Ep. 226: Are You a Fintech or a TAMP? with Aaron Wormus, SMArtX

Come on in and sit back and relax. You’re listening to Episode 226 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 Aaron Wormus, CTO of SMArtX Advisory Solutions. Aaron has been with SMArtX for seven years. And before that, he worked for 13 years at the precursor firm to SMArtX, which was called HedgeCoVest, that was built the built technology to enable investors to mirror the portfolio’s of specific hedge funds in real time, which helped them when they converted to SMArtX to build up their own technology there as well.
One interesting thing about Aaron which I just realized, when I was doing some research on him, he has an interesting LinkedIn URL. Most times you have to use your LinkedIn URL I found is logging into conferences and or some sort of some types of those type of things where they want you to know what your social media links and connections and so mine is LinkedIn/in/Craig Iskowitz, pretty simple. But that’s because I signed up for LinkedIn very early people who signed up later, their LinkedIns, aren’t just their names don’t be might be dashes or the numbers mixed in Aaron’s is linkedin.com/in/Aaron. That’s it. Just Aaron. Cool dude. I wish I’d seen it before I would have asked about it. I digress.
We spoke about a wide range of topics about the managed kind of platform which we’ve done a lot of research on follow up on some of our clients are using SMArtX, how they refer to themselves as a FinTech, rather than a TAMP and some of their key integrations AWS, Morningstar and others.

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

  • Are You a Fintech or a TAMP?
  • Integrating Core Components
  • Leveraging Open Architecture
  • Amazon AWS Partnership
  • QuickSight for Data Warehouse Analytics

Episode Transcript

Craig: I’m excited to introduce my next guest on the program. It is Aaron Wormus, CTO of SMArtX Advisory. Aaron, thanks for being here.

Aaron: Hey, Craig. Thanks a lot. I appreciate being on your show.

Craig: Fantastic. Where are you calling in from?

Aaron: I’m calling in from sunny South Florida, downtown West Palm Beach.

Craig: People who live in New Jersey like me are definitely jealous of people like you this time of year.

Aaron: Absolutely. The funny thing about it is that we have no idea what snow feels like. Every time I see snow, I’m like, “What a foreign concept!” But it’s nice to get cold every now and then.

Are You a Fintech or a TAMP?

Craig: You go for a nice visit and get your fill of cold and then you’re right back where you started. Cool. Can you please give us a 30-second elevator pitch for SMArtX Advisory?

Aaron: Yes. SMArtX is a managed account technology platform that powers growth and scale for asset managers, fintech firms, custodians, advisory firms, and camps. We fit well into that section of the fintech map where you have us, which is portfolio management, trading, and rebalancing. We believe strongly that advisors’ practice management can be transformed through managed accounts, so we built our portfolio management engine to be sleeve-based from the beginning to support managed accounts.

Aaron: We have model managers who use our manager portal or APIs to update models in our marketplace, and we do the full cycle of trading for our clients. We want to be the foundation of managed account innovation, providing that full trading lifecycle from adjusting the data, reconciling the accounts, trading the accounts, and then giving that data back to the advisors as reporting and data. There are a lot of peripheral technologies, features, and functionality that go into that, and that’s adjacent to our core focus. That’s essentially what we do.

Craig: One thing I find interesting about the way you’re positioning SMArtX is that you refer to yourselves as a financial technology firm, a fintech, rather than a TAMP. Why do you do that and what’s your advantage in that?

Aaron: As you know, the marketplace for financial services firms in TAMPs is very wide. We are a technology company, foremost. We specialize in a strong software engineering firm with a real core focus on our core competencies. We do have what I call our out-of-the-box experience, which is a TAMP for all intents and purposes. We are API-focused, but we are not headless like some other platforms because we do provide an experience that advisors and managers can log into. And, to be honest, we are really good at our user interfaces. We can integrate via APIs, but we can also integrate using web components. For example, if you want to use our tax-aware rebalancer—it’s a pretty advanced integration to do—you could take our web components, which is our rebalancer, and embed it into your core infrastructure.

Integrating Core Components

Craig: I would love to do that if I were an advisory firm or wealth management firm. What makes it easy to integrate your core components into my infrastructure? How would I go about doing that?

Aaron: One of the benefits of how we came about is that we’ve grown from the ground up to be focused on the advisor’s needs. We grew through engineering. We did not acquire any technology. We hire engineers. We have about 50 engineers throughout the country working every single day full-time for us, and we are focused on those integrations. When we look at a new technology that we’re building, we say, “How can we make this as straightforward and open as possible?” We use open technologies, from OAuth for authentication to REST-based APIs. We have open API specifications or Swagger Docs for engineers to use to reference our APIs. Creating API integration is not easy. There is work that needs to go into creating those integrations, but it is the way of the future for sure. The value that you’re going to bring to your asset management firm is going to be much bigger when you create integration as opposed to just a single sign-on connection, for example.

Craig: I like that. I like the sounds of that. What are some of the underlying technologies that you’re working with? And you mentioned before that you are open architecture. Can you give me an example of that and then talk about some of the technologies you’re using to drive and power that?

Aaron:. I am a big fan of AWS. I feel like their strategies and the way that they run their company are very similar to ours—the way they drive their product. When we think about how SmartX is going to run, we think about serverless. We think about unlimited scale. We think about: How can we make this in a way that we can take the pressure off of our clients so they don’t have to worry about their technology, but it can run with us on our AWS platform? That’s one example. And I missed the rest of your question.

Leveraging Open Architecture

Craig: In terms of open architecture, everyone says they support it. How does that manifest itself with your business? And what are some of the advantages you found from working with AWS?

Aaron: Open architecture is a buzzword that everyone likes to use. The way I see it is that I see us as providing a very specific service. We do UMA, managed account trading, for financial advisors or TAMPs. We are not opinionated about the other services that the advisor uses. And I think that’s the key. Other firms have an open architecture. They bundle services, so they pick the CRM that they want their clients to use or they pick the risk management software. Or they do all the different things. We assume that each of our clients is going to use either a firm that they partner with or some tool that they created internally. And we’re very happy to integrate into their platform. We’re not opinionated as to: Where does the portfolio come [from] that they’re sending into our engine to create an account with? That’s how I see open architecture—not being opinionated about the other tools that integrators are using.

Aaron: Also, we don’t need to be out in front. For a lot of our clients, we’re just running in the background, doing our job. Some clients use our out-of-the-box experience for their advisors, so the advisors are actively logging on to SMArtX. But with others, we just power their interface, so they can own that user interface. They can own the personal experience that they have with their clients. They can leverage technology that they’ve built over the years, and we just do our thing, which is to focus on the managed account side.

Craig: That’s important. You’ve got to focus. You’ve got to really focus. Along with open architecture, one important part is integrations, and if you’re not going to be able to integrate without APIs. This is a topic near and dear to our hearts here at Ezra Group with our WealthTech integration score research. Can you talk a bit about some of the integrations you guys have built, the underlying architecture, how you put it together and your strategy around integrations?

Aaron: We integrate with the firms that will move the needle to help us do our job better. Some of the examples are Flyer Technologies, which we use to deliver our trades and provide an OMS experience for our clients. They’re another AWS partner. We’ve done a great integration with them. And with AWS, our custodians, we integrate directly with them so that we can easily get the information that we need from them in a timely manner. Generally, our reconciliation is done to the sleeve level by 8 a.m. When it comes to third-party tools, that’s something that would be integrated into our out-of-the-box experience. If someone is using the out-of-the-box experience, then they may want to integrate that with third-party tools.

Aaron: Our first integration was with Black Diamond. That was at the very beginning of our SMArtX journey, and that’s been a very good integration. But at this point, our focus is to get the data into our clients’ hands. When we give that data to the clients, they can take that data, carve it up, and ingest it into their data warehouse. They can merge it with their clients’ real estate holdings or other components of the picture that we don’t have, and then they can send all of that into their reporting system of choice.

Aaron: That’s one of the things when it comes to specialization. When our clients say, “Hey, I’ve got all these different things that I want to put on the report; how can I get that data to you so that you can put it into the feed that you send to our reporting venue?” our take is a little different. Our take is: “You have that data. We’re going to send you your managed account data, and then you can put that data together and send it on to the reporting venue.” And that means that we do what we do, and all the other different components do their jobs, and it becomes that open architecture system. We don’t want to be the hub; we want to be a spoke and send all the information back into the hub so that you can make the decisions that you need to make that are going to make a difference for your business.

Amazon AWS Partnership

Craig: One part that I find very helpful is when you’re working with the same cloud provider that some of your partners are, as you mentioned. Morningstar and Flyer are both AWS clients, and that just makes it easier for you to work with them.

Aaron: Yes. We’re an enterprise customer of AWS. When you work with another firm that is also committed to AWS, like Morningstar or Flyer, you can benefit from not just the technologies that the cloud provides but also the leadership that the cloud provider has. As an example, we have our technical account manager at AWS. They can point us to products that we can use that we may not have even thought of. We have solutions architects that we can take advantage of and we can wire up cloud-to-cloud interfaces that will provide nice ways to integrate with our clients. If you’re not in the AWS cloud, we’ll use standard REST-based or file-based interfaces to get you the data you need. But being on that same cloud platform helps both, from speaking the same language to making sure that your security is buttoned down and getting the data out as quickly as we can.

Craig: You mentioned other tools. What other tools did they tell you about that you were using before that you’re using now?

Aaron: We love serverless. We love being able to turn a dial and enable additional resources on demand. The one that I like is their Step Function, which is essentially serverless coding. AWS has different levels of how close you are to that bare metal. It started out with the EC2, which is their compute cloud and then it went up to Fargate, which is their Docker-based cloud. But then they have Lambda, and then even above that is Step Function. That allows us to innovate quickly. And not just create quickly, but you can view every different loop that’s happening in real-time, get pointed to logs in real-time, and get a lot of information that you need. That is truly cloud-serverless computing. And I like it. It’s very, very neat.

Craig: I understand. That would make a lot of sense. Regarding these tools, how do they help with some key processes on your platform? For example, onboarding. How do your APIs, your integrations, and your work with serverless technology better support your onboarding?

Aaron: Onboarding is a unique situation because it’s both an operational task as well as a technology integration. Generally, how onboarding works on SMArtX is that we’ll do the integration with your custodian. If you’re at Fidelity, just put our G number on your account. What we do on our side is have this concept of enterprises. It’s a multi-layer parent-child structure. We just tag the enterprise with a G number or whatever type of identifier you’re using at your custodian. Then, when the accounts come into our system, they automatically get assigned to the right place. All the settings get set up. That happens in real time as the account data comes in.

Aaron: Generally, in the morning, what you’ll do is log into your screen and you’ll see all your accounts that came in the night before waiting there for you. That’s the ongoing account onboarding. But when it comes to client onboarding, especially when it comes to the APIs and getting everything set up, we have a whole other process for that. That’s what I like to refer to as the advisor modernization journey. And that’s what we’ve been through multiple times with both enterprise clients and standard advisors. That starts off with our out-of-the-box experience. When we did it with Morningstar, it was about a three-month period where we took them off of APL. I don’t know what the number of accounts was, but it was over 100,000 accounts that we migrated over to the SMArtX platform, set them up, and got them trading. And we’ve done some even faster where we’re moving accounts over, we’re setting everything up and we’re getting trading very quickly. And that process is a real integration effort.

Aaron: I think with our services team, who do a great job understanding our platform and how they’re set up, they’re able to take—whatever it is—their firm hierarchy, map it out into the SMArtX structure, and get people moving very quickly. We’ve been very happy with how that’s all worked out for us and the work that we’ve put into all the technology that’s supporting the onboarding of our clients. And with every new client we bring on, we’re just getting better and better.

Craig: Those are not easy conversions, which is different from Morningstar. It’s a non-trivial task. What are some of the lessons learned from doing that conversion?

Aaron: There is the speaking the same language part of it—the true understanding of what services are our job and what services are your job. When you’re coming off of something monolithic like APL, when they built that platform, they assumed that they were going to be owning 100% of the data. The data goes into APL. They make all their decisions. Then, if you want the data, you can request it from the APL gods and you’ll get a report with that data back to you.

Aaron: At SMArtX, we’re different. You give us the information that we need to do our business and we do our business and we send that back to you. Decisions need to be made as to: How are we going to store all this data that was just taken care of by our previous system before? But those decisions that a company is making about how to manage their data just become some of the most important and core decisions that can be made for a firm that’s trying to modernize with an API-based open architecture approach. I think that was a great integration.

Aaron: We made some really good decisions. We made the right decisions. I guess it’s about two years that we’ve been managing that book of business.

Craig: That is fantastic. That’s the way you want it to run. You mentioned data. That leads me to my next topic, data management. Can you talk about some of the ways SMArtX is managing data and some of the underlying technologies you’re using for data management?

Aaron: A lot of what we’ve built is internal to SMArtX. We’ve mentioned the enterprises, which is the first core of our ring-fencing of taking the accounts and putting them within these ring fences so that we can be a thousand percent sure that our clients are getting access to the data that they need and nothing else. But then we have ways to assign models to accounts, for example, where we can have two different clients. We have a model marketplace, but each client has the models that they choose. Someone might want a full slate of over 2,000 different managers. Other people may only need the 15 managers that they want their clients to use. That’s all internally managed to give that experience, both to the client’s interface as well as via APIs.

Aaron: Being able to use tools that give us insight into how data is changing and where it is coming from, especially when you have API clients, makes a real difference. As an API integrator is going through their system, they’re firing off thousands of calls to make changes to accounts. On our side, we have to not only manage that flow of data that’s coming in but also make sure that we have the controls in place so that we can evaluate the data and make sure that it all reconciles on our side. When trading turns on—we have a trading engine—we’re going to start making trades based on those API calls that the advisor makes.

Aaron: I think that’s one of the things that’s unique about our APIs. I’ve looked through a whole lot of different APIs from different clients, and generally, they’re not trading APIs. They’re APIs to manage accounts, set up things, fire off emails, and do this and do that. But with SMArtX, you make an API call to change a target, and immediately that will drop into your rebalancer. You can go and say: “Now you’re on a different model. Now you have to make these trades.” And then they can send another API call that says, “I approve this rebalance request,” and then immediately your trades are being made on your behalf. We do provide that full slate of end-to-end effort that the advisors are used to having to do by themselves. Now it can be completely automated through the APIs.

QuickSight for Data Warehouse Analytics

Craig: Regarding your analytics and data warehousing, what’s the underlying technology? Why did you select it? And what are some of the benefits?

Aaron: I keep forgetting the name of the AWS tool that they use for their data visualization, but we’re big fans of it. Give me one second; I’ll pull it up.

Craig: QuickSight?

Aaron: QuickSight. Thank you very much! We’re huge fans of QuickSight. QuickSight is the core of our data warehouse visibility technology. What that does is allow our data engineers to manage the dashboards. But then what we’ve done for some of our tools, like our manager analytics portal, is we’ve reached into QuickSight, and we render those screens in our client portals. When the manager is looking through all their analytic data, what they’re seeing is the QuickSight screens and dashboards within the SMArtX user interface. It’s another integration that we do to get that data. We don’t need to use our JavaScript engineers to go in and code graphs. All of that is done with our data engineers, who are creating the interfaces. And that will be, as we move forward, a bigger part of our view.

Aaron: When we started on that journey with QuickSight, I wasn’t 100% convinced that that was the right technology, so we looked at a lot of different things, from, I think, Sisense to all the different tools that we had. But we did keep coming back to AWS because it was a really good tool. It was focused on APIs and also the pricing aspect made it very, very feasible for us to embed it into our platform and then show it to all of our users without breaking the bank.

Aaron: That’s our visualization engine. There are all kinds of neat technologies that it uses to be able to pull all the analytics data out of Redshift. But essentially, our data comes into our main databases, flows through a data warehouse into Redshift, and then is visualized and delivered to our clients using QuickSight.

Craig: For the people who are listening who aren’t familiar with Redshift, can you explain what that is and what you’re using it for?

Aaron: Sure. Redshift is a data warehouse. It’s a database that is structured differently to be able to give people who query it the ability to query much, much larger data sets. And those data sets could be petabytes of data. As we grow, we’re trying to make sure that we get the right tools in place so that, regardless of our scale, we’ll be able to get our clients the data that they need. And they won’t have to worry about their technology because we’re working with AWS and the large data technologies that they need to fulfill their needs.

Craig: That’s excellent. Yes. I always like hearing what’s going on behind the scenes, how things are working, and what the specific technologies are. I think a lot of people in the audience are also interested in hearing this.

Craig: Aaron, time just flies, man. We are out of time. Where can people listening find more information about SmartX?

Aaron: You can go over to SMArtXAdvisory.com. That’s our main website. All the information about what we do is there. You can email us. You can call us. We have folks here at our phones waiting to talk to people who are interested in jumping on our platform.

Craig: Operators are standing by now!

Aaron: They are.

Craig: Awesome. And thanks so much for being here!

Aaron: It’s been great talking, Craig. Have a great rest of your week.



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