Ep. 243: The Breakaway Blueprint with Adrian Johnstone, Practifi

Come on in, sit back and relax. You’re listening to Episode 243 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 series called the Breakaway Blueprint and we are interviewing leaders in the industry, from technology vendors, who are targeting breakaways in with their technology. My guest this episode was Adrian Johnstone co founder and CEO of Practifi. Adrian has over 20 years in the industry. He’s been at Practifi 11 years since co founding in 2013 and he was made CEO last March. Adrian is based in Australia but travels to the US often as he was for this interview. We spoke about a wide range of topics, including organic growth, their sales pipeline management feature they’ve added recently, how they are positioning themselves as an operational backbone for advisors rather than a financial/investment tool, and we got a little bit of peek into the Practifi roadmap.
 
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

  • The Operational Backbone for RIAs
  • M&A and Inorganic Sales Strategies
  • Data Synchronization and Integration Innovation

Episode Transcript

Craig: All right, I’m excited to introduce my next guest is Adrian Johnstone, founder and CEO of Practifi. Adrian, welcome to the US again, glad you’re in the country.

Adrian: Fantastic Craig. I’m always happy to be here. It feels like somewhere that I spend increasingly more than half of my time, which is nice. Nice to be here at a warmer part of the year as well.

Craig: Perfect, you’re in Chicago?

Adrian: Yes. Yeah. In Chicago. The Midwest is turning on the weather for me, which is nice.

Craig: Coming in May, late May is a good time to hit Chicago.

Adrian: I like to think that all year is a great time to hit Chicago, but I know those who have to live through the winter probably disagree.

Craig: I like Chicago. And a lot of friends in Chicago and companies we work with a Chicago but I try not to go there in the winter. Not there’s anything wrong with it, but I can I can avoid it, I will prefer to go in the summertime when it’s not freezing cold. Although I am going back, I’ll be there next the end of next month for the Morningstar Investment conference.

Adrian: Just down the road from us.

Craig: End of June is a great time to be in Chicago. The frost is just just ended.

Adrian: Couple of weeks before it’ll snow.

The Operational Backbone for RIAs

Craig: Exactly, that small window between. So let’s just jump right in. Please give us a 30-second elevator pitch for Practifi.

Adrian: Practifi, for those who don’t know us, we are a wealth specific CRM automation platform, think of us as the operational backbone for RIAs. We come out into family offices we touch up into some enterprises, we sit on a Salesforce shazzy but what we’ve done is take all the hard work and the heartache out of it. So instead of having to start with a blank piece of paper, you get to start with something that was built specifically for your needs. We then work with you to tune it, dial it and make it your own make it add value and support you through sweating that asset to get the best out of it.

Craig: Awesome. I know a lot of people have issues they think Salesforce is going to be a panacea and it’s a great product but it’s not that easy to use. So having an application that’s custom built for wealth that sits on top of Salesforce but makes it better just seems like a great idea.

Adrian: We like to think so we I’m always entertaining people telling me they’re going to go away and build their own solution. And then they say I’ll start with Salesforce. So you’re not building your own solution, building on top of someone else’s. That then of course that conversation goes into well, we want ultimate control and we want ultimate flexibility and I think we can do it all and know at all and I often use the parallel of me flying a lot and say like I’d love ultimate control over the flight schedule, the destinations, the departure times, the in flight entertainment and catering and all those sorts of things. There is there zero chance I want to trust my life to flying on a plane I built that I have to maintain. And I’m always astounded how many otherwise very smart people in the wealth management industry seem to think that being a technology company on the side is a good extension of being a wealth management firm.

Craig: The clients we know that have built custom Salesforce, they forget they don’t realize that they have to hire their own developers who are on staff full time forever to maintain what they built. I just had a call yesterday with a $6 billion RIA, nd they’re saying maybe we insource too much, we thought it was a good idea. But now we’ve got people on staff that we get never get rid of because we’ve got to keep maintaining the software ago.

Adrian: Ihis is a conversation I’ve had so many times and people were I always want to pose a couple of questions. One is, do you believe that the valuation you would get for your firm in an acquisition is made higher because you have custom software? Zero people will ever answer that yes, if they’re being honest with themselves. And then do you measure your your business, like most advice firms would on a ratio of headcount to AUM? Because now you’ve got some software developers in that headcount, but they’re not contributing to the AUM so you’ve got a high risk, high effort, low return model, that people we would never suggest that as an investment strategy to an end investor, but but here we have people taking that risk over time.

Craig: That’s an excellent point. I’m going to steal that one. When I when I get that question. Let’s jump in.

Adrian: You can even just quote me.

Craig: Oh, yes circa 2024. I’ll put that on all the time. Let’s jump into some new features. Now if you want to hear read about the the current Practifi functionality, you can go to their website, Practifi.com.

Adrian: I’m old enough that I remember HiFi and so I think we think of it that way it’s it’s nice and easy to remember, it’s just Practifi.com.

Craig: Go to their website, you can read about all the great features of practice, but there’s some new ones coming out that I want to talk about. One of them is pipeline sales and pipeline management. What have you done around there that’s going to help firms that are looking to grow?

Adrian: We spend a lot of time in in that space already. Of course within Practifi today, you can set up deals that you’re running with your existing clients, you can manage a flow of prospects, those sorts of things, but we’re very conscious that the wealth management industry Sales Machine, particularly if you’re talking in an organic growth context is very different to the traditional sales pipeline that the generic tools like Microsoft or Salesforce have embedded in them. It’s not You’re not selling a widget and moving on. So we’ve taken that core capability and expanded it and deepened it so that you can run a referrals model, we have a lot of work with tracking centers and influence and client referrals. We have a very rich set of prospecting, and it links out to marketing platforms. And so we’ve just bolstered that significantly.

M&A and Inorganic Sales Strategies

Adrian: But Practifi is role based. So we also recognize that in larger firms and they’re typically our clients, typically our average client sizes is in the multi billion dollars that go through to the from the smaller teams of a dozen or so through to the many hundreds and those businesses as they become much more acquisitive. tend to have M&A, Business Development streaming teams. And so we recognize that their sales pipeline fits a little closer to a more traditional pipeline, but again, ist’ different. It’s more of a journey. It’s a little more organic along the way.

Adrian: We’ve been working with some clients, we’ve went in fairly hard in discovery and we’re excited towards the back part of this year to be pushing out enhancements to our business development. That will effectively mean that you can run both a inorganic sales strategy and an organic sales strategy in the same tool, something that you can sort of do if you look at a very generic sales flow in a in a standard CRM environment today, but we’re leaning in hard to look at all of the metrics that you would use for for deal, benefit, realization and all those sorts of pieces as they come through. Exciting time obviously given the amount of consolidation and M&A activity in the industry coming out of a record quarter that I saw for Q1. So we believe that well time to that need and particularly for those clients and other firms in the industry that see M&A as their path forward.

Craig: So when you say an inorganic sales strategy, that’s an M&A process, right, they’re looking for M&A targets.

Adrian: Correct. So how do you define a target what are the pieces of data that you’re wanting to capture? What are the metrics that you’re using to validate that it’s good deal worth doing? That recognizing and ultimately where we see this going is when you’ve identified a deal and you want to drive that through the entire process, of course, at the back end, the people that you’ve done the deal with become users in the system. You want to be able to check we bought a $1.4 billion team part of the deal economics was that at least 1.1 was going to come across what did how’s the activity been? We’ve got an urn out and to manage what does that look like? We want them to be able to do that entire process in the one system. So we’re laying the groundwork for a lot of that today’s the basis of it has been there for for a long while. But we’re extending that now into how do you identify a deal? How do you rate them? What does it come through? And then ultimately taking that through to how do you measure the success of that deal out the back end? What can you learn from each of those acquisitions in your pipeline?

Craig: That is cool. I don’t know anyone’s doing that. For some of our more acquisitive clients that maybe do five or six or more deals a year, after a couple years, you’ll have some nice data on both the targets you did go after and the target you didn’t go after. And so you can you’re tracking things like earn out their six other success rate of the you know, how much to ask if they moved over from the firm. And then over a couple of years, looking at that how successful that deal was, what the ROI on that deal was.

Adrian: That’s right. Ultimately, within Practifi we have a tool we call Propel, which is a business analytics platform built out using the tableau CRM suite. And that would allow you then to have all of that data that in alongside all of your user and end client data, your end investor data, so you can actually see a series of a time that says well, we bought this team in Rochester, we moved them in they managed to get all or 90% of the money to move over two years down the line, but we still have it has grown. How has that gone and trace that all the way back to the original deal.

Craig: That is excellent. So they may even find out they’re doing a good job or they may be finding out they’re overpaying.

Adrian: Or that there’s a particular type of firm and often we hear people everyone wants to buy the absolute cream but sometimes it’s the B and C grade deals that ultimately over time deliver the best value. So being able to dig in and understand that just like we do as a tech company understanding our ideal client profile, it’s them being able to understand the ideal acquisition target.

Craig: Are there any other characteristics you tracking for your clients to identify the ideal M&A target?

Adrian: So at the moment, we’re working with a group of clients to understand what they track today and that’ll be everything from you know, the average age of the team, the ownership, hierarchy and structure, the nature of locations of a single location, multilocation age demographic of clients, average account balances all those kinds of metrics that you would look at. To then line those often see how they fit in the puzzle that is the the combined entity. You don’t want to make an acquisition that looks great on paper, that have a core strategy to lower the average investor age, only to buy a book of business that pushes it up.

Craig: Or to lower the average. What if you’re wanting to book a business that has a lower revenue per client?

Adrian: You want to make sure that that you’re keeping an eye on those metrics as a whole because you know, for some of our clients who do 8, 9, 10, of these acquisitions a year, often smaller teams. They need to be able to very dynamically monitor what’s happening.

Data Synchronization and Integration Innovations

Craig: Do you pull in any data from the QuickBooks or accounting?

Adrian: We haven’t delved into that today. It’s an area we’ve spoken to people about. We have the ability. We’ve actually invested in parallel to punch the conversations lately. We’ve invested in parallel in building some powerful data ingestion capability. One challenge with the Salesforce platform that many people encounter is it can be cumbersome to pull large volumes of data into the platform. Super powerful once it’s in there can be a bit of a challenge to get it in. So we as a strategic partner, we both Salesforce and Microsoft, have gone away and invested pretty heavily in building some Azure infrastructure that allows us to do a lot with data.

Adrian: That was built with some very specific needs in mind. It’s now being augmented so that any flat file that we can get our hands on can actually be sucked up and ingested into into the tool using that same infrastructure. And then we’re building that out. We’re extending that to actually our clients can do that themselves. So as they get any a format of file, they can load at once. Create a mapping and then just ingest that, think an SFTP coming in and just auto load feels like an integration without needing to go and build up a spoke integration every time.

Craig: I ask those firms like Truelytics, which was acquired by Envestnet a couple of years ago, became experts in that and pulling in data from QuickBooks, which most RIAs use unless they’re big. QuickBooks is probably the most common accounting platform for RIAs, but every RIA does it differently. They have a different chart of accounts. So you’ve got to be able to normalize all that and getting that data in would tell you what the value of the firm is versus well. Here’s what our revenue is like behind that you don’t know.

Adrian: Absolutely. Not an area we’ve delved into yet. But again, we we sit in a very fortunate place, I think, where we have this incredibly powerful shazzy sitting under the hood, but we’re not dependent on their products or their product direction. We just use Salesforce as a platform. And so it allows us to be incredibly focused on our clients and what they want to achieve without having to worry too much about all the kind of nitty gritty under the hood. That gives us the bandwidth to step back and say, well, let’s explore. Let’s think about what this looks like. When I talk to our investors, I talk about practice fires and operational backbone. We see that the Orion and Envestnets have created the financial backbone of that operational backbone is an open space. Today, it’s a lot of point solutions, and we see Practifi stepping in to fill that operational backbone for for our clients.

Craig: Speaking of acquisitions, is if I’m an RIA aggregator buying up RIAs but then keeping them independent rather than merging them in can I use Propel the business analytics to compare all my different RIAs to each other how well they’re doing who’s who’s profitable. Who’s not as profitable, where they’re going, etc

Adrian: You absolutely can. You would take a data feed it’s it’s quicker and easier if those individual firms are also Practifi users, but it’s not a requirement. So at the top end, at the at the aggregate a home office, you’d have practice files set up with propel hanging off the back and they feed in as external data sources. So that you can also have data feed in from other CRMs other other databases, data lake so you could push data in and out. This is very powerful capability for clients where all ends of the Roper are on practice by it’s much more plug and play.

Craig: That’s cool. And with other acquisitive firms, you would want to switch gears into something else you had mentioned you built. What is this where if I’m affirming of buying up other RIAs, they’ve got different portfolio accounting systems, you can integrate those. I’m very interested in that. It’s something we work on a lot. And if I can, if I have a better tool to do that, I’d be interested to hear more about it.

Adrian: We know that these feed acquisitive firms, particularly in the large shops that get up into the tens, and even hundereds of billions are doing a lot of acquisitions often have multi billion dollar firms themselves. So they have long established client books. They’re working in their portfolio accounting tool. And when they make that acquisition, what they want across the firm, from a standardization perspective is a standard client record, standard workflow, standard reporting, all that great stuff that comes from the CRM but a real barrier to achieving that today is that they then also need to do a portfolio accounting tool migration or they need to pump everything into a data lake, pull it all back out and push it into to somewhere and they are big, complex technology projects, high risk, low return long timeframe.

Adrian: We’ve had a few clients who sit in that space, talk to us over the years around wouldn’t it be great if we could acquire a firm, move the CRM into Practifi but not do the portfolio accounting system migration maybe ever, but certainly not as part of that transition activity. So we took it upon ourselves to dig in and investigate how we would go about doing that. And we’ve now solved and we’ll have a game coming out later this year. The ability that you can have any number of portfolio accounting systems plugged into one Practifi, so you may have three Black Diamond, two Orion an Addepar and four Tamaracs all plugged into one CRM concurrently. So no interest no interpose layer, no need for that technology project. Just plug another one in. We’ve done that by looking at how we can authenticate and how we change the structure within Practifi or accommodate lots of plugs into one so I’m super excited for that we we have so many clients who are inquisitive and we just see them going through that pain and want to be able to help them solve it.

Craig: What data are you pulling in from three Black Diamonds, four Tamaracs, one Orion?

Adrian: It varies a lot based on the individual provider, but if we throw a blanket over the most common data set, it’s the portfolios the underlying holdings in a current performance data. What a Numerix we then navigate out in most instances to the portfolio accounting system you go and look at portfolio reporting or performance kind of attributes. But then some Orion with Orion Connect for example, they pull in Portfolio reporting metrics into Practifi. Addepar, we were in the press just recently have released a performance widget. And we’ve now got that fully integrated into Practifi as well. So depending on which of those systems you’re on, you get more or less there but from a data set perspective, we keep client and household information in sync. We keep the portfolio structures and groupings in sync. And we keep the holdings the kind of underlying assets detail in sync.

Adrian: So that if we’re looking at the bulk of the transactions or interactions that occur in a phone, many of them can be answered without having to navigate to the portfolio accounting system. So that client experience is richer because you can see all that information into one place. You’re not having to navigate to multiple systems to answer a simple question.

Craig: What do you mean by client and household information in sync? Are you syncing across the platforms back to them or just internally inside Practifi you’re syncing that?

Adrian: No we’re pushing it back across so if you update your your home address details in Practifi it will all push into Tamarac. And if a request happens at Tamarac that will make its way back toPractifi, that kind of two way sync of demographic information is a very common pattern. But of course, we don’t offer the list of asset data. That’s viewable in Practifi but not editable in Practifi. But if you’re tracking held away assets, you know, car collections, houses, all those kinds of things. You can enter those into Practifi and pass them as well.

Craig: That’s impressive. Is this running now?

Adrian: Yes. So the ability to connect individuals of those systems is running now, by the end of the year, it’ll be the ability to connect another one.

Craig: Wow, that’s impressive. Okay, we’re running out of time. I have a couple other things to ask you. You mentioned briefly earlier about ingesting large amounts of data into Salesforce, and can you expand on the Azure infrastructure you’ve built in some of the other work you’ve done to make it easier to ingest large amounts of data into Salesforce?

Adrian: For sure. I mean, the need at our end is great with high demand and the market and lots of people making move of course, when you do a data migration from one CRM to another, there’s a big complex set of data that gets ripped out allowances and it’s got to be loaded. So it’s all it wasn’t a selfless act we needed to help our poor data engineers.

Craig: It wasn’t for the betterment of mankind?

Adrian: Well depends, if you’re a Practifi data engineer, for the betterment of mankind. That allowed us to look and say well, what format to those files come out in if we look at look at our our kind of primary donor competitor set, wherever to look at the standard files that come out through there, and actually take it so that we can ingest so the client will upload that data in through a secure portal. It’s ingested up into Azure formatted and then pre predefined scripts and run and push that data into Practifi but in a way that optimized for the mapping experience and the API load rate experience so that the bumpers that you hit, have lots of data into different systems.

Adrian: We’ve now got that so that it can be driven by either standard file formats for for the the other kind of wealth CRMs that come across, perhaps those that are suited more to smaller firms, and as they grow, they move out. Then also, where files come in template. So if you’ve got an Excel format file that is going to be consistent, perhaps protocol data or book of business you buy that comes away. You can ingest those as well. So we’re doing work right now to make that a client facing tool. One of the challenges with pushing data into into platforms like Salesforce is that it’s kind of one at a time you push it and if you find a problem, you’ll back it all out again, and it’s very messy. We’ve taken care of that as well with with data staging capabilities, so you can load it, review it be happy with it, and then go so try to make that a client friendly activity because again, where we see so much acquisition activity within our client base. We don’t want to slow them down. With those migrations. We want to give them a lot of control. So that’s been a huge area of focus for us. And again, it allows us to make the best out of the Microsoft world. And you unify that with the Salesforce world.

Craig: We all want client friendly activities. Adrian, I’m sure we can all agree on that. Alright, so last question, product roadmap, what’s coming down the pike this year for Practifi clients, what can they expect to see what new exciting stuff you have in the plant?

Adrian: We’ve touched on a few things. Then we are also going to be pushing some exciting capabilities out around the way that meetings are scheduled prepared for and run. So part of that looks at how we touch into into the kind of visual tools that are used these days, primarily the video conferencing world, but a lot of is about that preparation process. We know that advisors, on average, hate using CRMs. They just don’t love it. It’s too much clicking. It’s workflow and client service operations oriented technology. And so we are working very hard to bring all of that experience into a neat capsule. So that an advisor who’s prepping for a meeting can go in, consume everything they need, have that spun around and back out the other end with is low touch as possible, ultimately with a goal and not on a this year timeline but ultimately with a goal of bringing that into the Microsoft AI world and how does that sit maybe in the background and teams and email and do a lot of that work for them. It’s an area that we continue to push and experiment as well. Of course, some of the other pieces we touched on already around around portfolio accounting systems and in sales and growth pipelines. There’s always a few other little poles in there that stick their way through some straight through processing work that we got to confirm or deny that we’re doing with a couple of custodians that will help a lot with with account opening and account maintenance transactions over time as well.

Craig: What are some of the things you’re able to do if you bring it into the Microsoft AI world, Microsoft and Salesforce are two players who are trying to be control the the world of AI Microsoft with their openAI investments Salesforce with Einstein, how do you compare the two when their AI strategy?

Adrian: Look, I think like all AI strategies at the moment there’s there’s a lot of hype there’s is you gotta go do a little bit of substance. I would say at the moment Microsoft has more substance sitting there they had a bigger head start I guess. The the goal for us is to meet the advisor where they want to be. We know that that’s not in a CRM. So a heap of AI investment natively in the CRM platform might be a challenge for advisors to see value. So we’re looking at how do we leverage the work Microsoft is already doing? How do we take the capabilities that they’re already using with copilot and and other tools to embed into the Office 365 experience? And how do we hide practice find the background so that an adviser can email a client get prompted with other content they might want to include in the email have a meeting coming up and and have it linking to the previous video recording all those kinds of tools and capabilities that that we can piece together that are already there. We work very closely obviously we work with the Microsoft side and the Salesforce side. We work very closely with what’s happening in Einstein AI and we can see it in a large language models and those pieces. Nothing there is hugely exciting when you scratch on the board just yet. I have no doubt it will get there. It’s an amazing business with amazing tools. Right now I think for wealth advisors it’s probably something that’s it’s a little it’s a little while.

Craig: On that note thanks for sharing that insight appreciate it. We are out of time. So everyone listening please go to Practifi.com to learn more about Practifi. Adrian, thank you so much for sharing with us and being on the program.

Adrian: Thanks so much, Craig. I’m always happy to chime in.

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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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