Welcome to a new FPPad fintech briefing, Here are the top fintech stories you need to know today.
BlackRock Announces Strategic Relationship with Envestnet
First up is news from BlackRock, the world’s largest asset manager, as the company announced a strategic relationship with Envestnet, a provider of research, analytics, portfolio management, and reporting tools for financial professionals, and also announced that the company purchased a 4.9% equity stake in Envestnet for roughly $123 million dollars.
According to a press release, the new partnership will accelerate work to integrate BlackRock Digital Wealth’s technologies into Envestnet’s platform, which includes solutions such as iRetire, FutureAdvisor, and Aladdin Risk for Wealth Management. The partnership also provides Envestnet with additional growth capital, which some analysts expect Envestnet will use for strategic acquisitions in 2019.
LPL Financial Acquires AdvisoryWorld
And speaking of acquisitions, earlier this week, LPL Financial, the nation’s largest broker-dealer announced the $28 million dollar acquisition of Advisory World, an investment analytics technology provider to financial advisers.
The AdvisoryWorld acquisition will bring over 30 years of analytics and technology expertise to LPL, as the company’s tools like proposal generation, hypothetical illustrations, and digital on-boarding workflow have been widely adopted by over 30,000 financial advisors and institutions in the U.S.
I caught up with AdvisoryWorld COO Mike Wilson for his thoughts on the acquisition announcement:
This is just a great opportunity for us to continue to serve our existing clients in new ways and to deliver our capabilities to more people. Leveraging LPL’s resources will allow us to evolve our offerings, we’re going to be able to try new things and to learn from a broader base of customers which will help us deliver the most sophisticated service we can to all of our clients, both existing and new. Something completely that I must underline is LPL has this broad base of experience and knowledge that we can use to widen our offering to different types of products and to a more diverse audience.
For more information, be sure to visit FPPad.com/flashbriefing for all the links to today’s top stories.
I’m Bill Winterberg, and those are your fintech headlines for today from FPPad.com. Check back in with me later for more fintech news.
Several investing apps announced new rounds of fundraising this week, with the biggest announcement coming from Robinhood, the commission-free stock and cryptocurrency trading app. Robinhood said it officially raised $363 million in Series D funding, valuing the company at $5.6 billion, confirming a report published by the Wall Street Journal earlier in March. Robinhood says it now services more than 4 million stock trading accounts and has rolled out cryptocurrency trading to users in ten states, although the company declined to say how many users pay for the Robinhood Gold premium membership or whether the company is profitable.
Acorns Raises $50 Million in Round Led by BlackRock
Another company raising new capital is Acorns, as the spare change investing app announced it raised $50 million in a round led by Blackrock, the world’s largest asset manager with more than $6 trillion dollars in assets under management. According to a company press release, Acorns now has over 3.3 million investment accounts on its platform and says Blackrock’s participation won’t influence the allocations among the exchange-traded funds in customer portfolio allocations, which include a mixture of ETFs from Vanguard and Blackrock.
BillPort Supports Complex Adviser Fee Billing
And with all these free apps available for investing, consumers are getting much more sensitive to paying fees, including the they pay for financial advice from their financial advisers. So if you’re a financial professional, how are you managing the different fee schedules you want to support overwhelming your staff with custom spreadsheets to monitor your billing. I recently connected with Hemant Moré to learn more about how his solution called BillPort can address nearly every method an adviser wants to use to calculate fees:
There are some clients who like to prorate the fees, there are some clients who like to provide credits, write offs, discounts, minimum fees, maximum fees, minimum or maximum fees on tiers. So there is a whole different kind of way that each firm behaves, and BillPort can handle many of those situations.
To view the full promotional demo of the BillPort solution, visit fppad.com/flashbriefing for the links to today’s top stories
I’m Bill Winterberg, and those are your fintech headlines for today from FPPad.com. Check back in with me later for more fintech news.
On today’s broadcast, LPL Financial hooks up with BlackRock’s FutureAdvisor, Riskalyze and Advizr integrate their platforms, and bots might be the future of financial technology.
Today’s episode is brought to you by Twenty Over Ten, providers of beautiful, tailored, mobile responsive websites specifically for Financial Advisors.
Easily manage your brand while automatically archiving your website changes for compliance. Sign up for a 45 day free trial today by visiting twentyoverten.com/fppad. Oh, and be sure to watch the YouTube channel for videos from next week’s NAB Show, which are also brought to you by Twenty Over Ten.
[Now on to this week’s top story which comes from LPL Financial, as the nation’s largest independent broker-dealer announced it will use BlackRock’s recently-acquired FutureAdvisor platform to power an online automated investment offering. LPL first hinted at its plans for a “robo advisor” back in the summer of 2015 at its annual Focus conference, which was roughly one month before BlackRock made its FutureAdvisor acquisition.
While the announcement sure generated some buzz, no details on specific pricing or availability were provided. What the press release did say is that the model portfolios will be provided by LPL’s research department, so at least initially, advisors and reps will not be able to create their own custom allocations.
The press release also said the automated solution will be integrated with LPL’s custodial platform, but it didn’t say if that was the existing BranchNet platform or the much-anticipated ClientWorks, which as far as I know, has still not been officially released.
So at least we now know what LPL’s robo strategy will be, but with so many forward-looking statements, we don’t know when that strategy will be ready for use by LPL’s financial advisors.] Leading retail investment advisory firm and independent broker/dealer LPL Financial LLC, a wholly owned subsidiary of LPL Financial Holdings Inc. (NASDAQ:LPLA), today announced it will use BlackRock Solutions’ (BRS) FutureAdvisor platform to support a digital advice platform for use by LPL’s financial advisors and institutions and their clients.
[Next up is news from Riskalyze and Advizr, as the two companies announced a new integration to streamline financial advisor workflows. The new integration will import Riskalyze model portfolio sets into the Advizr financial planning software, allowing advisors to recommend the most appropriate asset allocation according to their client’s personal Risk Number.
Not only that, both companies offer effective lead generation tools for advisors, with Riskalyze offering prospects the opportunity to determine their own Risk Number, and Advizr offering a quick financial plan illustration with Advizr Express.
The combination of the two will help advisors gain more information about prospects’ risk tolerance and the building blocks of a complete financial plan.
The companies called the integration “a match made in heaven” because both of them are winners of the Best Client Facing Technology award announced right here on FPPad.
So as a result, and I am now officially accepting endorsements for matchmaking on my LinkedIn profile.] Advizr, the financial planning software recognized as the Best Client Facing Technology of 2015 by Bill Winterberg’s FPPad, and Riskalyze, the world’s first Risk Alignment Platform recognized for the same award in 2014, are integrating their award-winning products to provide an elegant, intuitive and seamless solution to financial advisers.
[And finally, this week’s top story comes from the future, oh wait, “THE FUTURE!” as Facebook CEO Mark Zuckerberg took the stage at this week at F8 conference and detailed the company’s roadmap for the next 10 years.
My best takeaway for you is the launch of the Messenger Platform that includes automated messaging powered by bots, no, not that bot, these are automated messenger bots.
With bots in messenger, you can make online clothing purchases, receive weather forecasts, view top headlines and more.
I can totally see bots making their way into your technology. Imagine if you could ask your Redtail bot when you next client meeting is scheduled, or your Orion bot how your AUM has grown over the past year, or even allow clients to ask the MoneyGuide Pro bot for their updated retirement confidence meter. How cool is that?!?
And if vendors eventually integrate bot into existing services, I bet that they’ll also include message archiving and retention so you can confidently use bots without violating your compliance requirements.
Oh, did I just give those vendors a little more work to do? I’m sorry!
Unfortunately there’s no word yet from FINRA or the SEC whether your bot has to be fingerprinted and subject to a background check. Thank you, I do two shows a night!] We’re excited to introduce bots for the Messenger Platform. Bots can provide anything from automated subscription content like weather and traffic updates, to customized communications like receipts, shipping notifications, and live automated messages all by interacting directly with the people who want to get them.
Here are stories that didn’t make this week’s broadcast:
Less than one month after an investment round that doubled its private valuation to around $700 million, the robo-adviser Betterment is adding a former top executive from Charles Schwab, John S. Clendening, to its board.
That’s why starting today, we’re introducing Goals in Google Calendar. Just add a personal goal—like “run 3 times a week”—and Calendar will help you find the time and stick to it.
Orion Advisor Services, LLC (“Orion”), a premier portfolio accounting service provider for financial advisors, has announced it is now integrated with FactSet, a leading provider of financial data, analytics, and service, to offer its advisor clients easy access to portfolio research and analytics.
On today’s broadcast, BlackRock plans to acquire FutureAdvisor, Salesforce previews it’s Financial Services Cloud platform, and a new white paper from Kaleido will tell you how you’re going to overhaul your business model.
Today’s episode is brought to you by Laser App Software, host of the brand-new Laser App Advisor Con event coming this October in Las Vegas.
This event will be led by top advisors, offering their own case studies and best practices on adopting industry-leading technology. Space is limited, so secure your registration today by visiting fppad.com/laserapp2015.
[Well, if you haven’t heard by now, the big news this week comes from BlackRock, as the world’s largest asset manager with around $4.7 trillion under management, agreed to acquire FutureAdvisor, the online automated investment service based in San Francisco. Let’s run the numbers: FutureAdvisor reportedly manages $600 million dollars, at 50 basis points, they earn, at best, $3 million in gross revenue, BlackRock reportedly paid something like $150 million for FutureAdvisor, so they paid 50, that’s right, 50 times gross revenue for the company. Wow. If it’s true, that’s like, way beyond Facebook and Twitter valuation territory! For an automated investment service!
So let me cut to the chase for your business. In a Wall Street Journal interview, BlackRock COO Robert Goldstein said that as BlackRock looks to “grow the company, our focus is going to be on working with our partners.”
In other words, financial institutions. Does that include you, the RIA? I don’t know. But it could be just institutions that compete with you day after day for client assets. Great.
So if this doesn’t light a fire under you to enhance your technology, improve your client experience, and clearly identify that your services go WAY beyond automated investing, I don’t know what will.
Look. I believe in you, I believe in the value you add for your clients, and I trust that what you is so much better than a five-question risk survey followed by an asset allocation recommendation.
But if you just sit there on your hands and do nothing, I just don’t see how your business stands a chance over the next five years.] BlackRock, Inc. has entered into a definitive agreement to acquire FutureAdvisor, a leader in digital wealth management.
[Next up is news from Salesforce, another industry behemoth, that this week announced it will release the Salesforce Financial Services Cloud in February 2016.
Claiming it’s the company’s “first industry-specific product,” (I guess they want to forget about Salesforce for Wealth Management?), the platform will offer a much more modern interface, secure private messaging with clients, and even integrations like Advisor Software for portfolio rebalancing and Yodlee for account aggregation.
But after closer inspection, Salesforce Financial Services Cloud seems positioned mainly for broker-dealers and large enterprise RIAs like United Capital, one of the firms who offered design feedback. Just look at some of the terminology they use: Book of business? Tear sheet? That should give you a clue.
So as an independent advisor, I don’t quite yet see you using something like this directly from Salesforce, but rather it will likely be an option offered by an institutional custodian or one of the many Salesforce overlay providers like Concenter Services, Navatar, Salentica, and more.] Salesforce, the Customer Success Platform and world’s #1 CRM company, today introduced Salesforce Financial Services Cloud, transforming the client-advisor relationship for the digital age.
[And finally, if you’re not already depressed by today’s broadcast, the researchers over at Kaleido, led by co-founders Angie Herbers and Kristen Luke, have noticed a disturbing trend among advisory firms. That trend is the rapid decline of profit margins.
Great. Just what you wanted to hear. But, I produce this broadcast to give you solutions to grow your business, so along with Kaleido’s research, the company issued a white paper describing what it calls the X-Cell Process™.
In a nutshell, the four-step X-Cell Process outlined should help you overhaul your service models so you can successfully incorporate automated investment technology into your business.]
This is not a paid endorsement, I just think it’s a useful resource for you to have, and all it will cost you is your email address.] Kaleido Inc., a practice growth agency serving independent financial advisory firms, has released a white paper entitled “X-Cell: The New Frontier of Advisory Client Service,” identifying growth inhibitors and other trends affecting the independent advisory community, as well as focused, tangible solutions.
In a press release this morning, BlackRock, Inc., the world’s largest asset management firm by AUM (source: relbanks.com) announced it has entered into a definitive agreement to acquire FutureAdvisor. Terms of the acquisition were not disclosed.
Let’s hit some fast facts again, shall we:
FutureAdvisor was founded in 2010 and had raised $21.5 million in four rounds (source)
FutureAdvisor had a reported AUM of $600 million in June 2015 (source), though their most recent SEC Form ADV from September 2014 reflected $232 million. This lagged online automated investment leaders Wealthfront and Betterment by approximately $2 billion as of August 2015
FutureAdvisor charged a Subscription Fee for the Premium Service of 50 basis points, making it more expensive than competitors Wealthfront and Betterment
Assuming a 50 bps fee on all $600 million results in gross revenue run rate, at best, of $3 million (remember AUM of $232 benchmarked in September 2014)
What does this mean for advisers?
Not much. Really. Return to your business.
But here’s the thing. BlackRock is an asset manager. BlackRock does well when its asset base grows. How can the company continue to grow its assets?
One way is to offer a new, simple, and attractive way for investors to automatically add their assets to low-cost, broadly diversified portfolios of funds and ETFs.
Enter FutureAdvisor.
A bonus for BlackRock is if the company can find a way to invest those assets into BlackRock-managed products.
Say, iShares ETFs.
What to do now
You come to FPPad for ideas on what to do with the technology in your business. So here’s what I think you should do.
Number one: Offer your own online, user-friendly interface
If the world’s largest asset manager sees the need to add a low-cost user-friendly online asset allocation tool to its arsenal, isn’t it time you have one for your business?
Prospects are comparing your capabilities to the services they see from Wealthfront, Betterment, FutureAdvisor, et. al., and if you come up short and don’t have an answer to their slick platforms, you’re probably viewed as a laggard.
Number two: Tell clients what you really do
Automated investment management is a commodity.
Anyone can get it from Schwab, Wealthfront, Betterment, FutureAdvisor. You could argue that the first mutual funds were the earliest automated investment management solution!
Sure, tax loss harvesting, daily rebalancing, and instant deposits are bells and whistles for automated investment solutions, and the results of whether or not those features actually result in any additional money in customers’ pockets is highly dependent on each customers’ personal situation.
But for you, as an advisor, investment management is just ONE of the things you do. It’s not the ONLY thing you do.
You do SO MUCH MORE.
So let clients know.
Even better, let your prospects know how much more you do.
You’re not justifying the fees you charge, you are reinforcing the value you provide by giving clients the service they need in ALL areas of their financial life.
You go WAY BEYOND investment management.
So do that. Tell clients what you really do, and why what you do goes way beyond automated investment management.
