Ep. 225: The Breakaway Blueprint w/ Phil Rogerson and Brian Daley, Tamarac

Come on in and sit back and relax. You’re listening to Episode 225 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.  

This episode is part of our breakaway advisor series. We are covering Envestnet Tamarac. Envestnet Tamarac is one of the most popular tools for advisors in the industry. They have a wide range of features and functionality basically end to end for any RIA or advisor from CRM through to portfolio management, portfolio reporting, performance reporting, trading rebalancing client portal, basically everything you’ll need to run your RIA.

According to a couple of surveys they are ranked either 1, 2 or 3 and depending on which server you look at in the Kitces 2023 Tech Survey, Envestnet Tamarac in portfolio management has a 12% market share. For just performance reporting. Kitces has a 34% of RIAs with 10+ advisors using Tamarac, and for the Tamarac CRM of RIAs with 10 advisors, they hold 10% market share which is quite impressive.

On another survey from T3 their Inside Information Software Survey which just came out at the T3 conference last month, compiled by Joel Bruckenstein and Bob Veres. Tamarac CRM has a 6% overall market share, but almost 12% of our IPAs with 8 million in revenue and above so they break things out a little differently. The Kitces survey bases on number of advisors to three survey breaks it up based on revenue. In terms of portfolio management, T3 has Tamarac at 12% of the overall market but 22% of RIAs with 8 million plus in revenue. And finally trading rebalancing, they are ranked number one in the T3 survey with almost 11% market share.

So bringing Tamarac in is a great idea and to talk about the product technology platform. We have a few people, first is Philip Rogerson, who is head of the RIA channel and he brought a few members of his team which they will introduce themselves when we get the episode started. Now Phil has been at Envestnet for almost five years and before that, he spent his entire career at Russell Investments, eventually moving his way up to running your entire US advisor oriented business. So he’s got a lot of good experience in the industry.

We had a really great conversation we spoke about, again, the breadth and depth of Tamarac’s market share, talked about their rebalancing, how they rebuild some of those workflows improved. We’re big on rebalancing here at Ezra Group, we do a lot of competitive analysis when it comes to portfolio management so we dive deep into rebalancing. We also talk about integrations and how they’ve expanded the integrations to Tamarac, which are already pretty decent, and also their internal integrations, not only external, but internal integrations with the Envestnet core platform around UMA which we always were pushing pretty hard for that for a number of our clients. So you’ll get we’ll get into all that in just a few minutes.

But before we get started, let’s talk about tech stacks. At Ezra Group, we’ve seen tech stacks of hundreds of RIAs and let me tell you, most of them are loaded down with tech debt. So you shouldn’t feel too bad about yours. But let’s face it tech debt is like a giant anchor, holding back your business growth. If you want to free your firm for exponential growth, you should run, not walk to our website EzraGroup.com and fill out the Contact Us form. Our experienced team can evaluate your current tech ecosystem, deliver targeted recommendations, optimize your existing systems and operations or run an RFP and help you implement new software to take your firm to the next level. You can take advantage of our free consultation offer by going to EzraGroup.com.

Topics Mentioned

  • Insights into RIAs’ Shifts and Breakaway Trends

  • Envestnet’s RIA Dashboard and Operating System

  • From Tamarac Trading to Seamless Custodian Connectivity

  • Streamlining Reporting, Trading, and Performance Across Platforms

Episode Transcript

Craig: Hi, I’m happy to introduce our two guests for this podcast. We have Philip Rogerson, head of the RIA Channel for Envestnet, and Brian Daley, sales engineer for the RIA Channel for Envestnet. Hey guys, welcome.

Phil: Hello!

Brian: Good morning!

Craig: Phil, you say hello first.

Phil: Hello, it’s good to be on the podcast. Thanks very much, Greg.

Craig: That’s Phil’s voice. And for those listening, here’s Brian.

Brian: Hey, this is Brian Daley. Thank you.

Craig: All right. I introduce one at a time when I do multiple people, so we know who’s who. Awesome guys! I’m happy to have you here. This podcast is part of our new series on breakaway advisor tech, where we are bringing on vendors such as Envestnet and Tamarac to talk about your technology and how it can help breakaway advisors build up their businesses and enhance their sales and growth. And of course, this is all about the technology around here, so enhance and improve their tech stacks. Let us dive in. Phil, do you want to start off maybe talking about some of the trends in the breakaway space and how Envestnet sees it?

Insights into RIAs’ Shifts and Breakaway Trends

Phil: Yes, absolutely, Craig. Thanks. I think this is one of the most exciting times in my multi-decade career to be working in the independent channel. If there’s been a contest for the winning business model, I think the jury’s in, and the RIA channel has won. I think everyone’s well aware of the fact that the channel is growing faster than any other channel. It’s more than doubled in assets in the last 10 years and more than doubled in headcount. But by a number of survey estimates, most notably Cerulli recently did a survey of IBD and wirehouse advisors, 35% of those advisors said that they had considered going independent within the last 12 months. The idea of preparing a path for advisors to make that move from large financial services entities to the independent model—whether that’s as a part of an existing practice that they’re going to take an ownership stake in, that they’re going to be an employee in, or whether they’re going to start their own brand new firm—creating a methodology for them to do that in an efficient way and set up a new business is increasingly important in the industry.

Craig: That’s incredibly important.

Phil: It’s hugely important. I think the other point I would make with that is that most of the time people think of technology as an afterthought to what they’re going to do once they’ve made the decision to go independent. But I also offer the view that technology, in many ways, is a catalyst for this. Our firm, Envestnet, was founded on the principle that we could enable smaller independent advisory firms to compete with the largest, most well-capitalized financial services entities in the world. I think that that premise is more important today than it was even 20 years ago. Today, I guess I would just say that technology’s come far enough along that more and more advisors are seeing technology as an enabler that will allow them to do that. And that’s playing, in some part, a role in encouraging advisors to make that move.

Craig: Do you see more breakaways that are launching on Tamarac launching their own firms or joining existing firms?

Phil: We see a little bit of both, and I’ll give you some very specific statistics here. According to data over the last two years from Cerulli, about 43% of breakaway advisors have joined an existing practice. We’ve seen pretty significant activity through aggregators. Fifty-seven percent have gone on to start their own firms. The numbers are not skewed dramatically, but there is a slightly larger percentage [of those] who have gone independent. And I would say that our experience has roughly reflected that.

Craig: Excellent. Yes, here at Ezra Group, we work with a lot of RIAs and we’re also seeing both: We’re seeing existing clients bringing in breakaways and enticing them with packages, technology, and other ways to grow their businesses, as well as firms launching and starting their own.

Craig: But talking about specific technology, the core of Envestnet’s RIA capabilities is still around the Tamarac platform, which has the largest market share, if I’m not mistaken—over 40% of a billion and up RIAs.

Phil: That’s correct.

Craig: … If I quoted that properly. Can we talk about some of the technology and capabilities you’ve been adding recently that you feel would be interesting to breakaway advisors?

Envestnet’s RIA Dashboard and Operating System

Phil: For sure. And I’m going to transition this pretty quickly over to Brian, but as a headline into that question, just to add a little detail to some of the content you put out there, we have about 1,500 RIA relationships today through our Tamarac toolset. We have about another 1,200 RIA relationships through our Envestnet toolset, which we’re going to talk about in a second. We’ve done an enormous amount of work to integrate those two toolsets over the course of the last little bit. But in general, we do have about a 40% market share of advisors who are over a billion dollars in assets, so our client base tends to skew a little bit to the larger side. We’ve seen a lot of different use cases over the course of the last few years. I’ll let Brian talk a little bit more about some of the specific technology work that we’ve done in regard to those integrations.

Brian: Yes. Here at Envestnet, we offer the RIA, an advisor, an entire dashboard or operating system for you. We offer reporting, trading, CRM, and, if you want, MoneyGuide planning as well. Those toolsets have existed for over 14 years at this point. A couple of them have been rebuilt from the ground up recently. Specifically in the trading space, there are trading toolsets for advisors who are managing their own models and trading their own accounts. Our toolset for Tamarac Trading is the best in class. And some things we’ve done recently there, we’ve rebuilt the tool—the main trading screens, if you will, from the ground up over the last three to four years—improved the workflow, minimized clicks, made screens faster, quicker to respond, easier to read [with] better data points, and integrated some of the other fields from our reporting toolset. That’s a major upgrade we’ve made recently.

Brian: The other one, we’ll talk more about this, but we’ve integrated access to separately managed accounts and model portfolios from Envestnet directly into our trading toolset. And then we also have direct connectivity to the main custodian platform—Schwab, Fidelity, and Pershing—out there in the RIA space, where you can either send your trades in via API. Or, if you need to trade via FIX and have more sophisticated trading needs, you can trade via FIX as well. We’ve worked on making that a seamless process so you can scale your trade workflows using our trading platform.

Craig: If I could paraphrase, what you’ve done is eliminate the need for exporting a trade file and then importing it into the custodian website like we used to do in the past. Now we’ve got direct connectivity.

Brian: Exactly. And most importantly, in those earlier steps, before you’re making the trades, we’ve made it easier to monitor for cash needs. Do you have enough cash? Are you short-cashing the account, whether that’s sweet cash or position-traded cash? Is your model on target? Do you need to make a wide-scale change across many accounts that are assigned portions of a model? In all those pre-trade workflows, we’ve continuously improved since we built the tool over 20 years ago.

From Tamarac Trading to Seamless Custodian Connectivity

Craig: I want to go back to the custodian. A lot of our RIA clients are larger, and they have multiple custodians. I have to tell you that exporting and uploading the files is a real pain when you’ve got multiple custodians who have to manage all that. Being able to send trades via API and FIX and manage it with one click to the Schwab blotter is a tremendous time saver.

Brian: Exactly. Almost none of our clients use only one custodian. I don’t know the exact number, but it’s in the 90s—[the number of those who] use more than one custodian.

Craig: Indeed. Something you mentioned—I apologize if I missed some of your clients—there are 1,500 RIAs on Tamarac, but another 1,200 RIAs on the UMP Envestnet Enterprise platform.

Brian: Yes. And they’re using either the platform holistically, so they’re doing their billing and reporting as well as trading, or they’re using that just to access managed accounts because we have the largest managed account marketplace available to our independents, or some combination therein.

Phil: As just a shorthand for understanding those two toolsets, as Brian was saying, we’ve done an awful lot of work to integrate those two environments over the last three years. In general, what that allows us to do is meet the advisor where they’re at. As Brian said, Tamarac tends to be the core reporting platform for us, given that it’s the most robust reporting platform that we have. The Tamarac Trading tool ends up being the primary tool for advisors who want to administer their own trading. But as they wish, they can use outsourced trading capabilities through Envestnet, in particular, to access managed accounts. And the distinction between what’s Tamarac and what’s Envestnet as a toolset is blurred these days. It doesn’t matter. We tend to feel like we’ve got a pretty good solution to meet advisors with the trading capabilities and reporting capabilities that they want.

Craig: And that’s one of the goals of, I think, even acquiring Tamarac at some point: To integrate all of your capabilities and make it such that it doesn’t matter. You can bounce back and forth between platforms.

Phil: Admittedly, it took us a while, but we’re finally there where those distinctions just don’t matter.

Craig: That’s impressive. In terms of the rebalancer, what’s coming this year? Can you give us a taste of what we’re going to see?

Brian: Yes. The one we’re most excited about is that we’re going to introduce what we call a manual trade blotter. It’s designed to support some of the individual bond trading that some firms are doing, especially as bonds have become much more popular these days. But it will support carving off any manual trades or assets that don’t trade as liquid as ETFs, funds, and stocks, allowing you to block those orders, go find the bond that you want, or, if a bond falls in your lap, be able to allocate that appropriately to client accounts. But we’ll also see firms use it for interval funds, which trade less liquid, of course, or alternatives like hedge funds and private equity. If you’re trying to allocate to those in the trade workflow, you’ll be able to save those trades, block them as necessary, and then fill them back into the accounts using the trade workflow—improving that manual trade workflow for those assets that don’t trade as liquid as others.

Craig: How does it work with hedge funds and PE? Are you getting data from somewhere? Is it just manually entered?

Brian: We do have data feeds from the likes of CAIS and iCapital, two of the bigger marketplaces of alternatives. Also, we find many of our clients just have access to stuff that there’s no data feed for, so they’re plugging it in. There’s the use of dummy tickers or placeholder tickers to allocate to, and then as they make the purchases, maybe they transact on a CAIS or an iCapital to invest in the funds, and then we’ll get the data feed back from there and be able to match that up to the trade. It depends on where you’re transacting or how you’re transacting those types of assets, which is still a very fragmented part of our business. But [it’s about] connectivity where possible.

Craig: It’s fragmented in a lot of places. When you’re talking about these liquid assets, it is difficult to bring all that data in. But I think this kind of capability will be great for breakaways that maybe come from wirehouses, have some alternatives or other types of assets, and have higher net worth clients, as do most Tamarac RIAs in general, which tend to skew higher net worth. They might have access to CAIS or iCapital, other liquidity sources, or other alternative investment marketplaces. It’s great that you guys are bringing that data into the platform.

Craig: Can we move on to the client portal? Tamarac is one of the most popular client portals, as well as, of course, the Envestnet portal. Can you talk about—on the Tamarac side at least—the client portal? What’s new and how would it be helpful for breakaway advisors building their businesses?

Phil: I’ll let Brian get into some of the details here. But maybe the first point to make is that we’ve just gone through a complete rewrite of the portal. Today we’re using the same portal for both the Tamarac toolset and the Envestnet toolset. It’s one single unified platform portal across the entire platform that we’ve been implementing for clients for the last six months. It’s been in production for the last six months or so. And I’ll let Brian get into some of the more specific details around what we’ve done in the portal.

Brian: Yes. This new portal—the design—where we’re at today is one thing and where we’re going is next. But where we’re at today is that we combined the performance reporting data—what has happened in the client accounts from an investment standpoint, such as asset allocation, performance, transactions, and the like—putting the performance of what has happened next to: What is the plan going forward? Bringing MoneyGuide information in: What is the probability of success? What does the plan look like? What are the costs in the plan?

Brian: The third component is more of that short-term spending side of it to be able to link credit cards and checking accounts and be able to see: What does my spending look like?—a la [something] like a Mint or some of those other personal capitals, some of those other aggregators out there. But it’s under your roof, with your logo on top, so your client thinks about you as they’re thinking about not just their long-term investments but also their short-term spending. In different ways, you might be able to help them there.

Brian: Those are the three things we’ve got in this new portal: Planning, investments, and investment performance, and then the short-term spending idea where you can do budgeting. You can also see some peer group spending; how are you spending in certain categories against a peer group that you can model yourself around? Those are the portal. The portal is delivered in a website, of course.

Craig: Hey, Brian, can I stop you for a second?

Brian: Yes.

Craig: I want to make a comment. I think the PFM capabilities are super interesting to me. As a former Mint user who’s now left without it because Mint shut down, if my advisor were to be able to offer these capabilities, it would be very interesting to me because I would be spending way more time on my advisor’s portal than I ever have in the past. And that’s always been something that’s bothered me—[the fact] that advisors don’t want their clients on the portal very much because when they’re logging in, they think something’s wrong. “Why are you on my portal so much?” It’s because you don’t have anything else besides your holdings. If you had other stuff for them, like PFM, like credit cards, like peer group spending, like you mentioned—which could give me more interaction, more capabilities to learn more, to work with my finances—and still see that “Hey, this is on my advisor’s website,” it makes my relationship stickier.

Brian: Yes. The reason we did that, too, is that we see that the advisors aren’t just picking stocks, models, or funds anymore; they’re having to work both sides of the balance sheet for their clients. They see that they’re overspent somewhere and they need a credit line, or they’re underinsured through the planning process. An advisor needs to be able to have that conversation, and the tech is what’s enabling that.

Craig: It certainly is. Continue. You were moving on to another part.

Brian: Yes. The way it’s delivered is [through] a website that you can link to from your website as an advisor, so the client can log in from your website. It’s also delivered via an app—of course, we all spend time on our phones, more than we should—[such as] Apple and Android apps that have the firm’s logo or the advisor’s logo in the app store. We’ve delivered that. Apple/Android phones and tablets deliver the same experience that they would see when they log in on the web in an app form. They can—on the go, when the client is traveling—look up and see all the same data points, the plan, investments, and personal spending. There’s also some capability to click on the phone number, for example, and call their advisor. If you, as an advisor, want to do that, you can offer that capability through that app as well.

Craig: And this app has been updated, right? It’s been rebuilt?

Brian: Yes, we’ve had an app for many years but haven’t done much to it. But as we rebuilt this new portal experience, we’ve also released a new app that feels much more modern in the look and feel but also inherits those features. Because we’ve rebuilt this app as an API-first experience that’s Envestnet-wide—whether you’re using Envestnet, MoneyGuide, or Tamarac, you can use a portal experience—we’ll be able to add new features. One of the ones we’re looking to do in 2024 is a Calendly integration or Calendly-like integration. Clients can click and schedule on your calendar with a tool like Calendly from directly within the app or on the website. Just being API forward with this portal opens up so much more for us to do here in the future.

Craig: Does Envestnet use the same APIs internally? When your different applications are talking to each other, is it the same set of APIs or is it a different set?

Brian: Yes. We’ve standardized the API. There’s an API team now that just works on the APIs across all things Envestnet, so they consume data from anywhere if you need to use it somewhere else. It’s been a multi-year effort. It wasn’t simple, but that is the approach going forward.

Craig: Excellent. What is the percentage of end investors who are accessing the client portal?

Brian: Yes. We’re seeing that since 2020, this has grown. We’re at about 42-43% of our clients, so the firm’s investors are now using the portal—generally, [those] who have logged in once a month or once a quarter. We’re not quite sure on that timeline, but we’re close enough there. And that was in the mid- to low-20s before 2020. As we all know, everybody is very comfortable, at this point, transacting business and engaging with advisors and others online. And we’re definitely seeing evidence of that among our client base as well.

Craig: Let us shift to the last topic, which is integrations. We’ve mentioned earlier some better integrations with the core Envestnet-managed account capabilities. Can you expand that a little bit? What am I going to see if I’m a breakaway advisor using Tamarac? What am I going to be able to get access to on the Envestnet side that I didn’t have before?

Phil: Just at a high level, I’ll acknowledge that I think this is an area where we had a little bit of catching up to do. As Brian said a minute ago, we spent an awful lot of energy and time over the last couple of years building out a robust API library to provide for better integrations, both internally and with third parties. And, Brian, I’ll let you talk a little bit about some of the specifics that would be most notable.

Brian: Yes. As I mentioned, we offer CRM. We’ve always been well integrated there. We’ve also reinvested in the integration there to support more. That’s a Microsoft Dynamics-based CRM that we sell and support directly to our firms. That has always been and will likely always be our tightest CRM integration. But we also support many firms that use Salesforce. Salesforce is a big grill in the industry, if you will, for CRM. Some of the largest firms use Salesforce. We’ve improved our app. We’ve updated the app experience. The key point there was supporting a personal account, which is a specific entity. But we rewrote some of the ways that it integrates with Tamarac to support coming soon custom field integrations as well. And those are some of the keys.

Streamlining Reporting, Trading, and Performance Across Platforms

Craig: It’s also important. A lot of our enterprise clients are using Salesforce and custom fields are everywhere. There are some firms using dozens and dozens of these custom fields. Being able to move that data back and forth to Envestnet, I can see it having tremendous value. Can you talk more about connecting, reporting, and trading performance?

Phil: Yes, sure. I’ll dig into that. Just to set the stage for this a little bit, we’ve had a benefit and a curse. We’ve got probably, I would argue, the largest technology-based stack for wealth managers on the planet, perhaps. And the big initiative for us has been getting all those various components to work together. The two main components of that, frankly, in this space, have been the Tamarac toolset and the Envestnet toolset.

Phil: Two years ago, we developed the integration between Tamarac reporting and the Envestnet managed account platform that effectively allows us to do sleeve-level performance reporting in the context of a unified managed account for any advisors who want to utilize a UMA structure. The issue there is that we’re allowing advisors to deploy mutual funds, ETFs, and multiple different third-party separately managed accounts in a single brokerage account and have the performance reporting for each of those individual sleeves flow through to Tamarac.

Phil: This is a big deal because we’ve got clients who’ve reduced the number of brokerage accounts that they have to maintain by 30% based on the fact that they don’t need to continue to maintain separate brokerage accounts for each of the separately managed accounts that they use. That was the first big integration that we did between Tamarac and Envestnet on the reporting side.

Phil: We just launched the integration on the Tamarac Trading side. As Brian has articulated, Tamarac Trading is our flagship advisor-run trading platform. It’s been around for 20 years. It’s one of the industry leaders in terms of being able to do asset allocation and manage investment policy across multiple different registrations and brokerage accounts. We’ve preserved that capability in Tamarac. We’ve allowed the advisor—while administering a household-level asset allocation policy and rebalancing process—to select components of the household that would be deployed on the Envestnet platform in these managed accounts. It’s clear, but you can control for asset location. You control for a household-level asset allocation on the Tamarac Trading platform but have trades executed appropriately on the Envestnet-managed account platform.

Craig: And that’s done seamlessly? I don’t need to do any toggling or task-switching?

Phil: That was the work that had to be done to make sure it could happen seamlessly. And the answer is yes; it happens seamlessly from the Tamarac Trading platform.

Craig: That I like because, if I have a household, I don’t want to have to worry about what platform they’re on. I just want to trade it.

Phil: That’s exactly right. And I think advisors are constantly making decisions about the extent to which they want to control the minutiae of trading. Some of them want to control every trade that occurs in every account. Some of them are quite happy to outsource that trading; it’s not where they’re adding their competitive advantage. And some want a combination of the two. We feel like today, given these integrations, we’re uniquely positioned to, as I’ve said earlier, meet them where they’re at on that spectrum.

Craig: That is fantastic. That’s what I want to hear, at least from my clients. We are out of time. Guys, you’ve been fantastic. Where can breakaway advisors and anybody interested find out more about Envestnet’s RIA capabilities?

Phil: If you go straight to our website, you’ll be able to connect with Brian, me, or any of our colleagues. And, of course, we would love to talk to you.

Craig: And that would be Envestnet.com, would it not?

Phil: Correct.

Craig: All right, Phil and Brian, thanks so much for being here!

Phil: Great. Thanks for having us!

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ABOUT ME

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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