The Golden Age of FinTech in Wealth Management

The Golden Age of FinTech in Wealth Management

I tweeted recently that the Fall season in the independent advisory industry draws parallels to football season – after a prolonged, fairly sleepy Summer of re-charging, as soon as our calendars flip to September and we find ourselves suddenly past Labor Day, things get intense in a hurry. This has been true for many years. Yet, this year feels different. This year, it feels as if the entire industry got jabbed with an adrenaline shot and we’re all running around like mad people, equal parts excited, anxious and amazed. I believe I’ve discovered the root cause.

In years past, the industry has had its share of trends – “commission to fees” was hot about 10+ years ago. Succession planning has been sliced and diced in myriad ways, and will always be important. M&A? Always of interest – deals and advisors moving about fascinates us all and is particularly thrilling when the independent space wins. Pick your topic, they are all interesting, especially to industry nerds like me. Greying of the industry you say? All day baby, can’t wait to read the latest stats and analysis! But we’re in a new phase of growth and development – the industry has passed its technology tipping point.

It all started with the robo-craze. All of a sudden, advisors were looking over their shoulder. Pundits have been talking about an extinction-level event for RIAs, particularly smaller ones, for years and years – was this it? Would human advisors become obsolete? The prospect sent a jolt through the industry and has been debated and dissected ad-nauseum at this point. The general consensus is that no-one is being replaced by robo-advisors or artificial intelligence – but this ignited a fire that has recently become a full blown inferno. While the “robo-debate” held everyone’s rapt attention, the DOL was cooking up some rule-making that would be the catalyst to what can only be classified as a technology frenzy in the industry.

Orion Advisor Services held its third annual #FuseUtah event in Park City and invited coders only (a few advisors were judges) to collaborate and develop the foundations of future financial technology. The problem next year will be “how big” should the event be allowed to be – a good problem to have, to be sure.

Then, on September 19th, in San Diego, another dynamic event took place – the second annual XY Planning Network Conference (#XYPN16) which featured a brand new fin-tech offering from Michael Kitces (AdvicePay) as well as a competition featuring 6 finalists (from dozens of entrants) that represented small, as-yet unknown firms in the industry vying for the attention of a group of over 400 independent financial planners and RIAs whose median age was 37. Alan Moore, co-founder (with Kitces) of XYPN remarked from the stage, radiating unbridled excitement: “. . .have you ever been to a conference in this industry where you looked around the room and saw this many women? This many people of color?” He was right – I hadn’t.

Kitces and Moore, partners in more than a couple ventures together, were in rare form. They also unveiled a book detailing their “retainer model” for charging for planning and advice. AdvicePay offers a technology-driven platform for planners to take their fees, on a recurring retained basis, in fully compliant fashion. They have effectively built an RIA 101 starter kit for the younger generation just getting a feel for the entrepreneurial wilderness, or the older set who wants to offer service to Gen X and Y clients and prosper despite volumes of papers and articles warning that this set is not wealthy enough to bother with.

The winner of the inaugural small-firm FinTech competition was a firm called Snappy Kraken, whose logo is a jolly little version of the fearsome creature found in mythology. Snappy offers planners a robo-marketing platform, aggregating many digital tools into one hub that busy financial professionals can use to organize their campaigns. It is headed by Robert Sofia, a longtime financial advisor coach and marketing expert. Interestingly each of these firms had to stand and “pitch” their concept and platform to a room full of advisors and a judge’s panel that included Kitces and Bill Winterberg among others. Fuse also puts companies in the hot seat to pitch their creations, albeit in a smaller (but no less intimidating) environment.

Despite my excitement with regard to all of the FinTech buzz in the first half of the month, it felt as if we were building up to something. It was almost a natural progression – coders drinking beer in a large ski lodge and not sleeping for days, leading to hundreds of young planners eager to access the XYPN brain power and see brand new FinTech firms in action. . . all of it culminating with an industry alpha-dog putting on a technology clinic that would set the bar and tone for the industry heading into 2017. Enter the eMoney Advisor Summit, which kicked off on Sept. 21st in Dana Point at the Ritz Carlton.

Once you caught your breath from the ridiculously spectacular views (did I see a whale breach out in the Pacific?), you couldn’t help but note that this was a veritable who’s who of FinTech companies gathered together to discuss the future of the industry, led by Ed O’Brien, who was appointed CEO in March of this year. Joel Bruckenstein kicked it off and gave the firms assembled the big tech picture – CRM, ECM, robos. . . what are they? How do you buy them? Implement, train? Hint: one way NOT to do it is to purchase technology and expect your staff to use it and do it all for you. eMoney spent the next 2.5 days rolling out new offering after new offering – all DOL oriented. Ed O’Brien repeated the phrase “post-DOL world” at every turn – everything needs to be framed and viewed in this context according to eMoney. FinTech was to be, henceforth, “Fiduciary Tech”.

eMoney announced enhancements to all tools available to their customers. Archiving, tracking every movement of every form, and a new custom analytics dashboard, for both advisors and larger firms. It would be easy to brush this aside as opportunist sales strategy – advisors concerned with robos? Let’s offer a whole bunch of robo-solutions! DOL got you up at night? There’s an app for that!

But there’s more at work here. Conferences around the industry all of a sudden have a Silicon Valley vibe to them. Technology is all anyone wants to talk about – this “greying” industry feels sexy all of a sudden. Financial advisors seem infected with a techie swagger. Roaming among them, in fact, are those very techies. They talk fast and have opinions, and tempers, and spar with each other. They woo the advisors, court them – the cool guys fighting over the bookish analysts and planners’ mind share. It’s not just sales talk and posturing – this is real, tangible, hot new technology that you can demo – you can play with it, integrate it, shape it to suit your business. It’s more than a “topic” or “trend” – you can touch it.

In this invigorated landscape, firms like eMoney and those of their size find themselves in the enviable position of being the technology foundations (integration partners) of many smaller firms – and the object of larger firms’ desire. When Fidelity bought eMoney it was major news in part because of many industry talking heads peering into their crystal balls and putting bats wings and frog’s eyes into the cauldron and foreseeing a quick assimilation into the mother ship. But what they and perhaps the acquirers might have underestimated is the fierce independence of these firms – it’s the very thing that makes them so dynamic in the first place. They are like wild stallions – beautiful creatures with awesome power and stamina that people are determined to control – but they cannot, nay, should not, be controlled. Let them run free and you’ll witness their true power. Which is not to say you can’t guide them in certain directions to a reasonable extent.

I caught up with Mike Durbin shortly after the eMoney conference to check up on the Fidelity/eMoney relationship. I told him that people are curious – does one and one equal more than two? Has the acquisition yielded what was expected? He is emphatic in offering a resounding “yes”. One can’t dispute the numbers, with eMoney projected to be up over 60% post-transaction in top-line revenue, and users since the end of 2014 (projected through end of 2016 based on available data). Durbin, keenly aware of perception that eMoney and Fidelity are an inseparable unit, describes the sense of navigating a “tightrope” – but nearly two years in, eMoney retains its independent spirit and Durbin maintains the stance he put forth in his open letter to the industry when transitioning the CEO torch to O’Brien – “let us show you” rather than tell you (how this is going to work). Fidelity is, of course, responsible for a portion of this rapid growth, he says (of course, how could they not be), but eMoney is growing irrespective of the relationship and this is important, and will continue.

Does Fidelity have an “eMoney advantage” over other custody firms? Any firm with eMoney as a partner would. But again, Durbin says, look at the deals – Waddell and Reed, for example. eMoney, he says, is absolutely clearing and custody agnostic – in fact as we spoke one can almost sense an imperceptible wince, as Durbin bleeds Fidelity green through and through. He is also unmistakably a huge eMoney fan, speaking about them in a reverent way befitting a man who took the reins post-Edmond Walters and led them successfully onward and got to know them and their spirit. The tone is that of a proud parent – yes you have some degree of influence, but ultimately you need to do your best to counsel and offer advice and then get out of the way. That is the sense I came away with here.

And what of the plans for a Fidelity robo, using eMoney as the engine? What has become of that? Durbin points to the significant amount of resources that have been invested in eMoney to enhance and upgrade systems already serving advisors as they serve their clients – many announced at the Summit. The short answer? Stay tuned. And other acquisition plans? Again, stay tuned – there will be builds, and there will be buys, and partnerships. Durbin is effusive in praise of O’Brien and eMoney senior management in no small part because they have done so well at the helm that Fidelity Wealth Technologies can now get back to focusing on the vision and looking further downrange at how to achieve it. The overall sense you get in speaking with him is that everything is thought through extremely carefully. This pairing does not feel like an appendage slapped onto a creature in Frankenstein fashion, left to flap about haphazardly, but rather more like a heart transplant.

Add everything up, go conference to conference, and you see technology everywhere. You see the large-type multi-faceted old school cats with their booths and spiffy marketing collateral and sales pros. You see kids who look barely old enough to shave rocking the dope skinny jeans and sneakers, tatted up and spouting what sounds like gibberish but has some coder or another hopping up and down with excitement. You have entrepreneurs of well-known RIAs and industry aggregators rubbing elbows with tech entrepreneurs who prefer t-shirts over suit and tie. No industry conference or event happens without a Twitter hashtag nowadays – and if they do, who cares, because no one pays attention to those ones. Publications can’t develop a FinTech section of their websites fast enough. If you thought the industry was exciting years ago, like I did, and you’ve been a part of it for a while, you can’t help but smile. Technology is here to stay and the digital age is permanent – “robo-advisor” is a word in common usage by consumers. The SEC is holding a FinTech forum on November 14th and live streaming it. This is a golden age.

Jason Lahita
Jason Lahita
After hanging up his spurs fixing military aircraft, completing his undergrad at NYU and being dragged to Southern California by his wife, Jason promptly entered the RIA community alongside Joe Duran, as the first employee of the newly formed United Capital Financial Advisers. At United Capital, Jason got his first taste for financial PR, securing Joe on the cover of Financial Advisor magazine, as well as coverage of the company and its advisers across numerous other financial media outlets. In addition to representing the corporate brand nationwide and establishing clear and consistent messaging, Jason also worked with the regional RIAs that joined the firm. Following United Capital, Jason built the financial advisory unit of an international financial PR agency, establishing and leading their Los Angeles regional office. While in the early stage of his time at the agency, Jason received his MBA at UC Irvine’s Paul Merage School of Business, with a Marketing focus. Jason left the agency in 2012 to launch FiComm Partners and focus 100% on the RIA space. He was soon joined by business partner Megan Carpenter. He has established relationships with journalists from the NY Times, Wall Street Journal, Barron’s, CNBC, FOX Business, Forbes, Thomson Reuters, Financial Planning, Investment News,, REP, ThinkAdvisor and Financial Advisor Magazine, to name just a few. When he’s not writing articles marveling at the evolution of the industry and it’s citizens, Jason can be found in the shadows, where good PR folks are most comfortable.

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