Our second stop in Charlotte, North Carolina is with Anthony Valente, Vice President of Business Development for Portfolio Pathway.
We picked up a hot dog and a soda before sitting down to talk about how Anthony first connected with Portfolio Pathway and why he works hard to support financial advisors.
CHAPTER MARKERS:
0:14 FPPad Tech Tour Intro
1:07 Anthony’s connection with Portfolio Pathway
2:03 How has Portfolio Pathway stayed competitive?
3:00 Why do you work on technology that supports financial advisors?
3:51 What’s your typical day like when working with advisors?
5:36 How accessible are you for advisors?
6:33 How to you maintain balance in your day-to-day life?
8:36 Why the baseball glove?
8:57 Support for the Foundation for Financial Planning
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Our second stop in Charlotte, North Carolina is with Anthony Valente, Vice President of Business Development for Portfolio Pathway.
We picked up a hot dog and a soda before sitting down to talk about how Anthony first connected with Portfolio Pathway and why he works hard to support financial advisors.
This is an audio-only podcast of the FPPad Tech Tour interview with Anthony Valente, VP of Portfolio Pathway. Click here to view the full video.
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In the race for robo adviser supremacy, neither Wealthfront nor Betterment wants to be runner-up.
Love it or hate it, AUM, or assets under management, is the default metric by which investment management businesses are benchmarked.
Robo-Advisor AUM
Certainly, many automated investment services (or rather, robo-advisors) have been flaunting their AUM figures in recent years, to, well, I don’t know why, exactly, other than to beat their chest on how good they are at gathering assets.
The most vocal automated investment service for publishing AUM figures is Wealthfront, with periodic blog posts issued when the company passed the round numbers of $500 million, $1 billion, and $2 billion in AUM.
Taking the more subtle approach to AUM milestones is Betterment, long viewed as the runner-up to Wealthfront in the AUM-gathering contest since 2013.
Instead, Betterment mentions the number of customers it serves first (in part because they have more than Wealthfront, so they can be number one in that comparison), followed by the level of AUM represented by their customers.
Still, there are a few posts from Betterment that place dates on when the company crossed $1 billion (with 50,000 customers) and $2.5 billion (with 100,000 customers). One has to dig through trade publications like TechCrunch and Forbes to put a date on earlier AUM figures like the company’s first $100 million and $500 million, respectively.
Ok, fine. So how is that asset gathering coming along today?
Graph of Wealthfront vs. Betterment AUM Growth
This morning I wanted to take a quick look at the AUM growth of the two leading automated investment services, Wealthfront and Betterment. But after 10 minutes of Googling, I had no charts or graphs of how each company is growing their AUM.
So I built a quick Google Sheet using the dates and AUM figures from most of the blog posts and articles cited above. Here it is!
Wealthfront vs. Betterment AUM Growth
So what is my biggest takeaway from this chart?
Betterment poised to overtake Wealthfront in AUM
Betterment has consistently lagged Wealthfront’s AUM since 2013, and Wealthfront’s growth rate was higher than that of Betterment, but then something changed around December 2014.
The rate of Betterment’s AUM increase accelerated, while Wealthfront’s growth rate generally remained the same from January 2014.
And the most recent figures for August 2015 show that Betterment has significantly closed the AUM gap with Wealthfront.
This being mid-August, and assuming Betterment’s faster growth rate continues as it has since the beginning of 2015: Betterment is poised to overtake Wealthfront in AUM.
What Happened to Betterment’s AUM Growth?
What happened to boost Betterment’s AUM growth starting around December 2014. I suspect the cause is:
So not only does Betterment have its own client acquisition strategies (web banner ads, TV commercials, ads on taxis and phone booths in NYC…), now the company has a new salesforce, if you will, of investment advisers who are using the Betterment Institutional service for their emerging clients.
This new cadre of advisers likely stands at a hundred or so today, but as the popularity and appeal of automated investment services expands, potentially thousands of financial advisers may be directing their emerging clients to use the low-cost service.
This is a totally new salesforce and asset gathering funnel that Wealthfront lacks today.
So in the race to be the dominant VC-backed automated investment service measured by AUM, the guard is about to change.
And nobody wants to be number two.
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On today’s broadcast, Envestnet acquires account aggregation provider Yodlee, Advizr makes two announcements to close the gap among financial planning software, and find out why automated investing services might be losing their competitive advantage.
Today’s episode is brought to you by eMoney Advisor, host of the eMoney Advisor Summit coming October 19th through 21st in Orlando.
Take a deep dive into the emX strategies that help you Connect, Engage and Win with your clients. Plus, everyone watching this show can take advantage of a one hundred dollar discount off your registration, so visit fppad.com/emoneysummit15 today and use promo code FPPAD100. That’s FPPAD100.
[This week’s top story comes from Envestnet, as the wealth management technology and service provider announced it is acquiring Yodlee in a deal valued somewhere around $660 million. Now most of you know Yodlee for account aggregation, but Yodlee really doesn’t sell services directly to advisors.
Instead, some advisors benefit from Yodlee aggregation through third-party integrations, with MoneyGuidePro being the most well know,after announcing a Yodlee integration to much fanfare last year, priced at a dollar per day. You can get more details on that in episode 120 that I linked over here.
So let’s cut to the chase: is this good or bad? If you’re an Envestnet technology user, this is really good. Aggregating clients’ held away accounts gives you better visibility on what clients actually own, how they’re allocated, and in some cases, how they manage their cash flow. This information can only make the advice you give better, and that’s a fantastic thing for everyone!
BUT, if you compete with Envestnet and/or take advantage of Yodlee aggregation today, the future isn’t so clear. It’s way too early to speculate what’s going to happen to Yodlee’s pricing and availability, but if efficient account aggregation is a cornerstone of your business, it might be time to keep alternatives like Aqumulate, ByAllAccounts, or Quovo in mind.] Envestnet, Inc. (NYSE:ENV), a leading provider of unified wealth management technology and services to financial advisors, and Yodlee, Inc. (Nasdaq: YDLE), the leading cloud-based platform driving digital financial innovation, today announced that the Boards of Directors of both companies have unanimously approved a definitive agreement under which Envestnet will acquire all of the shares of Yodlee in a cash and stock transaction valued at $18.88 per share, or approximately $660 million on a fully-diluted equity value basis.
[Next up is news from Advizr, an up-and-coming financial planning software provider, who this week made two announcements. First is the introduction of a prospecting tool called Advizr Express, allowing you to attract prospects by offering a super-simple retirement readiness illustration either on your website or for use with prospects during an initial meeting. Advizr Express is in beta testing today with an official release anticipated later this month.
Advizr’s second announcement is a new integration with Orion Advisor Services to import client portfolio holdings to avoid manually entering that information by hand. This adds to an existing integration with Blueleaf, and should be a preview of what to come with connections with many of the leading custodians. Wink wink.
So while Advizr is still a ways away from offering the number of integrations found in category leaders like Advicent, eMoney, and MoneyGuidePro, updates like these should help Advizr close the gap and offer you more choice in the tools you use to deliver financial planning.]
[And finally, I want to wrap up this week’s broadcast with an article from Harvard Business Review titled Automation Won’t Replace People as Your Competitive Advantage. For two years and seventy episodes of Bits and Bytes, the chatter about automated investment services and algorithmic rebalancing has reached a fever pitch, but scroll down to the end of that article and you’ll read a striking statement:
“Once smart machines are built to solve problems in asset efficiency (or indeed any area of operations) they very rapidly spread and become pervasive across an industry. Therefore, they cease to provide a competitive advantage.”
I think this perfectly describes what’s happening today in automated investing. Sure, six years ago, Wealthfront and Betterment attracted attention because there was nothing out there like their automated services. Their exclusivity was their competitive advantage. But fast forward to today where automated services are available from Schwab, Vanguard, Future Advisor, Blooom, and even LPL Financial having announced their own plans for an automated service. Automated investing is becoming pervasive.
But what that also says to me is that if you don’t have some kind of low-cost automated service to offer, it may actually be viewed as a disadvantage because they’re so common in the industry. It’s like telling clients you won’t communicate with them via email. It’s so pervasive, who DOESN’T use email?] Geoff Colvin’s primary argument is that there are some unique human capabilities, like empathy and storytelling, that will keep people employable even as automation chips away at the content of most jobs.
Watch FPPad Bits and Bytes for August 14, 2015
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Note: Treat this video as you would treat a TV show. FPPad Tech Tour is committed to telling the stories of people who are working hard to support financial advisors. These stories can’t be told in a two-minute video. So fire up your Apple TV, Chromecast, or your smart TV, kick off your shoes, and enjoy this up-close-and-personal video series.
Our first stop on FPPad Tech Tour is in Charlotte, North Carolina, where we met up with Victor Fetter, CIO of LPL Financial to learn about what attracted him to manage LPL’s technology solutions for the nation’s largest independent broker dealer.
CHAPTER MARKERS:
0:16 FPPad Tech Tour Intro
1:10 How did your career bring you to LPL Financial LLC?
2:55 How do you accommodate and respond to the needs of a diverse group of financial advisors?
4:55 Victor speaks about candid conversations with financial advisors
6:29 What’s your typical day like? How much do you interact with financial advisors?
7:53 Victor talks about connections with LPL Financial advisors beyond the business setting
8:43 One secret not many people know about you
11:14 How do you feel about automated investment services, aka robo advisors?
12:38 What are you telling advisors to do about automated investment services?
13:09 Where do you get your best information on where the industry is headed?
14:40 We take a drive to Fort Mill, South Carolina to view the construction site of the new LPL Financial facility
15:45 What investments are you and LPL Financial making for the future of financial advisors?
Our first stop on FPPad Tech Tour is in Charlotte, North Carolina, where we met up with Victor Fetter, CIO of LPL Financial to learn about what attracted him to manage LPL’s technology solutions for the nation’s largest independent broker dealer.
This is an audio-only podcast of the FPPad Tech Tour interview with Victor Fetter, CIO of LPL Financial. Click here to view the full video.
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Yodlee, known by financial advisers mainly for its data aggregation services, agreed to be acquired by Envestnet, the wealth management services and technology provider to financial advisers.
Yodlee raised $75 million in an October 2014 IPO after approximately 15 years as a private company, valuing the company around $340 million.
Financial advisers do not directly use Yodlee products or services, but many of the technology services they do use employ Yodlee account aggregation services (see below).
Fiserv’s CashEdge also performs account aggregation and the company sells an advisor-facing aggregation product called AllData Advisor®.
MoneyGuidePro has offered discounted pricing for Yodlee, but now is presented with a conflict given that Yodlee’s new owner also recently acquired Finance Logix, a competing financial planning software solution.
Who Uses Yodlee?
Noteworthy adviser technology vendors who use Yodlee include Blueleaf, CircleBlack, MoneyGuidePro (see MoneyGuidePro to integrate Yodlee for account aggregation), Orion Advisor Services, Wealthminder, Wealth Access, and Wells Fagro.
If you’re Envestnet, or if you use Envestnet products and services in your business, this acquisition is good. Very good. Envestnet now has a very broad portfolio of services that helps financial advisers run efficient businesses.
What services, you ask? They offer CRM, portfolio management and reporting, client portals, business intelligence, and mobile apps from Envestnet|Tamarac, financial planning software from Finance Logix, and now account aggregation from Yodlee.
If you’re a vendor who competes with Envestnet AND offers account aggregation to your financial adviser users, it could be bad. One of your product’s competitive differentiators, account aggregation, just got acquired by a leading vendor of financial technology and portfolio management solutions to advisers. Now what do you do?
And if you’re an adviser who doesn’t use Envestnet, your choices for an independent account aggregation solution are now smaller. Who’s left? Aqumulate, Intuit, Quovo, and Openfinance.
ByAllAccounts is owned by Morningstar (but an important note is that Morningstar doesn’t sell investment products or portfolio services, but rather adviser technology and investment research).
And Intuit is a special case, too, as once again, advisers can’t directly purchase or subscribe to Intuit aggregation. Aggregation from Intuit must be integrated by a third-party technology provider.
Openfinance is one to watch, as I was told recently that First Rate, SunGard’s main performance reporting partner, teamed up with OpenFinance to provide aggregation solutions for First Rate integration partners (e.g. Grendel CRM from Big Brain Works).
Plaid is out there too, but as far as I can tell, their bread-and-butter customers are consumer-oriented financial apps like Acorns and robinhood.
So overall, are the limited choices among aggregation solutions good or bad? I’m not entirely sure.
Some advisers choose not to offer account aggregation at all. Some do. It largely depends on how the business is structured and whether or not account aggregation boosts the overall value proposition of the firm.
A Yodlee Backstory
One of the Achilles’ heel of financial services is the forced fragmentation of where all of us keep our money.
Your monthly income and spending flows through a bank checking account.
Want a savings account that actually has an annual interest rate that isn’t zero? You’ll probably open an online savings account.
Want to invest in low-cost mutual funds? You’ll likely open an account directly with the fund company.
Want to own a few stocks? You’ll need a brokerage account for that.
Want to save for retirement? Your employer requires you to use certain retirement plan providers. Time to open another account.
Want to save for college? Again, your state might have a specific plan sponsor if you want to take advantage of state tax deductions. Boom, another account!
Seriously, why must the industry be so fragmented that consumers have no choice but to open so many discrete accounts across so many financial institutions?!?
So if you’re like most people who live on planet Earth and use money, it’s nearly impossible to see what you have one place AND keep that report up to date as your spending fluctuates and your investments rise and fall.
Enter Yodlee.
Yodlee seized the opportunity among this fragmentation to facilitate all-in-one reporting. As online financial account access became mainstream, Yodlee allows consumers to grant permission to read data from each financial account and aggregate all that disparate data into one dashboard, the Yodlee MoneyCenter. To build a buisness, Yodlee charges third-party companies (e.g. banks, insurance companies, trust companies, broker-dealers, financial apps like Personal Capital and LearnVest) to be on the receiving end of the aggregated data.
Fast forward to today and Yodlee’s market value for its business is in the neighborhood of $660 million.
And now you know the Yodlee backstory (well, as I tell it. There’s a lot more to the story, but this is what matters for you, the financial adviser).
Note: An earlier version of this post suggested that rumors indicated the Fiserv adviser-facing product AllData Advisor® was being phased out. A company spokeswoman for Fiserv wrote, “At this time, Fiserv has no plans to phase out the referenced advisor-facing product.”
On today’s broadcast, LPL financial reveals its robo intentions, Wealthbox raises the CRM stakes with an integration with Slack, and Smarsh steps up its archiving of your Microsoft Office 365 content.
Today’s episode is brought to you by ExternalIT, a leading provider of cloud solutions to the wealth management industry, With the recent integration of Microsoft Office 365, you can enhance the familiar tools of Word, Outlook and Excel with an extensive range of apps including VoIP communication, on-line meetings, collaboration, business intelligence, and more.
See how External IT brings all this together in a free webinar on August 18, so be sure to register today at fppad.com/externalit
[Today’s top story comes from LPL Financial, as the nation’s largest broker-dealer, oh, thank you disclosure, held its annual LPL Focus conference in Boston last week. On the technology side, LPL announced it will soon introduce its own an automated investment service, cough robo-advisor, consisting of low-cost ETF portfolios powered by LPL’s research. No details on pricing or even a name for the solution were provided, but LPL president Dan Arnold did say that a pilot program with about 20 advisors will be begin in the next few months.
LPL also announced the launch of its Vendor Affinity Program, calling it “a centralized repository” of vendors that offer discounted pricing to LPL advisors for their products and services. LPL is launching the Vendor Affinity Program with over 50 vendors from the get-go, with discounts ranging anywhere from 10 percent to 80 percent off retail pricing.
Now if you’re not affiliated with LPL Financial, don’t get too discouraged. Vendors don’t get to be included in the affinity program simply by offering a discount; vendors must also meet certain security and compliance requirements imposed by LPL, so this is the takeaway for you. If you’re not really sure a technology vendor will meet the standards for your own business, you can be more confident in those vendors who have passed muster with LPL by meeting some pretty high standards.
As far as who is in the affinity program? I couldn’t reach anyone at LPL in time before filming this episode to get that list, but some detective work on Google should yield a list of usual suspects who’ve issued press releases regarding their inclusion into the program.] LPL Financial LLC, the nation’s largest independent broker-dealer, a custodian for registered investment advisors (RIAs), and a wholly owned subsidiary of LPL Financial Holdings Inc., today announced the launch of its Vendor Affinity Program, a new initiative designed to help advisors reduce the complexity and costs of running their businesses.
[Next up is news from CRM provider Wealthbox, as the company announced a new integration with Slack, a wildly-popular online collaboration tool. “What is Slack?” you ask.
I’d rather not make a comparison to email, but, Slack is like email on steroids. But instead of collaborating via back-and-forth email threads, Slack lets you use real-time chat, aka messaging, to work with your team using Channels centered around certain topics, connect privately with colleagues using direct messages , or set up private groups with just a few team members to work on top secret tasks.
With the new Slack integration, Wealthbox users can select from 22 different notification types to automatically push into Slack, helping everyone in the firm stay informed on day-to-day activities. And with the Slack feed on your favorite mobile device, you should be able to stay in the loop on all sorts of tasks in your office no matter where you are.
And one last thing: since Slack can be used to chat about clients, and potentially WITH clients, you’ll need the Slack Plus plan that’s around $15 per month per user that includes compliance exports of all your message so you keep your compliance officer happy.] Wealthbox CRM, an activity stream-based client relationship management app for wealth management firms, has announced an integration with Slack, the messaging app for business teams.
[And finally, this week’s episode wraps up with news from Smarsh, the archiving solution provider, as the company introduced enhanced archiving support for Microsoft Office 365 environments. As more of you move away from local servers to the cloud, you still need to fulfill your compliance and record-keeping obligations required by FINRA and the SEC.
By all accounts, Microsoft is moving full-steam ahead on cloud services, so it’s pretty much inevitable that as long as you want to keep using Word, Excel, Outlook and more, you’ll need to incorporate a compliance solution for the resources you manage in the cloud. In addition to archiving Office 365 email, the Smarsh solution can also capture content on Yammer as well as Skype for Business Online, formerly called Lync, which is Microsoft’s attempt to compete with Slack that I mention, oh, about a minute ago.] Smarsh®, the leading provider of cloud-based comprehensive archiving solutions for compliance and e-discovery, today announced enhanced archiving support for electronic communications within Microsoft Office 365 environments.
Where have I been and why has FPPad been so quiet lately?
I just finished a three-week road trip up and down the eastern United States, not only for a great summer experience with my family, but to also launch the FPPad Tech Tour campaign for you.
FPPad Tech Tour is a new campaign I’m conducting with my executive producer Steve Biermann to collect the stories of people who are delivering technology solutions for your business.
We met with a dozen technology providers and filmed video with them learning more about the passion behind the work they perform each day.
Over the next few weeks, I’ll be posting the full video interviews online so you, too, can get a sense of why others are working so hard to help you build a better business and deliver better advice to your clients.
In the meantime, I hope you enjoy these short recap videos of week one and two on FPPad Tech Tour with some of the lighter moments experienced on tour.
Week One
Week Two
But wait, there’s more!
FPPad Tech Tour is not just a campaign about financial adviser technology, it’s also a campaign to raise money and awareness for the Foundation for Financial Planning.
Please support the Foundation for Financial Planning and the grant writing they perform to support the growth of pro-bono financial planning nationwide.
On today’s broadcast, Michael Kitces highlights a roadmap for location independent advisors, several new tech tools emerge that are worthy of your attention, and what are all these videos about something called FPPad Tech Tour?
Today’s episode is brought to you by Laser App Software, host of the Laser App Financial Services Conference coming this August in San Diego.
This year’s conference is all about adoption, delivering strategies for broker-dealers, enterprises, and more to increase stakeholder adoption and get the most out of their technology platform. Space is limited, so secure your free registration today by visiting fppad.com/laserapp2015.
[Now on to this week’s top story which comes from Michael Kitces over at Nerd’s Eye View, as Kitces writes about the growing trend of location-independent financial advisors. This business model of the virtual financial advisor is still relatively new, enabled by the nearly ubiquitous access we all have to the Internet coupled with technology solutions based exclusively in the cloud. It wasn’t that long ago that most of us couldn’t even read business email while out of the office!
So in his post, Kitces highlights an eBook called “The Virtual Advisor” written by XY Planning Network co-founder Alan Moore. By the way, Kitces is the other co-founder of XYPN. Anyway, the 41-page eBook is loaded with dozens of technologies, apps, and solutions that can help you work from anywhere along with several profiles of XY Planning Network members and the systems they use to run a location-independent business.
Now you don’t have to be an advisor to Gen X and Gen Y clients or even meet the age criteria of Gen X or Gen Y to benefit from these tools and techniques. I think you should take a look at the resources in this book and see if anything can complement or outright replace some of your existing legacy systems to improve the way you work.
The best news is that The Virtual Advisor eBook is free provided you’re willing to give up your email address, so you can head over to fppad.com/168 to get the link to download the ebook today.] Yet the rise of technology is creating a new service model for financial planning – the “virtual” advisor, who uses web-based tools and technology to serve clients, regardless of where the client (or advisor) happens to be.
[Next up is news from Dave Grant of Finance for Teachers, as Grant recently highlighted five smart tech tools for advisors in his column for Financial Planning magazine this month. Some of these tools I’ve mentioned on the show before, including Advizr from episode 146, which Grant complimented for it’s attractive, easy to use basic financial planning capabilities, and Schwab Intelligent Portfolios from episode 153, as Grant mentioned the potential time savings from the low-cost automatic allocation and rebalancing solution.
But Grant covered three other solutions that I haven’t covered before, leading off with MyPlanMap. This tool takes your action items and todos from your planning meetings and places them on a timeline so clients can see what’s ahead, and they can also see what you’ve done for them in the past. I think that’s pretty cool.
Second is Twenty Over Ten, a website provider that offers a variety of attractive themes that are responsive for all kinds of devices, simple editing tools, and a built-in archiving for compliance. At $49 a month after a one-time setup fee, it’s definitely an attractive option.
And finally, Grant highlights ClickDesk which is a plugin for your existing website that reveals a chat box for your website visitors. If your website visitor wants to ask you a question, they can start a live chat right from your website, and completed chats are emailed to you so you can save the record for compliance. I covered a similar service called Olark two years ago in one of my columns for Morningstar, which I’ve linked to over at the FPPad website.] I am always on the lookout for new technology to use in my practice. Here are some of the platforms that have recently caught my eye.
[And finally, you might have seen a few videos from me this week about something called FPPad Tech Tour. That’s right, starting Monday, I’m going on tour!
FPPad Tech Tour kicks off next week with an epic three week road trip from Atlanta to New York City and back, stopping in seven cities along the way. My executive producer Steve Biermann and I are going on tour to capture the stories of people who are working so hard to build technology solutions for you, the financial advisor, so you can run a better, more effective business.
There’s already a lively discussion happening on Twitter using the #fppadtechtour hashtag, so I invite you to join us and follow along as we work to capture the passion each individual has to make you a better advisor.
Make sure you’re subscribed to FPPad newsletter for updates from the tour.]
In the race for robo adviser supremacy, neither Wealthfront nor Betterment wants to be runner-up.
