s going in planning light prudentialadvisors.com is LeadGen, La Meer, that’s with two Es. La Meer is in compliance. Levitate, Digital marketing, Life Insurance Sustainability Analysis or LISA, is the first going in insurance data and analytics. Mirror Web, it’s a good name. Social Media Archiving, New Retirement, another good name. Planning Light, Reich and Tang, not a good name. Cash management, Trustworthy, Specialized Planning Legacy Veralytic goes under insurance analytics, Wealthvoice.ai is going under in digital marketing. And finally, Wink is insurance analytics.

As I mentioned, new category, insurance, data analytics other changes. We have one other change, wealth access moved from client portal. Just double check before I say anything moved from client portal. There it is to advisor data warehousing which you can find right in the middle of the map. And I think that’s all the changes. I always like to talk about the things that weren’t added or generically, I don’t wanna mention the company’s names, but if you are a company that is offering consulting services, you’re not going to get on the map. If you’re offering investment products or options or some sort of derivatives, you’re selling some sort of securities or investment products, you’re not going to get on the map.

That’s not what the map is for, the map is for software. You have to be selling software lower price. If you’re giving away software as a loss leader, because you’re selling some sort of product, you’re most likely not going to get on the map. If you’re offering any of the kinds of services, if you’re a tamp, you’re not going to get on this map. Although there are some tamps on the map because they also sell software or they sell you know, they sell a combination of software and tamps like Envestnet and Orion are on the map. Because you can also buy their software separately. But firms that only sell tamp services do not get on the map. You have to have similar to some sort of software that advisors can buy or other types of services are not going to get on the map either.

And of course any companies that close or get acquired, they no longer being sold will be taken off the map as long as if a company acquires another company and they continue to sell the product under the original name or still is a standalone product, we will keep it on the map most likely. If of course if they integrate it and they do can no longer buy it, we’ll take it off the map. There are a few conditions where firms get multiple logos. It’s very rare. We’re trying to, we’re going to be rationalizing that soon. There’s some grandfathered in products that allowed companies to have two logo for example, Envestnet has Envestnet Tamarac and Envestnet MoneyGuide. We left MoneyGuide on because it’s still being sold standalone and plus it’s one of the most popular applications. But also number one, probably number one financial planning tool. So we left that on there.

If you have any updates you’d like to share if you’re a vendor who would like to get on the map or if you have added new features and functionality and you think you should be in another category, please email us at technews@kitces.com. You can also email myself directly, although you’ll probably get a much quicker response technews@kitces.com.

9. Ezra Group WealthTech Integration Score Updates

Craig: Our next segment is one of my favorites, which is our monthly review of the Ezra Group WealthTech Integration Score. And this month, I was special guest. I’d like to introduce David Rossien who is the head of our WealthTech Integration Score team. Hey, David. 

David: Hi, Craig.

Craig: Thanks for having me on. I’m glad you could make the time to talk to us. So what we’re talking about today is the changes in methodology we made that just launched this month. So can you just give an overview of why we made the changes, what the changes are, and how they were going to impact the scoring?

David: Sure. So there are basically three categories of scores that add together to get your total score. First is breadth, and originally that was basically just how many applications does this application integrate with? The issue there was that we wanted to give a higher weight to more popular applications. So the new calculation basically half the score is focused on the 40 or so most popular applications and the other half on all the rest. Next we had depth. Depth is an individual score for each application integration. And there we wanted to give a higher weight to stronger and deeper integrations. We found that there were some firms that had quite a number of just single sign-on integrations, but lacked deep integrations, what we call a square of five. So we wanted to point David, let me jump in there.

Craig: So that’s something that we wanted to highlight. One of the complaints we had from our clients, whether they’re RIA’s, TAMPs, broker dealers, banks, was that vendors would tell them they have all these integrations and how wonderful it is. And then when they got to, that signed the contract and tried to implement, they’re mostly just single sign-ons and didn’t move with any data between the systems, which was a bit of a bait and switch. So we wanted to make sure that depth was an important part. In fact, we made it 50% of the score is depth.

David: Right. Exactly. And then we have the third which was originally just three questions because it had to do with how easy other vendors might find it to integrate with this particular application. We call it usability yes and basically it was just you have get APIs that allow other vendors to get access to your information. Do you have post APIs that allow vendors to give information to you presumably for display or a utilization? And then the simple question do you have the developer portal? We’ve expanded that from the original three questions to 20 different questions where we focus on about 10 questions on the portal functions quite a number of questions. questions on certifications, so SOC 2 certification or ISO certification, etc. And then a number of questions on the APIs themselves. So one of the things that that is done is given a depth to the way that vendors scores are maintained. It used to be that if you have questions, yes, you would get a perfect score. Frankly, with 20 questions, no vendor out there has answered all 20 has all of the 20 things that we ask. Quite a number of them, of course, have the great majority, but it allows a little bit of detail that was lacking before.

Craig: Yeah, that’s an important part because I understand the usability of the integrations and APIs. If it’s not usable. And what’s the point? You’re paying for something that is not going to provide a lot of value. So these questions pull out and tease out the vendor prepare enough support for these capabilities or they just roll something out that nobody can even access.

David: So the end result of this has meant that the median score went up slightly and largely we believe that that’s a function of the fact that it is true that most firms do emphasize the popular apps. So the breath score increased a little bit. But usability as I said went down slightly because before you only had to answer three yeses and now there’s quite a lot more there. Overall, no significant changes, no surprises per se, but I think Users of the score will now find it a bit more valuable and we’re always interested in thoughts about how to improve it. In fact, usability questions, 20 questions came from a group of CTOs, VPs of engineering and others. So if you have any further comments or questions, you can just email us at integrations at asagroupllc.com and we look forward to hearing from you.

Craig: David, thanks for taking the time to join us.

David: I appreciate it. My pleasure.

You’ve made it to the end of another episode of the WealthTech Today podcast. That had to be the longest news podcast episode I’ve ever recorded. It was just so much also, I think because we didn’t get the news done last month, so it had a lot of rollovers. So definitely a lot of news. Thanks for sticking it out and getting all the way to the end. And before you go, please visit 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 and links. You will not be disappointed. Thanks again for listening and talk to you all again next time.

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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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