Executive Summary
Welcome to the November 2022 issue of the Latest News in Financial #AdvisorTech – 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!
This month’s edition kicks off with the news that a new RIA custodian – Entrustody – has launched, as independent RIAs continue to clamor for more alternatives than what has now become the ‘Big 2’ of Schwabitrade and Fidelity. As with Altruist, the ‘other’ new startup RIA custodian to launch in recent years, Entrustody is pledging to have a more modern interface with a better user experience, more and deeper integrations, and a more transparent price structure than ‘traditional’ custody services.
Notably, though, the reality is that changing RIA custodians still requires the repapering of clients and retraining of staff (and the latter cost is still incurred even if firms ‘just’ add Entrustody as a second custodial platform without moving existing clients), which raises the question of whether Entrustody has enough efficiency improvements to actually convince advisors to switch. While at the same time, competition has already heated up for new advisors (who can pick a new custodian without repapering or retraining because they’re just getting started) with SSG, Altruist, and even Schwabitrade itself pledging no minimums, and a number of ‘new’ RIA custodial competitors like LPL and SEI are increasingly competing for breakaways as well. Which raises the question of whether and where Entrustody may even be able to make a beachhead in a surprisingly crowded marketplace for the few advisors who are in a potential custodial transition?
From there, the latest highlights also feature a number of other interesting advisor technology announcements, including:
- Orion’s Redtail launches “Redtail Campaigns” in partnership with Snappy Kraken to facilitate CRM-based drip marketing emails
- Hearsay Systems rolls out a new small-to-mid-sized RIA platform for social media compliance and website design
- Riskalyze signals an intent to rebrand itself away from ‘just’ risk tolerance assessments to a broader focus on helping advisors grow clients and assets
Read the analysis about these announcements in this month’s column, and a discussion of more trends in advisor technology, including:
- Merrill Lynch launches a new ‘Merrill Match’ system that downplays an advisor’s geography and focuses more on advisor ‘fit’ with respect to expertise, meeting preferences, and communication style
- Ezra Group launches a new “WealthTech Integration Score” for major AdvisorTech vendors to help advisors better assess which software has the most meaningful deep integrations
In the meantime, we’re excited to announce several new updates to our new Kitces AdvisorTech Directory, including Advisor Satisfaction scores from our Kitces AdvisorTech Research, and the inclusion of WealthTech Integration scores from the Ezra Group!
And be certain to read to the end, where we have provided an update to our popular “Financial AdvisorTech Solutions Map” as well!
*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!
Nearly 3 years ago, Charles Schwab ushered in the new era of “ZeroCom”, cutting its trading commissions on stocks, ETFs, and options to $0. At the time, Schwab generated less than 10% of its revenue from trading commissions, while many competitors relied on them for more than 20% of revenue, such that Schwab aptly determined that the cut would allow them to both win retail investors (attracted to zero trading costs) and have opportunities to acquire competitors that couldn’t survive in a ZeroCom era. And sure enough, within just two months, in the fall of 2019, Schwab announced that it was acquiring TD Ameritrade.
From the advisor perspective, though, the “Schwabitrade” merger made waves immediately, raising concerns that it would be “anti-competitive” by concentrating so much of the RIA custodial market share in a single player that Schwab’s immense economies of scale would be able to dominate on pricing and services (especially recognizing that it was Schwab’s ZeroCom pricing strategy that “took out” TD Ameritrade in the first place, and, after the merger, Schwab would just be even larger with more pricing power!). Yet ultimately, after conducting an antitrust investigation, the Department of Justice concluded that the Schwabitrade merger could go through, giving Schwab the majority of all independent RIA assets.
In the more-than-2-years since, the question from the advisor industry has been what new or existing players would arrive to take on Schwab, as what was historically the “Big 3” (Schwab, Fidelity, and TD Ameritrade) came down to the Big 2 (Schwabitrade and Fidelity), with two mid-sized competitors (Pershing and LPL’s RIA platform), and a very long tail of smaller more niche-oriented RIA custodians like SSG and TradePMR. For which the number of new competitors thus far has been relatively sparse, with just Altruist entering as the sole startup competitor, and SEI expanding its existing independent-broker-dealer and trust platform into a full-fledged RIA platform.
And now, the next new entrant has appeared: Entrustody, which debuted itself on the FinTechX Demo platform stage at the FutureProof wealth festival. In a hyper-competitive space, Entrustody is aiming to differentiate itself on a more modern (i.e., “more intuitive and easier to use”) custodial interface, along with a ‘virtual digital assistant’ tool that helps to prompt advisors about their next action items, and similar to SEI’s recent offering a more transparent ‘fee-for-custody’ type of pricing structure.
The caveat, though, is that notwithstanding a general clamor from RIAs to have more options than ‘just’ Schwabitrade and Fidelity, it’s not clear whether Entrustody will be able to win away custodial business from the incumbents, as the irony is that it’s still so much work to repaper clients and retrain staff on new custodial systems that it will be hard for Entrustody to save advisors more time using it than they’ll lose by switching to adopt it in the first place. As is, most RIA custodians that have gained business in recent years either did it by having something else to offer (e.g., historically the Big 3 dangled their custodial referral platforms as incentives to attract large firms), by differentiating with a more niche capability (e.g., SSG with its human service, Equity Advisor Solutions with its ability to support alts, etc.), or by pursuing new RIAs when they’re getting started to capture the new-RIA formation (e.g., SSG with its no-minimums platform, and more recently Altriust).
But Entrustody doesn’t appear to have a big incentive to convince existing advisors to switch (or do the additional work to add a new custodian on top of their existing), and capturing the new-advisor space is harder than ever with Schwabitrade itself now vaunting a no-asset-minimums pledge, on top of existing no-minimums competitors.
In fact, at the same time, Goldman Sachs – which has also been reportedly working on a new RIA custodial offering ever since it acquired Folio Financial nearly 2 years ago, with an expectation that it would pursue wirehouse breakaways who would value Goldman’s Wall Street brand coupled with an independent RIA platform solution – recently announced that its RIA custodial offering has been even further delayed, as even with all of its resources, Goldman still appears to be struggling with the overhaul of Folio necessary to compete more broadly for larger RIAs, and building out the distribution system and service capabilities necessary to attract larger breakaway teams quickly. Which just further highlights how challenging it can be to break into the RIA custody business.
Ultimately, the concentration of RIA assets at a small number of mega-players does highlight a need for greater competition, but the sheer economies of scale needed to effectively compete in the RIA custody business also highlights how difficult it is to break into a highly competitive – and highly commoditized – marketplace. Which suggests that in the end, the real question for having more and better competition in RIA custody is not just getting funding to launch a competitor, but whether companies like Entrustody and Goldman can establish a combination of unique capabilities and a distribution strategy that allows them to make a beachhead when so few advisors want to go through the trouble of making a change in the first place?
For most of our history as financial advisors, growing a client base was a “contact sport” – literally, by getting out into the community, cold-knocking or attending networking meetings, shaking hands and ‘making contact’ with prospects. It was, in essence, a consultative-sales approach to growth, where advisors would seek to make connections and build relationships with prospects, get to understand their needs and challenges, propose solutions to help them, and then turn them into clients who will pay for help to implement those recommendations.
In the traditional sales-driven approach to advisor growth, there was no such thing as “marketing”. The very idea that you could spend marketing resources to “make the phone ring” was almost comical, analogous to trying to go fishing with a strategy of waiting for the fish to just jump into the boat for you. As the saying went, “financial services products are sold, not bought”.
However, beyond the financial services industry, “marketing for small businesses” – in particular, email marketing – has become a hot tech category, spawning unicorns like MailChimp and HubSpot, that built platforms to make it easy for business owners to begin using email to drip market to their prospective customers. And over time expanded into building landing pages, websites, and CRM systems to manage the growing base of prospects and customers in a single unified system.
In the financial advisor domain, email marketing systems have been slow to gain adoption, as while financial advisors have historically used some drip marketing tactics – for instance, sending a quarterly (print) newsletter to the names on the business cards that were collected at networking meetings – most financial advisors don’t know how to build an email list online. As a result, the more successful advisor marketing services like White Glove and Snappy Kraken have taken a very “done for you” (or at least, very “pre-built for you”) approach to marketing.
The challenge, though, is that as email and drip marketing systems gain more popularity, they inevitably become more and more intimately linked to CRM systems, both because interactions with marketing leads inevitably turn into more involved sales processes as they turn into bona fide prospects and approach the point of becoming clients, and because most businesses want to be able to keep all their relationships within one system as they evolve from leads to prospects to clients. Thus, again, why most email marketing systems (outside the advisor world) end up building email marketing and CRM into a single solution.
Accordingly, it is perhaps not surprising that this month Orion’s Redtail CRM announced a deeply integrated solution with Snappy Kraken’s email marketing system to facilitate advisor marketing directly within Redtail. Dubbed “Redtail Campaigns” (‘powered by Snappy Kraken’), the solution will not only facilitate email drip marketing to an advisor’s prospects, but ultimately be capable of bringing a prospect all the way from initial marketing emails to Orion’s Planning tools in a “prospect to Plan” journey. More practically, the joint venture also simply means that advisors using Redtail can facilitate more of their email marketing from directly within Redtail and have less burden to log in to multiple systems as often as they may have in the past.
From the companies’ perspectives, the deal makes a lot of sense for both Redtail (gaining the ability to offer a core email marketing capability within Redtail via a partnership) and for Snappy Kraken (which benefits from Redtail’s sizable distribution potential with its existing advisor base). And for advisors, the deeper integration is quite natural, given the long-standing tie-ins between email marketing and CRM systems.
From the broader industry perspective, though, the deal also still highlights how Snappy Kraken and other email marketing systems still operate outside of (and must integrate back to) existing advisor CRM systems, raising the question of whether the company will eventually build, acquire, or merge itself into an advisor CRM system (as most other email marketing systems outside the financial services industry have eventually done, and similar to how Snappy Kraken solved for its website-building needs as well with its Advisor Websites acquisition earlier this year).
For the time being, though, the most significant aspect of the Redtail-Snappy Kraken deal is arguably just the validation of Snappy Kraken, and email marketing more broadly, when a company at Redtail’s size and reach hears from its advisor users enough of a demand for modern email marketing that it’s willing to engage in such a partnership in the first place. Suggesting that, after a decade-long “slow start”, advisors do in fact appear to be slowly but steadily transitioning away from sales-based business development towards a more digital-marketing-centric future to growth?
When social media platforms first began to gain steam nearly 15 years ago, marketers heralded them as the next great channel for marketing, a means of communicating on a one-to-many basis by sharing relevant content that would lead prospective clients to find you, follow you, and eventually do business with you.
For the financial services industry, though, the shift to social media was difficult, especially for larger enterprises – e.g., banks, broker-dealers, and insurance companies – where any and all communication with prospects is deemed “marketing”, which requires compliance pre-approval and archiving of all communication. Which in practice made it almost impossible for compliance teams to oversee a steady flow of social media sharing from a large base of advisors, leading to a more ‘command-and-control’ approach where enterprises developed a centralized social media marketing strategy that was then implemented through their advisors who could share the company’s pre-approved marketing messages and materials.
To address the unique challenges of enterprises trying to engage with and oversee social media ‘at scale’ across hundreds or thousands of advisors at once, a number of enterprise social media solutions arose, including Socialware, Actiance, Grapevine6, and Hearsay Social. Built primarily from a compliance perspective, the platforms made it possible for larger enterprises to support at least a limited level of social media engagement across their base of advisors, which over time become more flexible as compliance departments and the supporting technology developed the systems and protocols to monitor and review advisors’ social media activity on an ongoing basis.
Notably, though, because the early social media management systems in the financial services industry were built primarily as enterprise compliance tools to oversee and top-down manage their advisors’ social media activity, adoption amongst small-to-mid-sized independent firms was negligible. After all, for a smaller advisory firm, the primary buyer is not likely to be a compliance department that needs to centrally manage and oversee advisor social media activity; instead, social media tools are more often purchased to support the actual growth marketing process of the advisory firm, or to simply fulfill the review obligation of the firm’s Chief Compliance Officer (which for many small firms, is the advisor who is responsible for overseeing themselves, such that archiving and post-review are sufficient as the advisor-owner doesn’t need to pre-approve themselves!).
To help bridge the gap, this month Hearsay announced a new offering specifically targeting small-to-mid-sized RIAs (i.e., firms with fewer than 50 employees), which effectively packages together Hearsay’s Social (social media compliance), Sites (advisor websites), and Relate (text message archiving) into a single unified solution for RIAs, which can then deeply integrate to Salesforce CRM (for RIAs that use Salesforce).
From the Hearsay perspective, trying to move ‘downmarket’ from the largest enterprises (there are only so many, and the market is largely saturated now as all the enterprises have bought whatever solution they’re going to buy over the past 5-10 years!) to the large mass of small-to-mid-sized RIAs that are still largely untapped in the respective categories that Hearsay serves (e.g., Smarsh and MessageWatcher for social media archiving, a cottage industry of advisor website providers, and MyRepChat for text message archiving).
From an advisor perspective, though, it’s not clear whether or why Hearsay will be able to gain much traction with smaller RIAs. In practice, most firms that engage in social media or text messaging already have a solution (necessary to open the door in the first place), and likewise already have some website provider. In addition, Hearsay does not appear to cover email archiving and compliance – which is typically a separate system within enterprises – which means it will be difficult to displace existing RIA social media archiving tools that advisors typically use for both social and email archiving (as it means RIAs using Hearsay Social would still need their ‘old’ social media archiving tools for ongoing email archiving?).
In addition, because small-to-mid-sized RIAs are by definition not large enterprises, they don’t tend to have the layers of staff that can utilize the layers of roles and permissions that Hearsay built for its enterprise customers. And by bundling the solutions together, advisors would actually have to switch out of multiple systems at once just to consolidate into Hearsay… for which there don’t appear to offer any particular feature advantages to merit consolidation of systems for the individual RIA, and Hearsay has not disclosed any kind of pricing that would create cost-savings to make the switch worthwhile (which Hearsay simply states will be “competitive”).
Of course, the reality is that Hearsay wasn’t necessarily built for small-to-mid-sized RIAs in the first place – it launched to solve enterprise-scale problems, for which it built an enterprise-scale solution – and so it’s not necessarily surprising that their multi-layer-compliance-centric feature set wouldn’t be as appealing for the under-50-employee independent channel. But at the same time, it also highlights that, as a result, pivoting “downmarket” with an enterprise solution isn’t just a matter of repackaging or rebundling existing solutions to offer the RIA marketplace, but a more wholesale rebuilding of the enterprise offering to better fit into the typical (and different) technology infrastructure of independent RIAs.
When Riskalyze first arrived on the AdvisorTech scene more than 10 years ago, the category of “risk tolerance software” was a sleepy corner of the AdvisorTech Map, in which the only real competitor was FinaMetrica’s risk tolerance questionnaire, and most advisory firms simply used their own compliance-built questionnaires to do a basic assessment of the client’s tolerance for risk to ensure that their investment recommendations were ‘not unsuitable’.
But within just a handful of years, Riskalyze quickly became the dominant player in risk tolerance software, leading to what was at the time an eye-popping $20M round from FTV Capital in 2016 (when virtually no AdvisorTech companies had ever raised any capital from a private equity firm), and subsequently spawning nearly a dozen competitors trying to take down Riskalyze by offering what they claimed was an ‘ever better’ way of assessing the client’s tolerance for risk.
Yet, the reality is that Riskalyze didn’t actually build its size and market share by being a ‘risk tolerance assessment’ tool, per se, because a formal “assessment” is something that advisors do (as a compliance requirement) with existing clients in order to invest their assets, but Riskalyze’s success was driven primarily by advisors that used Riskalyze with their prospects instead. Because the reality is that virtually every self-directed investor over-concentrates and under-diversifies their investments, such that nearly every prospect an advisor would ever have will see via Riskalyze that their current portfolio is taking far more risk than they can actually tolerate… for which the advisor’s solution will inevitably score better than what the prospect currently has (if only by virtue of being more appropriately diversified).
In other words, Riskalyze was never really risk tolerance software; it was an investment proposal tool for prospects, that happened to use its Risk Number system as a framework to facilitate the conversation and help advisors grow (and because Riskalyze helped to generate new revenue, it was also able to charge significantly more than its competitors, too!). For which, over time, Riskalyze built even more tools to help advisors analyze their prospects’ portfolios to craft more targeted recommendations, then implement those recommendations with new clients (via Riskalyze Trading), and then monitor on an ongoing basis with Client Check-Ins and the ability for compliance to oversee and ensure that clients remained invested consistent with their risk tolerance.
And so in that vein, it is perhaps not surprising that at its recent Fearless Investing Summit, Riskalyze CEO Aaron Klein announced that the company is planning a rebrand in 2023, where “Riskalyze” will remain a Product name for its risk assessment tool, but the company itself will receive a new (yet-to-be-determined) name that fits its broader focus on being a “growth platform” that helps advisors add and retain clients and assets (by plugging into their CRM, investment platform, and financial planning software solutions).
From the Riskalyze perspective, the rebrand makes sense. As ultimately, when the company’s value proposition – and its pricing – is built around its ability to help advisors turn prospects into clients and add revenue, being known as a “risk tolerance assessment” solution (which is only used once prospects have already become clients, and which most advisors still get, for free, from their home office/compliance departments in the first place) can become limiting. While rebranding around being a platform for prospecting, investment proposals, and more generally for “growth in clients and assets” can help Riskalyze better align its messaging to what it is actually being bought for. In addition to opening new avenues for other strategic partnerships and deal-making (e.g., Riskalyze acquires Snappy Kraken to bundle its investment proposal and prospect engagement tools with Snappy Kraken’s marketing funnels and landing pages, or acquires VRGL to package its analysis of prospects’ investments with Riskalyze’s analytics?).
From the broader industry perspective, Riskalyze’s rebrand to move out of the ‘risk tolerance’ category simply helps to cement why its competitors were never successful in unseating Riskalyze as the dominant player; because even Riskalyze wasn’t primarily competing in the category itself! Instead, Riskalyze now becomes more squarely positioned where the bulk of new investments are going into the AdvisorTech Map in the first place – proposal generation, digital marketing, and advisor lead generation, all focused around helping advisors grow.
Ultimately, though, the biggest question for the Riskalyze rebrand will simply be whether the advisor marketplace “allows” Riskalyze to rebrand… given that the company is very well known for its “Risk Number” and the core risk assessment tools that it’s built, such that Riskalyze will have to finely thread a needle between distancing itself enough from the Riskalyze name to go beyond risk tolerance, but not so far that it loses the decade of brand equity it’s built in the first place. Though to its credit, Riskalyze seems committed to getting the transition right, going so far as to hire the legendary Lexicon Branding (of Swiffer, Febreze, and Intel’s Pentium fame) to determine how to name Riskalyze’s future.
One of the biggest challenges of being a financial advisor is that “advice” is an invisible intangible service. Consumers can’t pick it up, shake it, see how it feels in their hands, or try it out first; instead, no one knows if it will be any good until after they’ve gone through the process and received the advice. And because the quality of advice is almost entirely reliant on the knowledge and skills of the advisor – which up until that point, is also unknown to the consumer – in practice, it’s extremely hard for the typical consumer to even figure out who will be a “good” advisor versus not.
The end result of this dynamic is a frustrating and time-consuming process for consumers just to pick a financial advisor in the first place. As when there’s no way to know upfront who is a good advisor or not, at best consumers have to seek out, reach out to, meet with, and interview multiple advisors, just to find out for themselves who feels like a good fit. Which can take hours upon hours of research, for consumers who by definition are typically looking to delegate rather than do all this work for themselves in the first place.
In turn, just creating a list of advisors to vet is a challenge in itself. Because advisors are so indistinguishable to consumers (at least, until they’ve met for the first time), most consumers don’t even get their initial list of advisors based on the advisor’s capabilities; instead, they choose advisors based on convenience. Thus, why the primary criterion for advisor searches on most ‘Find An Advisor’ websites is not based on the advisor’s expertise, but their zip code instead. Which means the primary way that consumers find a “good” advisor is simply based on whether the advisor’s office happens to be conveniently located relative to the consumer’s home or office (rather than based on their actual expertise to solve the consumer’s problem!).
The problem is so challenging that one recent survey found that nearly half of consumers who chose not to work with an advisor didn’t do so because they dislike advisors; instead, it was either because they couldn’t figure out how to find the right advisor (22%), they found it intimidating to have to reach out to advisors initially just to get to know them (14%), or they just couldn’t figure out how to find an advisor who actually understood their unique needs (10%).
And so it was notable that this month, Merrill Lynch announced the rollout of a new advisor-prospect matching tool to help consumers more easily find the right (Merrill) advisor. The platform, dubbed Merrill Match, deliberately eschews geography as the main criterion for searching for prospective advisors. Instead, the tool invites consumers to share their general background and situation (e.g., are you a business owner, are you reaching out because of retirement or some other life transition, etc.), meeting preferences (e.g., in-person vs virtual, frequency of meetings, and whether in-person meetings would be at the advisor’s office or the consumer’s home or office), and communication and relationship style (e.g., prefer meetings to be all-business or more social, talking mostly about investments or more holistically, prefer to see lots of visuals or hear more explanations from the advisor themselves). Ultimately, the tool does ask about the consumer’s location (and whether they even want a local advisor, or are comfortable working remotely with an advisor anywhere in the country), and provides matches based on those geographic preferences, but only at the end after going through the rest of the process of inquiring about other preferences first.
While the Merrill Match tool is ultimately specific to Merrill’s business and its advisors and does have a unique dynamic because of the Merrill brand (by the time consumers arrive, they’ve likely already decided they trust Merrill and want a Merrill advisor, so the consumer doesn’t have to be ‘sold’ on a Merrill advisor, the question is simply which of their nearly 15,000 advisors are the right fit), it’s still striking that based on Merrill’s own years of research in building the Matching tool, the biggest driver in determining fit to ensure a good match is a combination of the client’s expertise need (e.g., business owner, corporate executive, prospective retiree, etc.), and their communication and meeting preferences (to ensure a good interpersonal fit between the advisor and client).
From the broader industry perspective, this in turn raises the question of whether other advisor-lead-generation tools – from the third-party lead-generation tools, to the various ‘Find An Advisor’ website tools, to any multi-advisor firm that has different advisors with different personality types – would do better to identify client meeting and communication preferences upfront to help increase the likelihood of a personality match and not just based on geographic convenience. As, in the end, when consumers still struggle to identify who is a “good” advisor, in practice they’ll tend to revert back to “which advisor do I feel a personal connection and rapport with”… as Merrill’s own tool highlights.
In the long run, though, perhaps the greatest challenge is simply that matching consumers to the ‘right’ advisor based on their preferences requires advisors to get clear on their own preferred style of working with their clients, and which types of clients – by expertise, and communication and meeting preference – are the best fit for themselves. Which will require a rather fundamental shift for most advisors, away from simply trying to serve anyone and everyone they meet, to instead getting clear on who their ideal clients are, and making it easier for ideal clients to find their way to the advisor instead. Or stated more simply, algorithms can’t help consumers differentiate between advisors until advisors get comfortable actually differentiating themselves first?
One of the great boons of the internet was the rise of the Application Programming Interface (API). As, up until that point, most software had no efficient means to integrate with other software, at best relying on multiple tools installed on a local computer or server to be able to share common files, that would ‘break’ when one software went through updates while the other had not yet mailed out disks for their own respective update; however, publishing software to the internet (where updates are instantly propagated to everyone), combined with the interconnectivity of the internet, made it possible for the first time for software tools to build connections more directly to one another through a standardized API protocol.
From an AdvisorTech perspective, the rise of the API was an enormous boon to independent AdvisorTech software, and more generally to the independent advisor channel. As in the past, it was the largest financial services enterprises, with the largest advisor base, and the largest technology budget (that could be amortized across all those advisors), that could produce the most comprehensive and internally integrated all-in-one solutions. However, in the era of the internet and APIs, suddenly independent software solutions could all integrate with each other directly, producing independent AdvisorTech platforms with tens of thousands of users, far more than what any one individual enterprise could ever accomplish! Which in turn meant that independent advisors had access to technology tools with even more development resources than the advisors at large enterprises!
The caveat, though, is that the average independent advisor has little capacity to evaluate and vet the quality of those API integrations, even as more and more advisors have clamored for more and better integrations across the advisor tech stack. The end result has been a proliferation of ‘shallow’ integrations, where some vendors build basic integrations from one tool to another (e.g., a Single-Sign-On [SSO] integration that lets advisors log into one system from another but doesn’t actually do anything) to say and show that they have a “broad range of integrations”… with the caveat that the integration doesn’t actually do anything meaningful to make the advisor more efficient. And most advisors don’t discover until after they’ve made the switch whether it’s really a “meaningful” integration or not.
To help sort out the ‘good’ integrations from the shallow, AdvisorTech consultant Craig Iskowitz of the Ezra Group announced this month the launch of new “WealthTech Integration Scores”, that will for the first time actually grade software vendors on their integrations. In practice, scores will be based on a combination of integration breadth (the number of integrations, particularly to ‘key applications’ that commonly form advisor hubs, such as CRM, portfolio management, planning software, and major custodians and broker-dealers), on depth (how substantive the integrations actually are, from basic SSO pass-throughs to one-way data sharing, bi-directional data flows, and the ability to actually trigger cross-application events and workflows based on the API), and on their overall technical capabilities (e.g., cybersecurity, quality of the API documentation, support for developers building integrations to the software, etc.). Integration scores will be available directly on the Ezra Group website, and are also now embedded directly into the individual software profiles on the Kitces AdvisorTech Directory.
From an individual advisor perspective, the opportunity to see in one place the Integration Scores for any and all vendors the advisor may be considering should help to shortcut the evaluation process of potential tech vendors. Notably, though, Ezra Group’s Integration Scores are still an average based on the breadth and depth of all the vendor’s integrations, and not any one in particular; as a result, a vendor with a high score could still have a weaker integration to a specific application the advisor uses (and vice versa for a low integration score that is still ‘good’ for the advisor’s one preferred solution). As a result, Integration Scores will likely be most useful for advisors picking their ‘hub’ systems (e.g., CRM, portfolio management tools, planning software, etc.), who want to be certain they’re picking a hub that has a good breadth and depth of integrations (which increases the likelihood that any particular solution they want to be integrated with in the future will have a good integration).
From the broader industry perspective, Ezra Group’s WealthTech Integration Scores will arguably create some much-needed transparency regarding the quality of certain vendors’ integrations, particularly to address the “broad but shallow” integration phenomenon that has frustrated so many advisors. Which in turn may (hopefully!?) lead AdvisorTech firms to focus on fewer, more meaningful integrations (given that Integration Scores have a much higher weighting to integration depth over raw breadth) that both improve their Integration Score in the AdvisorTech Directory… and actually improve advisor efficiency!
At the least, though, Ezra Group’s WealthTech Integration Scores provide a new foundation by which advisors can vet their advisor technology for its integration capabilities, and express their own preferences about how important it is to have a higher integration score (versus simply being a best-in-class tool in its software category, regardless of integrations). As, in the end, integrations will likely be more important for some tools (e.g., CRM systems that need to integrate to ‘almost everything’) than others (such as specialized planning tools that at the most just need to integrate back to the advisor’s main financial planning software). But now advisors will have a better basis to make that choice for themselves.
Note: AdvisorTech vendors that want to receive an Integration Score for their software can go here to submit their required information for evaluation by Ezra Group.
In the meantime, we’ve rolled out a beta version of our new AdvisorTech Directory, along with making updates to the latest version of our Financial AdvisorTech Solutions Map with several new companies (including highlights of the “Category Newcomers” in each area to highlight new FinTech innovation)!
Click Map For A Larger Version
So what do you think? Will Entrustody be able to gain market share from the existing RIA custodians? Are you a Redtail user who’s going to check out the new Redtail Campaigns partnership with Snappy Kraken? Is it useful to you to see Integration Scores for all the major AdvisorTech providers? Let us know your thoughts by sharing in the comments below!
