Welcome to the March issue of the latest news in Financial Advisor #FinTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors and wealth management!
In this month’s edition, we recap the recent Technology Tools for Today (T3) Advisor Technology conference – the best dedicated FinTech conference specifically for financial advisors. Overall, the major themes of the conference – most of which were highlighted in the opening keynote session by Riskalyze CEO Aaron Klein talking about the “Advisor of the Future” – include the ongoing shift of “robo” tools to serve as the technology automation infrastructure of an advisory firm’s back office (allowing the advisor themselves to spend more client-facing time than ever!), to the opportunities in using technology for lead generation and a prospect engagement tool (though it remains unclear whether most advisory firms have the marketing savvy and resources to use them effectively!). And Riskalyze’s own rapid growth in recent years seems to have boosted “risk tolerance assessment tools” into a highly competitive category of its own, with almost half a dozen competing tools represented at T3 Advisor (whereas 6 years ago, Riskalyze was one of only two!).
Other major conference highlights included:
- Riskalyze debuted a new Riskalyze “Premier” solution (with a new client dashboard and more digital account opening and onboarding tools)
- MoneyGuidePro highlighted the recent growth of its MyMoneyGuide Lead Gen solution, and a new study suggesting that clients may find virtual financial planning meetings less stressful
- eMoney Advisor announced its own new Lead Gen capture tool and more Advisor-Branded Marketing coming in Q2
- Schwab announces it will be integrating eMoney Advisor into OpenView Gateway, alleviating concerns eMoney would become a Fidelity proprietary product
- AdvisorEngine (fresh off its $20M round of capital and rebrand from Vanare) acquired advisor prospecting tool Wealthminder
- New client engagement tools, including a safe withdrawal rate illustrator (Big Picture App), and an advisor-specific solution to facilitate mind mapping in the data gathering meeting (Asset Map)
- The debut of two new risk tolerance assessment tools, Tolerisk and FinMason
- A software developer called Chetu that can work with financial advisors to build their own software solutions
- And the T3 Advisor Conference itself released the results of a major new survey of advisor software adoption (including both what’s popular, and how advisors actually rate the use of the software itself!).
You can view the analysis of these announcements, and more trends in advisor technology, in this month’s column, including highlights of the other T3 Advisor conference newcomers (from new robo tools, to software that helps clients maximize the yield on their “idle” bank accounts), how major custodians are responding with their own technology initiatives, and the emergence of new technology consults who can work with financial advisors to help them evaluate their own tech stack.
I hope you’re continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!
*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit directly to TechNews@kitces.com!
Highlights Of The T3 Technology Conference
Last month, nearly 600 people, including those representing 76 vendor sponsors, gathered at the Hyatt Regency Orange County in Los Angeles for the 12th annual Technology Tools for Today (T3) advisor technology conference, chaired by advisor technology guru Joel Bruckenstein. With a comparable turnout to its recent year highs, the conference continues to maintain its place as the best dedicated FinTech event specifically for financial advisors… even though it still continues to draw only a moderate turnout of financial advisors themselves. Nonetheless, T3 has definitely become “the place to be seen” for advisor FinTech solutions, not just for financial advisor attendees, but thanks to a strong turnout of executive leadership from key vendors (CEOs and CTOs commonly attend for networking, partnership, and integration opportunities), along with a growing number of “influencer” attendees that this year included both industry media, technology consultants, and for the first time (at least, that I recall seeing) several venture capital or private equity firms looking to invest capital in the “right” FinTech opportunities.
Notably, this year seemed to be an upgrade for the conference itself as well. The T3 conference has a long-standing reputation for being a “no-frills” event, and while 2017 certainly wasn’t over the top, the addition of hot breakfast (with the support of ActiFi), and an overall upgrade in the venue quality (an upscale Hyatt Regency) were noticeable. Though the hallway
buzz was an open debate about whether this was simply a decision to step up the conference as Adivsor FinTech continues to grow, or newfound pressure on the organizer to reinvest more into the conference experience for attendees after last year’s lawsuit between Bruckenstein and fellow advisor tech guru Bill Winterberg made public that even the smaller T3 Enterprise companion conference in the fall was allegedly generating $458,000 of profits (though Bruckenstein still disputes this number and claims it was inflated).
At the conference itself, there were the usual series of “blockbuster” new product announcements – not quite as large as some prior years, such as in 2015 when SS&C acquired Advent, Fidelity bought eMoney Advisor, and TA Associates purchased Northstar (Orion Advisor Services) all at once – but still including major feature release announcements from lead sponsors Riskalyze, Orion, and eMoney Advisor, along with a slew of integration and feature rollouts, and even a small acquisition deal (as robo-advisor-for-advisors AdvisorEngine bought the client prospecting platform WealthMinder). Also notable was a new Financial Advisor Software Survey released by conference organizer Joel Bruckenstein himself, in partnership with Bob Veres of Inside Information and Advisor Perspectives, which captures not only advisor technology adoption trends, but also ratings of how much advisors actually like their various software solutions!
But as always, the biggest opportunity at the T3 advisor conference is simply to walk the exhibit hall to see the latest and greatest in advisor technology. And if there was one clear theme to this year’s list of vendors, it’s that advisor technology is increasingly shifting from being “just” investment-centric, to a wider range of both back-office and client-facing solutions. From a world where just a few years ago, there were more than two dozen various “investment analytics” and portfolio accounting solutions at T3 Advisor, this year there were only three (Kwanti, Chaikin Analytics, and of course Morningstar), and just a handful of portfolio accounting solutions (including the “big ones” – Advent/Black Diamond, Orion Advisor Services, Tamarac, and Morningstar Office – and also smaller players like Panoramix, AssetBook, Advyzon, Clearwater Analytics, and FolioDynamix).
In addition, all the major custodians were in attendance this year, both the large (Fidelity, TD Ameritrade, Schwab, and Pershing), and the small (SSG, Scottrade, and TradePMR), and even a growing number of technology-centric TAMP and UMA providers like SEI, Carson Institution, and Sawtooth. And notably, Fidelity was a separate sponsor from eMoney Advisor, despite the fact that the former acquired the latter two years ago, helping to further set the advisory community’s minds at ease that the companies will remain separate; in fact, Schwab actually announced that eMoney Advisor would soon be getting integrated into OpenView Gateway, further affirming Fidelity’s intention to allow eMoney Advisor to remain a cross-custodian platform.
But the “real” story was/is the growth of all the other solutions for advisors, including an explosion of risk tolerance software solutions, a growing number of lead generation tools, the second generation of “robo-advisor-for-advisor” back office automation tools, a handful of emerging new companies and categories, and a growing ecosystem of service providers to support them. And if none of the solutions at T3 fit your needs, there was even a software development firm called Chetu that is available to help you build your own software solution!
The Explosion Of Risk Tolerance Assessment Tools
For years and years, “risk tolerance assessment tools” was a sleepy little segment of the advisory landscape, dominated primarily by simple risk tolerance questionnaires designed by broker-dealer compliance departments, and FinaMetrica competing against them with an alternative, more rigorously created questionnaire.
And then Riskalyze showed up 6 years ago, and turned “risk tolerance” measurement from just a questionnaire, into an entire FinTech experience. As a result, the company has experienced rapid growth, to more than 100 employees last year, and culminating in a whopping $20M Series A round last fall (which in turn is expected to fuel enough hiring to double their headcount again in 2017).
Of course, the reality is that Riskalyze (as with any solution) has its naysayers about whether it’s holistically assessing risk tolerance the “right” way, and the financial advisor landscape is so fragmented that even as a leader in its category (according to a recent 2017 Advisor Software Survey), it still has limited market share. At the conference, CEO Aaron Klein did note that Riskalyze now serves a whopping 17,000 financial advisors. But according to Cerulli, there are still over 310,000 financial advisors across all channels.
And as a result, Riskalyze has spawned… Riskalyze competitors. The latest entrants to the category, debuting in their first T3 Advisor conference appearance, included Tolerisk, and FinMason. Also in attendance (though not exhibiting) were the founders of Totum Wealth, and Pocket Risk. Though ironically, the category founder itself – FinaMetrica – was not present this year.
Ultimately, it remains to be seen whether any of these new risk tolerance assessment “upstarts” can unseat Riskalyze (and FinaMetrica), which together have the overwhelming majority of market share (at least for those advisors who use anything beyond their compliance department’s own risk tolerance questionnaire). The good news for the newcomers is that overall, the advisor marketplace remains highly fragmented, due to both the delineation of channels (RIAs vs independent broker-dealers vs insurance broker-dealers vs banks, etc.), and the fact that most advisors are at least quasi-independents (as RIAs or under an independent broker-dealer), which leaves room for newcomers to gain a toehold. Yet on the other hand, both FinaMetrica and Riskalyze are using their leading market share (and the cash flow that generates) to continue to reinvest into new features, with FinaMetrica announcing a growing number of integrations in recent years, and Riskalyze launching an entire new “Premier” tier of its product, along with expansions to its Autopilot platform.
Nonetheless, the fundamental point remains: first there was FinaMetrica, then there was Riskalyze, and now “suddenly” within just a few years, there are half a dozen competitors in the world of risk tolerance software solutions, all seeking to beat Riskalyze’s incredible success story.
The Rise (And Imminent Decline?) Of Advisor Lead Generation Tools
Perhaps the most under-appreciated aspect of Riskalyze’s success story is that their breakout growth – and their ability to charge $145/month for “just” risk tolerance software (rising to $245/month for their new Premier tier!), which is more than what companies like MoneyGuidePro charge for an entire financial planning software solution – is that they’re not merely software to “check the box” on the requirement to assess client risk tolerance. They’re a business development tool to support lead generation and the sales process, that advisors can embed on their website or use live in-person with a prospect – because given how most self-directed investors mismanage their own portfolios, taking a prospective client through the Riskalyze assessment process to find their “Risk Number”, and then showing how their own portfolio almost inevitably violates their own risk tolerance (while the advisor’s alternative does not), is as close to a “slam dunk” close as any sales process can be.
And so while Riskalyze’s success as “risk tolerance” software has spawned a number of competitors, its success as a business development tool – including and especially one that can be embedded directly on an advisor’s website – when combined with the overall growth of digital and content marketing across all industries, is spawning a new category of “Prospect Engagement Tools” that advisors can use to help turn prospects into clients. Because the reality is that it’s far easier for an advisor to justify the ROI of software, at a much higher price point, when it can be directly related to new-revenue-producing outcomes.
As a result, the T3 conference showcased a rapidly growing number of solutions specifically designed to help support the “mid-funnel” engagement process. On the digital marketing side, there was newcomer Financial Media Exchange to support client e-newsletters, enterprise content marketing provider Seismic, the experienced website design and content marketing solution FMG Suite, and Broadridge Advisor Solutions’ packaged content library.
In addition, MoneyGuidePro shared the latest features and success stories of its MyMoneyGuide solution – a “guided planning experience” where prospects enter their own data, and get a facilitated initial walkthrough of their financial plan, with the opportunity to then work with the financial advisor for a more thorough solution. MoneyGuidePro President Kevin Knull noted that not only are the advisors using the platform showing accelerated growth, but they even shared results of a new study where clients were measured biometrically for their stress levels during the financial planning process… finding that an initial virtual “pre-work” financial planning session is actually less stressful, even for boomer clients, than doing in-person financial planning.
Not to be outdone, eMoney Advisor also announced the launch of its own new “Lead Capture” solution at the T3 conference (and what will presumably be deep integrations into Fidelity’s new robo-advisor-for-advisors “Automated Managed Platform” [AMP] solution), along with a coming-in-Q2 “Advisor-Branded Marketing” offering that will help advisors do marketing by bringing prospective clients directly into the eMoney client portal.
Notably, the big caveat here is that while all these engagement tools can help turn prospects into clients and support the sales process, they don’t necessarily bring the prospects to the table (or the advisor’s website) in the first place. As a result, it’s still unclear whether many/any advisors will actually be able to succeed with these prospect engagement tools, given that most advisors have no experience or success with content and digital marketing online in the first place. On the other hand, it’s increasingly clear why major providers like Schwab Intelligent Advisory are adopting tools like MyMoneyGuide – because, for a large financial services company that does have scaled marketing strategies to help bring strangers to their website in the first place, these solutions can help. Of course, the irony is that means solutions that were originally developed for independent financial advisors may eventually get used by their large-firm competitors to take market share away from them!
From Robo-Advisors To Back Office Automation
Another major trend evident at the T3 Advisor Technology conference was the growing role that technology is playing in automating the back-office functions of an advisory firm.
Riskalyze itself set the tone yet again, with its opening session framed around the themes of “personalization + automation” – the idea that technology can both automate processes, and be flexible enough to customize the automation in a way that personalizes the solution for the client (but without an advisor’s manual intervention). Their case-in-point example was the expansion of their “Next Generation Autopilot Platform”, a quasi-rebalancing and model-management software that will help advisors to set model portfolios for clients (which can be designed themselves or selected from a series of third-party providers), automate monitoring that the portfolio remains in line with the model itself, and automate the process of matching the client (based on their Risk Number) to the appropriate model portfolio in the first place – akin to how robo-advisors similarly automated the process of matching investor goals and risk tolerance to appropriate asset allocation models.
Beyond Riskalyze, though, a number of “robo-advisor-for-advisors” were on display in full force at T3 Advisor, including AdvisorEngine as a Platinum Plus sponsor (having rebranded away from Vanare, and fresh off its $20M Series A round from WisdomTree), RobustWealth and its robo-plus-TAMP solution, and Invesco-owned Jemstep’s robo tools to facilitate client onboarding.
And the theme of deeper technology solutions to automate back-office advisor workflows was not limited to the robo-advisor-for-advisors platforms. Orion Advisor Services announced the launch of its Eclipse solution, a trading and rebalancing software built directly within Orion itself, that will facilitate managing and rebalancing models “at the Account, household, Sleeve, Asset Category, Sector, and Asset Class levels” and put it in direct competition with alternatives like iRebal and TRX. Fidelity also showcased a series of advisor workflow enhancements coming in their new Wealthscape platform in 2017. And there were numerous solutions present to facilitate the processing of (digital) paperwork in the onboarding process, including Docupace, LaserApp, and Laserfiche.
In other words, we’re now finally beginning to truly see the “end game” of the robo-advisor-for-advisors movement, as the B2C competitors melt away, and the technology morphs into the back-office technology hub that will power the advisory firm of the future – akin to how the internet was initially viewed as a “competitor” to financial advisors in the late 1990s, but ultimately became the technology infrastructure around which advisors build their businesses today.
Notable Newcomers At T3 Advisor Technology
In addition to the “old guard” of existing advisor technology providers, the T3 Advisor Technology conference has long been the leading event to see “newcomers” debut, and this year’s conference didn’t disappoint, with more than half a dozen solutions showcasing at T3 for the first time.
Notable newcomers included:
Tolerisk and FinMason. As noted earlier, “risk tolerance software” has become the hot new category of Advisor FinTech, and the newcomers this year included Tolerisk and its two-dimensional risk tolerance assessment process, and FinMason, which started out as a B2C risk tolerance and investment analytics solution that has now pivoted to the advisor B2B channel as a risk tolerance assessment solution and a Riskalyze-style lead gen engagement tool (and in the pivot last year FinMason hired away Riskalyze’s former director of enterprise solutions to help deliver these advisor solutions).
Screenmeet. First highlighted as a newcomer in the “Latest Financial Advisor FinTech” last September, Screenmeet is aiming to carve a place for itself as simpler screen sharing solution than competitors like GoToMeeting and WebEx. While Screenmeet doesn’t allow for video chat or conference calling – it is solely a screen-sharing application – its narrow focus makes it especially easy to use, and does not require the client to download any applications or grant any privileges, beyond just going to a specified URL and being able to instantly see what the advisor is sharing (from their smartphone, tablet, laptop, or desktop screen). Which may be appealing for those advisors who simply want to visually share a report that they’re already discussing with the client by telephone, or even as an in-office solution for everyone in a meeting to be viewing the same screen-shared document at the same time.
Asset Map. Also recently highlighted in the “Latest Financial Advisor FinTech” just last month, Asset Map is aiming to bring mind mapping to the client data gathering process with a more structured (and therefore easier to use) solution than “traditional” open-ended mind mapping software alternatives like MindGenius. All of which is better and more engaging for the client than having them watch you as you scribble down notes about their life story and assets and liabilities on a yellow pad.
Big Picture App. The Big Picture App draws its name from the popular “Big Picture” chart of historical market returns over time, but the new app itself is actually a historical scenario illustrator that allows advisors to show how client spending strategies in retirement would have faced in various historical market return environments. Which means, in essence, the Big Picture App is an illustration tool for showing and explaining Bengen’s 4% safe withdrawal rate (and the various ways it can be adapted for specific client circumstances).
RobustWealth. While most “robo-advisor-for-advisor” solutions were originally B2C solutions that later pivoted to go B2B (e.g., FutureAdvisor, JemStep, Upside Advisor, Betterment for Advisors), RobustWealth was built from day 1 to be an advisor solution that automates most of the advisor’s (investment-related) back office. The solution is effectively a combination of digital onboarding tools, portfolio management and rebalancing software, and a provider of third-party investment managers (accessible directly through the platform), a kind of all-in-one multi-TAMP conduit with a modern technology front end. Think of it as an alternative to Envestnet for RIAs, but cheaper, with a technology overlay that can fit on top of any of the major RIA custodians (albeit with deepest integrations to TD Ameritrade through Veo).
MaxMyInterest. While not precisely “new”, as they actually debuted for advisors just before last year’s T3 Advisor conference, MaxMyInterest is a form of “cash management” investment solution that automates the process of shopping client cash balances to the (online) bank with the highest yield, and automatically opening accounts and transferring funds as necessary to maximize yield (while, if desired, staying under FDIC limits). An appealing solution for those clients who tend to accumulate or like to sit on large cash balances, and at least want to maximize what limited interest they can earn on their savings account.
Vestwell. The 401(k) marketplace has been a tough nut to crack for FinTech providers, due to the challenges of reaching busy small business owners in the first place; Vestwell is aiming to succeed by building a technology-efficient 401(k) platform, that can assume 3(38) and 3(16) fiduciary responsibility, but is working with financial advisors to bring their solution to the marketplace. From the financial advisor’s perspective, Vestwell’s goal is to make it easy enough to “do” 401(k) plans for clients, that more advisors will actually want to help clients implement 401(k) plans in the small business marketplace.
Yourefolio. With the rise in the Federal estate tax exemption thresholds over the past 15 years, financial advisors have focused less and less on estate planning, and as a result software for estate planning has lagged. Having raised $500k of seed funding last fall, Youefolio is part of a recent new crop of solutions aiming to improve the estate planning process with an entire estate planning solution that combines the data gathering aspects, a central vault for clients to store relevant estate documents, and tools to help manage and track estate planning tasks. Though it remains to be seen whether the “modern” financial advisor wants to go into this much depth on estate planning for clients (at least for advisors not already working with ultra-high-net-worth clientele where it’s still a prominent client issue).
FutureVault. The idea of providing a “client vault” has morphed tremendously over the past decade. Early on, it was about providing clients a place to store relevant files from the advisor-client relationship (e.g., performance reports, and a copy of the financial plan), but adoption was lackluster due to what was typically a poor user experience for the client. From there, the solutions shifted into being integrated with other software platforms, such as the “client vault” built within eMoney Advisor financial planning software, or Orion Advisor Services, or focused on using the vault as a means to “securely transfer” (but not necessarily long-term-store) client files (e.g., Citrix Sharefile). But over the past few years, newcomers are trying to make standalone “client vault” solutions popular again, by infusing them with new relevance. Last year at T3, it was EverPlans Professional, which focused on providing an estate-planning-related client vault. This year, it was FutureVault billing itself as “the most sophisticated digital filing cabinet and safety deposit box ever built”. Ultimately, it remains to be seen whether this second generation of tools will have more success than the first – the good news is that they’re building with more secure technology and have a much better (i.e., user-friendly) interface. The bad news is that other parts of the advisor technology stack have moved so far, it’s unclear whether these new solutions will integrate with the rest of an advisor’s technology. Or whether clients will actually feel compelled to use them at all, given the number of direct-to-consumer solutions the average client already has available at his/her fingertips.
The Growing Ecosystem Of Advisor Technology Consultants And Service-Providers
The last notable trend that was evident at this year’s 2017 T3 Advisor Technology conference was the ever-growing ecosystem of consultants and service providers that support financial advisors and the technology they use.
This included several “overlay” providers for Salesforce (including Concenter Services and Orchestrate), John Norwood’s “CompositeBuilder” for PortfolioCenter and Advent Axys (for those RIAs who want to do GIPS-compliant reporting), as well as “full-service” outsourced/managed-IT technology providers like Entreda, ExternalIT, and True North Networks.
There were also several providers who consult with advisors about the technology to implement in their firms and how to maximize it, including Craig Iskowitz of Ezra Group, Jennifer Goldman of MyVirtualCOO, and Kim Mihalik of the aptly named “Tech Stack Consulting” which just launched offering a reasonably priced 2-hour “Advisor Tech Check-Up”. Also seen in attendance (though not exhibiting) were advisor outsourcing providers Jessica Riner of Consider It Done (virtual operations support), and Sue Chesney of Delegated Planning (virtual paraplanner support).
Ultimately, I will admit that it’s still a mystery to me why there aren’t 1,000+ advisors at the T3 advisor technology conference, given the depth and breadth of solutions available. Thus far, it would seem that even “independent” advisors are less independent than they might think or realize, relying primarily on what their custodian or broker-dealer provides (and thus, being a consumer of the technology options that are showcased at their platforms’ own national conferences). Nonetheless, the T3 conference is still to me the best place to keep up on the latest and greatest in financial advisor technology. So I hope you find this recap helpful, and consider attending in 2018!
For a further round-up of articles about the 2017 T3 Advisor Technology conference, here’s some additional commentary from those who attended:
And if you’re an #AdvisorTech company who wants to submit a tech announcement for consideration in future issues, please submit to TechNews@kitces.com!
So what do you think? Did you attend the 2017 T3 Advisor Technology conference? Do you plan on attending in the future? What do you think the biggest announcement of this year was? Please share your thoughts in the comments below!