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Come on in and sit back and relax. You’re listening to Episode 209 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting. This podcast features interviews, news and analysis on the trends and best practices, all about wealth management technology.
My guest for this episode is Rick Kent, founder and CEO of Merit Financial Advisors. Rick is an entrepreneur and visionary leader who founded Merit Financial Advisors on a servant leadership philosophy and a commitment to help individuals reach their financial goals while supporting fellow advisors and entrepreneurs and meeting professional goals.
Rick has been widely recognized for his contributions to the industry including being ranked amongst the Forbes Top 10 Best In-State Wealth Advisors. Rick had a clear vision for Merit’s growth, he designed a program that helped advisors to align with Merit in a number of ways.
I love talking to RIAs about their tech stacks, especially those like Merit who have a rags to riches story. I won’t give it away, but Rick tells us all about how he took his infrastructure from worst to first and we dive into both what his tech stack used to be and how he got to his current application infrastructure. We spoke a bit about the key applications that they have at Merit and why they selected them, how they work together and deliver a premier experience for their advisors and clients.
But before we get started, if you are an executive at a broker-dealer, enterprise RIA, family office or a TAMP, your tech debt is holding you back. Your old software platforms are rusty and falling apart and they need either a complete overhaul or to be replaced entirely. Your disparate systems don’t communicate with each other and it’s driving your operations staff and advisors crazy with manual processes and other errors. If this describes your company, you should run, not walk to our website, EzraGroup.com and fill out the Contact Us form on the home page. Our experienced team can evaluate your technology ecosystem, deliver targeted recommendations, optimize your existing systems and operations, or run an RFP or RFI to help you implement new software to help take your firm to the next level.
Topics Mentioned
- Tech-Powered Transformation
- Innovation in WealthTech – A Deep Dive into Merit Advisors’ Tech Stack
- Building Tomorrow’s RIA
- Technology, Acquisitions, and Future Initiatives
- Insourcing Versus Outsourcing
Episode Transcript
Craig: All right, I’m excited to introduce our next guest. It is Rick Kent, founder and CEO of Merit Advisors. Hey, Rick, welcome.
Rick: Good to be with you this morning.
Craig: I’m so glad to have you. I’m glad you can make some time in your very busy schedule for us to talk advisortech, and about Merit Advisors. Where are you calling in from?
Rick: Today I’m in Florida, in northern Florida in the panhandle area.
Craig: Nice. I love Florida. We have clients all over the country, but we have some some very big clients in Florida. I’ve been going there a lot this year. It’s been beautiful, fortunately, and fewer storms.
Rick: It’s beautiful today, Craig. It’s an awesome day today.
Craig: Excellent. Rick, can you please give us a 30-second elevator pitch for Merit Advisors?
Rick: Yes, Merit Advisors is a fast growing RIA. We have invested a lot of time or energy, a lot of money into technology. You and I talked about this previously, probably about two or three years ago, we made a decision to make a big investment in technology. It’s beginning to pay off and we’re excited about where we are. And we’re excited about the future. We do a lot of acquisitions as well. We did 12 acquisitions last year. We’ve done seven so far this year. We’ll complete a couple more before the year end. So Merit probably around 10 billion today and we have a lot of initiatives going and pretty excited about our potential better growth.
Craig: It does sound exciting. And I know we did a little bit of prep and I was very interested in your story and sharing that. Can you take us back in time? So obviously this is the WealthTech Today podcast, we’re talking about wealthtech. So I’m interested in your tech stack. Can you go back at the time about three years, talk to me about what was going on in the business at the time and what gave you the impetus to revamp your tech stack?
Tech-Powered Transformation
Rick: I’ll say about three years ago we were around 4 billion of assets under management at the time, and had probably just under 100 employees. I was in a boardroom one day and we were having our executive leadership team meeting. I remember going home at night and something came up during the day, some questions around our technology. I began to question myself as the CEO and saying, Rick, where are you? I mean, the company’s growing, you’ve got aspirations to continue to grow. But how much have you thought about how important technology is and where are where do we stand it out to begin? Again, asking myself that question, and, Craig, three years ago, looking at Merit at the time, I would give us a D Minus.
Craig: I don’t care what school you go to, that’s a bad grade.
Rick: I have to be honest, that’s where we were. Then I started thinking about it. And I thought, Well, we’re growing. We’re we have aspirations to get to 10 billion and we have aspirations to go beyond that. And I wondered if I don’t get the technology figured out now, how much harder is it going to be down the road? The bigger the firm is, seems like we started building some things here are some things there without a good strategic plan and are we going to end up just tearing all that down and rebuilding it because it wasn’t done right?
Rick: But now’s the time. This was three years ago. I thought to myself, now’s the time. I need to figure this out. And I need to make sure I’ve got the technology right and because technology is affecting every industry, Craig, I think it’s going to affect the financial services industry, even more so. We live in a world we’re delivering digital information to our clients. This is something we have to get right and it’s going to change quickly. I thought about this I don’t want to just come up with a solve for technology who we are today. I need to come up with a salve for who we’re going to become in the future. And so at that point, I started putting a lot of emphasis on building out our tech stack.
Craig: Indeed, looking at where you were at the time, if you’re going to build the tech for a $4 billion RIA that wouldn’t do you any good. Since you knew where you were going. You needed to build tech that was scalable. We see this all the time. You need to look down the road, which you did, to build that scalable tech stack. So can you walk me through what is your tech stack, what is the core of your tech stack at the moment, what’s your portfolio management and the core of the platform?
Rick: We’re a hybrid firm. I think that term is used in industry a lot. So what I mean by when I say a hybrid firm, 80-85% of our business that is fee based business assets under management, we’re charging a fee, but we also have brokerage business with variable annuities and other alternatives and brokerage type products and so we do both. To be a hybrid RIA, it’s a little tougher because of technology because you’re getting information from from a lot of different sources. If you’re working with a variable annuity carrier, they’re providing you their data through a statement or through a portal. Merit is multi-custodial and we work with Fidelity, Schwab, and LPL. We wanted to bring all that together.
Rick: So one thing we knew we wanted is that if somebody had different accounts at different places, we wanted to be able to pull it together and show that on one statement, that was important to us. So when you’re preparing for a review, I mean our clients would come in our advisors would spend a lot of time pulling from these different sources to show the client well you got an accountant Prudential, for example. You have an accountant Fidelity, 529 plan, you got this account over at LPL. So we wanted to pull all that together. The other thing that we wanted is we wanted the data that we could use for reporting when we’re able to track our data. We wanted to know what marketing campaigns were working, which ones were not. We wanted to be able to compare quarter over quarter or year over year, how many new net new access came in the door and things like that.
Craig: How big was your tech team three years ago?
Rick: We had one person who was an advisor, who raised his hand and said, I’d be glad to help out. If we have technical issues and fixing then when people can’t get access or something’s not working correctly. I say great, you’re hired and then he had part time person working with him.
Craig: So one person, and now how many do you have do you have now?
Rick: We have 13 people in our technology department today. And the team is getting stronger getting ready to hire another one, it’ll be 14. The team is getting stronger every day. It’s amazing too, the difference. Think about the different departments, you have the investment department. Once the investment department knows that they can get data, they want more of it right? Give me good clean data. Give me reliable data. And so they start thinking of all the things they could do if they get these reports delivered to them.
Rick: Well, the marketing department starts looking at your technology department and they say Gosh, I like to have data on these campaigns whether they work or not. And you have your compliance department who says guys, we would like to have certain kinds of reporting for this. So today all of our different departments are making a lot of requests. I found out yesterday Craig, that since we started a ticketing system, when you need something done instead of just calling you have a ticketing system where let’s submit a ticket it goes into our priority. The technical department gets back to you and tells you when they can fulfill that request. I found out yesterday cry this is amazing, since March, we’ve had over 3000 requests since March for the technology department.
Craig: Where did all those requests go before?
Rick: Before March, it was people just calling our technology department and saying hey, can you help me help with this or help with that and they were getting so inundated that they had to come up with a ticketing system.
Innovation in WealthTech – A Deep Dive into Merit Advisors’ Tech Stack
Craig: Let’s talk about your tech stack. So I know you guys use Orion as the core. Why did you choose them and how have they been during this this period of rapid growth?
Rick: When we did our research and thinking about what the different platforms that were out there, we Orion seemed it works for us. There’s some other great ones, Black Diamond or some other good ones out there. But at the research that we did, Orion seem to be the best fit. It fit us and we’re getting out of around what we need. And so it’s we it takes a while to get all get through. When you get reporting coming in from your different vendors. We have pipelines built from our stadiums that feed data in and it goes out into our data warehouse. Do we own that data? And sometimes the challenge a lot of times, Craig, is things will come in from Fidelity a certain way they’ll come in from LPL a different way. And a lot of its feeding into Orion but we have to figure out exactly how it’s being fed and understand it and work because meaningful data to us, but Orion has worked well with us.
Craig: That’s terrific. And having the core of the portfolio management platform be solid and be able to grow with you is critically important.
Rick: The pricing and all that it’s based on usage and our usage just keeps climbing. We have over 8000 households now. So they grown with us as we were getting started with them.
Craig: 8000 households is not a trivial number.
Rick: And a lot of those households had three or four accounts, two or three at least.
Building Tomorrow’s RIA
Craig: I’m sure. You mentioned a bit ago about the data, that’s important. We work with a lot of RIAs and helping them build out data warehouses. You mentioned, you’ve got a lot of data, what are some of the things you did to build out that data and how was that important to driving the way you manage your business?
Rick: Absolutely. LPL has been a good partner, Fidelity has been a good partner, Schwab, and it’s working with them to provide us the data. They get the data feeds, right, we build a pipeline from their platform to our platform, to our warehouse, and it’s just amazing once you can see that data. Think of a data warehouse just think warehouse in general, and think about everything on the shelf and everything organized with these numbers, this data, you can do anything you want. It’s more what report do you want? How do you want to organize this data, you want to show it this way? You want to show it that way? You want to carve out certain things with that data for reporting. It’s limitless once you do have the data where you can request it, how you want to read it and how you want it to get reported on.
Craig: I know you’ve got a lot of regions where you divide up your organization, can you do assets by region advisor performance? Are those the kinds of things you can do with this data?
Rick: It’s a great example. So we have nine different regions across the country. We call them regional directors that run their region. Think of it like they run their own P&L So every week, now, Craig they get a regional director dashboard. And the Regional Director dashboard has a lot of relevant information. We got them to collaborate with us to find out what they wanted in this dashboard. But so you can imagine some of the things that were very important to them.
Rick: They want to know, first of all, Where do I stand today? How much assets under management and have we picked up today on our region? How much should we pick up in the last quarter? How does that compare to a quarter from a year ago? Then they can drill down to each individual advisor in the regional say they’d have advisors in the region. The regional director can say I’m gonna see report who’s my top advisor, with a second, who’s third, how many how much assets if they brought in net new assets that they brought in, and the advisors themselves can go in there and drill down by client. So they can say, so the regional director is interested in how his region is doing. The advisor wants to know, well, how am I doing? Who’s my best client who’s my top 10 clients who’s my top 10%? They can drill down, our data will drill down and tell the advisor these are your these are your top clients.
Craig: What we always find amazing, we work with a lot of RIAs similar to to Merit, is how many are growing and operating without this kind of data. Imagine that, now that you’ve seen it. Without it, you’re flying blind. I know you guys built it in Power BI because you’re on Azure for your cloud. I mean, we built it we’ve helped clients build it in Salesforce or build it in other other tools, whether you’re in AWS, there’s other tools there. So the tool doesn’t matter. It’s that you make the decision as you did to make the investment to build a data warehouse, connect all the key data sources, which can be complicated and can take as you noted, it could take two years to get everything the way you want. But once you have it, then the ability to manage your business in a much more mature way is available to you.
Rick: It is amazing. To your point, flying blind if you don’t know that you end up making decisions without having the right information. I won’t say we’re all all the way there but we’re getting closer every day, Craig, we’re making data driven decisions. The data doesn’t lie. When you’ve spent $3,000 on marketing campaign, exactly how much money came back from a marketing campaign, whether to invest more money in that marketing campaign or not. Recognizing your top advisors, well, you need to know who they are. You need to have that information on a date right at your fingertips and the management of the RIA needs to know what’s going on. And the data is all there it’s but it’s a matter of corralling all that data to your point heavy into the warehouse that you can access on a regular basis in order to get that information.
Craig: And some of the things that are coming down the pipe you had mentioned you have some other reporting that you’re looking to build out in Power BI.
Rick: Yes. Again, and there’s no limit. It’s like what what type? My tech team, they came to our executive leadership team says tell us what you want, what kind of report you want to see. We can pretty much build deliver anything. What do you want to see and certainly that having your hand on the pulse of just watching the assets flow in and out and know exactly what’s going on is huge. 2022 was a down year for the market. The market was down, the S&P was down like 19%. Huge impact on our firm. Because of that grant, we saw $1.2 billion AUM drop, we saw $7 million in revenue to drop and times like that it’s important to know the data, what’s going on and what you can do to correct it and work your way out of a situation like that in a downturning market.
Craig: One of the most important parts of any advisor on the RIA tech stack is your client portal. This has been a particular area of, one of my pet peeves is the multitude of client portals we see multiplying across the industry, where firms will have one portal on their portfolio management tool then another portal from their financial planning tool, then their custodian has a portal, then their annuity as a portal. So you took a different approach. Can you talk about what you did to build Merit’s client portal?
Technology, Acquisitions, and Future Initiatives
Rick: That’s correct. So think about you so you say using eMoney for your planning. So your clients on eMoney, clients want to build and stay in touch with their plan. So now they have a login for eMoney. Let’s say they want to figure out how they they have a 529 plan over at Fidelity. They have some bank accounts and they’ve got logins for their bank accounts. They got credit card information, you have logins for that login, login and log in and so what we’re saying to our clients today, we have built our own portal, Craig and we have our own app. It’s live working today and with our clients they can be anywhere in the world and in the palm of their hand through their cell phone access all their financial data and with one single login.
Rick: When they log into our portal, they are connected. They were our portal communicates and talks with eMoney. It talks with MoneyGuidePro, clients can aggregate and all their accounts that they have they’re not accounts that ar held with Merit, that can be account with the bank or whatever credit card account, their 401k account or 403 B account. They can aggregate all their accounts and have that at their fingertips, their phone anywhere in the world. So to your point, instead of having all of these different logins to manage your financial life, ee have a portal you have one login and you have access to everything.
Craig: Kudos to you guys, because that’s not an easy thing to do. What was the underlying technology behind your client portal?
Rick: We asked the question, the beginning what do we want to build everything from scratch, can we start with a certain chassis and just start building on top of that? Our CRM is Salesforce, and we built out probably 30-40 workflows in Salesforce, which has been key. Orion is, as we mentioned earlier, a big reporting tool for us and gathering data from there.
Rick: So we were building it out. It’s like how much do we build and what chassis is doing build off of so Wealth Access was the chassis that we chose to say we’re going to build on top of this. It accomplished a lot in itself and we built on top of that to customize the way that we want to build it.
Craig: I think that’s fantastic. It’s great to see this moving in this direction of a single client portal rather than multiple client portals and making the client experience paramount and thinking about how to make their their lives easier.
Rick: It’s all about right? It’s it. A lot of us in the industry should should take our cues from Amazon.
Craig: Amazon, we keep hearing that a lot. Be we want to be the Amazon of this they want to be more like Amazon. It’s become a cliche.
Rick: We want to be Amazon easy, right? For our clients, we want to be very simple for them. One login, everything’s right there. They don’t need to log into four different places to get what they need. And I think also delivering it right with the right user experience. That’s very important. It has to be simplified. It has to be make sense. And when you’re creating your own portal, you have your own data again, you have a you have the flexibility to do that.
Insourcing Versus Outsourcing
Craig: And very quickly, let’s talking about insourcing versus outsourcing. You had outsourced your hardware support to True North, but at some point, you brought that back in house, can you still give me like a two minute overview of that decision?
Rick: Absolutely. We definitely had to outsource in the beginning. And as you mentioned, with True North, they were helping in a lot of different ways, a great company to work with and we’re just looking at the cost and say, Oh, how much is how much does it cost us to outsource? And what if we compare that to bringing qualified people in house and we did that comparison and it made sense for us to bring these people in house so today, we have three, we’re getting ready to hire a fourth, and we have offices across the country. We’re on the west coast, where as far as Washington state, and then on the East Coast, we’re Connecticut, that area is furthest east. We have a technology support groups in different time zones throughout the country. And right now it’s three people that they’re assigned to different regions, but we’re getting ready to hire a fourth. That’s been huge.
Rick: The big thing I saw there, Craig when you have problems with your software, you have problems with your hardware, things connecting things talking to each other. It’s what usually happens is you run into a problem and then you call for help.
Craig: Naturally.
Rick: So what we found by bringing people in house, they have gotten to know our systems, our company, what needs to be improved, so we can make proactive now instead of waiting for something to break and then call calling somebody outsourced outsource group and to help you out to fix the problem. We’re being proactive now. I’m trying to anticipate problems and issues before they happen.
Craig: That’s the way to go. Being proactive. I’m going to take the proactive reins here, running the podcast and we would be remiss if we didn’t talk about another key part of your tech stack which is Nitrogen, the company formerly known as Riskalyze. Since they are the reasons we got together here because you made an announcement about a partnership with them can you talk more about that?
Rick: Great partnership with Nitrogen. We have 65 advisors. I would say the large majority of our advisors use Nitrogen and some of the reasons why is that the first of all, I think Nitrogen does a good job of reporting, they do a good job of putting visuals together that makes sense to the client. Most advisors will tell you that they take complicated things in our industry and put it in simple terms for clients to understand. Their whole score from 0 to 100, like a speed limit, what speed are you going? What’s your score? Clients can relate. I see. I’m a 70. Okay, I guess I’m somewhat risky. So I think Nitrogen does a good job.
Rick: You can pull what you want to show the client. And most of them are client friendly. Like I said, they will also look at things like it will the next six months and say, here’s the risks that are in today’s market. We’re long term investors, but if you’re thinking about the next six months, here’s some things to consider. Like raising rates again and things like that. They also they have like a GPA, grade point average score for the actual investments. So clients are going to go to their advisor and say, Well, what do you think about this investment? Well, it’s easy Nitrogen, they can pull that up and say, well, here’s what you can how you can think about that investment. Here’s the cost. Here’s the returns. It gives them like a score and a rating on those investments. So there’s just a ton of advantages.
Rick: It’s the asset allocation, let’s say you’re comparing. client has 10 investments and asset allocation. You’re an advisor and you say, Well, let me compare. Let me take a look. Do a deep dive into the 10 holdings that you have. Let’s compare that to some other holdings that I made that I’m going to recommend to you. Here’s the pros, here’s the cons. So it’s tools like that that make Nitrogen a great software and use good technology.
Craig: Well, Rick, we’ve said it all, thank you for sharing all this information about your tech stack your journey, the tools, thought process behind that we are pretty much out of time, can you tell the listeners where they can find out more information about Merit Advisors?
Rick: MeritFinancialGroup.com is the website. We do get quite a bit of media press. Easy to find.
Craig: You heard it here. They’re easy to find everyone. Great. Well, thanks so much for being here. Appreciate it.
Rick: Craig, thank you. Thank you for your time today.
