Michael Kitces on the fate of robos, help from Yelp and recent fintech competitions, products


Welcome to the August 2018 issue of the latest Financial Advisor #FinTech news – where we look at the big news, announcements and underlying trends and developments that are emerging in the world of technology solutions for financial advisors and asset management!

The edition of this month kicks off with the great news that, after years of warning that the growth rates of robo-consultants were slowing and seeing many robo-consultants of high-profile pivot become B2B solutions for consultants, some of them are starting to be closed, with the first ro-consultant Hedgeable (founded in 2009) revoking the registration of its investment adviser as its founders move to new blockchains and WorthFM finally closes, in as the related DailyWorth multimedia site is sold (without the value WorthFM robo -visitor attached) to the personal financial media personality Jean Chatzky.

From there, the latest additions also include a number of interesting ad-consulting techniques, including:

• Despite authorizing customers to leave reviews for Yelp consultants, the SEC cracks and fines several consultants (and their marketing consultant) to ask customers to leave reviews as testimonial solicitation. [19659003] • The fintech competitions of the consultant overheat, while XY Planning Network announces its finalists of the fintech competition, TD Ameritrade launches a new fintech competition with $ 100,000 in prizes and Scratchworks finances its first winner of the fintech InvestmentPOD competition .

technology to support consultants' efficiency has a feverish pace, as Merrill Lynch launches a massive fiduciary dashboard for its consultants and Ameriprise announces an agreement of 10,000 consultants to move from Ebix to Salesforce CRM.

• MaxMyInterest announces an agreement with Dynasty Financial "cash management" becomes a new value-added service from consultants to their clients.

Read an alise on these announcements in this month's column and a discussion of multiple trends in consultant technology, including Wealthfront launching a new form of financial planning in Path that helps customers understand the implications to take a sabbatical or leisure time to travel (which is significant not only for the technology itself, which no other consulting software can do effectively, but the fact that its Millennial clients can not commit to retirement savings in the "Traditional" way, a new report from the Treasury Department that establishes the fintech regulation of the Trump administration guidelines that include a simplified process to enable companies to more easily obtain licenses and permits they need to operate and innovate, and a look at the second generation of real estate planning software that begins to emerge, while the tas if real estate pass into the background but become basic (but not always simple) the patrimonial planning documents in place assume a relatively greater interest.

And be sure to read to the end, where we have provided an update to our popular new "FinTech Financial Solutions Map for Financial Advisors", including a number of new companies and categories!

I hope you continue to find this new column on financial advice technology to be useful! Please share your comments at the end and let me know what you think!

* And for #AdvisorTech companies who want to submit their technical announcements to future considerations, please send them to [email protected]!

The first pioneer of Robo-Adviser Hedgeable goes out. While robo-consultants such as Betterment and Wealthfront are better known as the first pioneers of the movement, Hedgeable was founded the same way in 2009, with particular attention to the use of technology to actively manage portfolios with various strategies coverage (an appealing target in the immediate vicinity of the financial crisis). Unlike some of their senior siblings, however, Hedgeable has never been so well known, he has always collected only a modest $ 1.9 million venture capital (in 2014, when most of the robo-consultants were collecting capital aggressively), and has never managed to gain much traction or mindshare, with only a modest $ 80 million AUM out of 1,700 customers (according to their latest Form ADV, equivalent to an average managed family of around $ 47,000). Which means that with a tariff plan started at 0.75% on the first $ 50,000 that have declined from there, the company would probably generate only about $ 500,000 to $ 600,000 in annual revenue after nearly 9 years of business. As a result, Hedgeable announced this month that it is terminating its investment advisor registration and will no longer offer portfolio management services in the future, moving its existing customers to become self-directed accounts through its Institutional Folio. On the one hand, the announcement is not entirely surprising, given that growth for the pure B2C robo-consultants has slowed down for years, but Hedgeable has never raised the capital that would have been necessary to attract large-scale customers. Given the high cost of customer acquisition, and co-founders Mike and Matthew Kane have already spent more time in their second corporate effort, a blockchain API platform called Hydrogen. However, while most of the early robo-consultants have struggled, and many have long since been forced to do B2B (from Jemstep to FutureAdvisor to SigFig and more), Hedgeable marks the highest robo-consultant profile yet to officially withdraw from race and move on to something different.

Jean Chatzky buys DailyWorth, definitely Ending WorthFM Robo-Adviser. The fundamental challenge for most robo-consultants is not the creation of software to automate the management of the portfolio itself, but the cost of acquiring customers to get on board and investing in the hypercompetitive market for investment management. What made WorthFM, a women-specific robo-consultant launched at Finovate in May 2016, was so interesting that it was under the same umbrella as DailyWorth, a popular media site for women who already had nearly 1 million subscribers to moment, providing the company with a natural channel for scalable client acquisition. Yet only two years later, WorthFM had announced it was closing, and now the DailyWorth itself is being sold to Jean Chatzky, the personal finance media personality. In response to the news that the WorthFM robo-consultant was closing, some industry commentators have suggested that this was another victim of the notorious challenge of customer acquisition costs (similar to SheCapital focusing on women in 2016 for the same reason), however the fact that DailyWorth itself is acquired and continues as a brand suggests that WorthFM may have faced other funding or execution challenges. In any case, the transition from DailyWorth to Ms Chatzky, who explicitly noted that the purchase did not include any WorthFM technology or intellectual property, suggests that regardless of the reason, WorthFM is gone, leaving Sallie Krawcheck's Ellevest as the 39, the only remaining robo-consultant solution focused on women continues to try to make it.

SEC squeezes advisers urging Yelp reviews. With the growing popularity of social media and consumer review platforms in the last decade, the SEC issued a guide in 2014 to clarify that the mere fact that a third party review or a social media site includes favorable comments and A consultant's review would not necessarily violate Article 206 (4) -1 anti-testimonial, as long as the site and reviews are independent of the advisor and there is no material connection between the two. In this context, it is noteworthy that last month, the SEC issued a fine of $ 10,000 each against three financial advisors, along with a fine of $ 35,000 against the marketing consultant they used ("Dr. Len" Schwartz) , for the engagement of the Schwartz firm "Squeaky Clean Reputation" to contact the clients of the consultants and ask them, on behalf of the consultants, to publish reviews of Yelp. However, SEC has interpreted this as the equivalent of the same consultants who urge their customers to leave Yelp reviews, which violates the "no material connection" requirement that all Yelp reviews should be left completely independent. In other words, while customers who leave reviews of their own will on social media platforms or third-party review sites such as Yelp are doing well, they are still treated as testimonial (illegal) solicitation for consultants to ask their clients to go on those sites and leave reviews there.

Announced the finalists of the Fintech competition of the XY Planning network. In 2016, XY Planning Network created its first "fintech competition" to highlight emerging consulting technology tools designed specifically to help expand the scale of financial planning for next-generation customers (Gen X and Gen Y), with previous winners including the Snappy Kraken digital marketing platform and Vestwell digital retirement platform. Now in its third year, XYPN has announced its third harvest of fintech competition finalists from over 20 entries, all of which were new suppliers who had launched in the last 12 months or still have less than $ 1 million in revenue and include: Approach (an instrument of digital prospecting and onboarding of Mineral Interactive); tools for collecting and profiling data from Life Stage Insights and Touchstone Pathway customers; software solution for loan analysis for Payitoff students; analysis engine and health insurance recommendations Take Command Health; and the Yourefolio real estate planning software platform. The finalists will present demonstrations to show their tools to the judges in the final round of the XYPN LIVE competition in St Louis on September 25th.

TD Ameritrade launches the "Innovation Quest" Fintech competition with $ 100,000 in prizes. Building on the popularity of fintech competitions for consultants and sponsoring the XYPN fintech competition in 2016, TD Ameritrade announced this month the launch of its fintech competition to support the development of new RIA technologies. The competition will offer three finalists a $ 25,000 prize and the opportunity to shoot in a final in-person presentation at the TDA annual LINC conference in February 2019 to compete for an additional $ 25,000 prize (providing $ 50,000 in funding total to the winner). The technology's competitors will not be limited to any particular category of software, beyond the technology that helps the RIAs to do business and interact with their customers, potentially including requests from IT security to financial planning, to the customer's experience. or the consultant's efficiency. Although TD Ameritrade seems to be mainly looking for "ideas" for solutions – rather than already developed products – in the hope that their prize dollars will help entrepreneurs to come up with winning ideas. Interested candidates can submit their fintech ideas online directly to the TDA Innovation Quest website (deadline September 15)

ScratchWorks Fintech Accelerator makes the first investment in (yet another) InvestmentPOD digital investment platform. Last fall, five mega-RIAs joined together to form "ScratchWorks", which was to be a form of fintech accelerator that would urge the presentation by early fintech companies to demonstrate their goods on stage as part of the conference of Barron's Top Advisor and compete with "Shark Tank style" for the possibility of receiving an investment directly from those owners of RIA companies. And after narrowing the field to three finalists from Barron & # 39; s – InvestmentPOD, CircleBlack and Snappy Kraken – the ScratchWorks team announced a formal investment in InvestmentPOD. However, ironically, despite an expected attention to support consultants' innovation and new ways of doing business and interacting with customers, ScratchWorks has decided to invest in an already crowded and not new category of "robo" B2B solutions , as InvestmentPOD calls itself a "multi-strategy automated investment platform" offering the usual suite of onboarding, trading and rebalancing tools (as well as in-depth monitoring tools and investment strategies owned by InvestmentPOD) for consultants wishing to white its own "robo" platform at a cost of 20-40 bps. Not to mention that it was not possible to improve the tools of the robo-consultant, since the latest T3 Advisor Technology survey shows that the adoption of the robo tools advisor was very poor. Yet, ironically, even the "shark" investor ScratchWorks Marty Bicknell notes that InvestmentPOD is not yet ready for prime time in a company with their size and complexity (which collectively has $ 25 billion of AUM in its various branches of asset management). However, the investment objective of ScratchWorks is to see if the B2B robo can bring its customization capabilities to the needs of the modern mega-RIA, given the potential financial impact that the efficiency of "modest" technology can lead to a scale-up consultancy.

Are secondary houses taking the lead role in the next generation of counseling support tools? In July, Merrill Lynch announced the launch of its new "Fiduciary Dashboard", a monitoring tool that tracks all customer accounts and alerts the consultant when a portfolio drifts (from investments that dramatically out or under-perform , to accounts that have "excess" money due to a significant contribution), queue the required workflows and help the consultant prioritize client engagement to ensure that the customer invests or returns to the right path (and to ensure that the consultant fulfills his fiduciary responsibility). In addition, the dashboard tool will centrally manage the information needed for customer reviews and integrate directly into the rebalancing software. The significance of these tools, however, is not just the fact that it will help companies like Merrill Lynch fulfill their fiduciary duty through over 15,000 consultants, or just that automations can help consultants serve more customers more efficiently. , but specifically how the software will help consultants identify which clients to call, when and what should be discussed with the client. In other words, the new Merrill Fiduciary Dashboard recalls the "Next Best Action" initiative of Morgan Stanley, which similarly uses technology to monitor client portfolios and identify opportunities for consultants to interact with their clients. Which is remarkable, because such tools have not yet been created for the community of independent consultants, despite the fact that most of the technological innovation for consultants has occurred in independent channels over the past two decades. However, being a more vertically integrated organization, the metal structures are uniquely positioned to take advantage of the next generation of support and automation tools, which can quickly produce huge cost savings (since Merrill estimates that the consultants will save about 1 hour a week with the new technology, which has multiplied in almost 15,000 consultants, could cost over 100 million dollars in a year!), While independent channels rely on broker-dealers and custodians to develop this technology, but these companies have little incentive to do so, they would not benefit from the majority of cost savings (which would be borne by independent consulting firms rather than their depositaries and broker-dealers). This raises the question: the wirehouses have finally found a consulting technology that is uniquely positioned for development and scalability, to offer them at least a medium-term competitive advantage in the technological tools that provide their consultants that the independents do not can (or will not produce itself?

Ameriprise announces 10,000 consultant transitions in exchange for generational CRM from Ebix to Salesforce While most independent consultants are familiar with independent CRM tools such as Redtail, Junxure and Wealthbox, in the world of large companies – especially insurance companies and long-standing broker-dealers – Ebix SmartOffice has long had a substantial market share, due in large part to the fact that their CRM competitors (from Act and Goldmine in the past, at Redtail, Junxure and Wealthbox today) they simply never had depth and size ions to compete in the realm of mega-businesses where centralized offices have to literally monitor thousands of advisors at a time. It was not until the arrival of Web-based business CRMs like Salesforce and Dynamics that companies also had a viable alternative that could be customized enough for the specific needs of the industry (in large-scale enterprises). And Dynamics has also struggled to gain ground in the sector. Salesforce, on the other hand, seems to have found the right balance of scale and customization, with ever larger companies adapting the software to meet their specific needs (as, even among independent consulting firms, Salesforces is hurting heavily towards the big multi-billion-AUM stores), and Salesforce itself is building an offer of cloud financial services for companies that want a more industry-specific solution out of the ordinary. And now, Salesforce has announced its biggest "whale" yet: landing the consultant of nearly 10,000 Ameriprise, which in 2019 will move the entire company from Ebix to Salesforce, a move that will surely make the other Ebix companies turn their heads. Users like big companies try to modernize their web-based workflows in an era of increasing technology automation.

MaxMyInterest takes over Dynasty's financial partners with increasing returns and focused on customer cash management. For nearly a decade, interest rates close to zero have meant that most consumers (and their advisers) do not care much about cash. Obviously, liquidity has always been seen as a low-performing asset class and a higher probability of being considered "dry powder" for an investment than an investment in itself. But as long as interest rates – and money market funds – were all aligned to zero or close, there was no reason to spend time or effort focusing on them, as well as helping customers to stay fully invested and not have a lot of money (even if it meant allocating to an ultra-low bond fund with at least slightly higher returns). With rates starting to rise, however, not only is cash performance starting to mean something again, but the fact that most RIA custodians are still paying near-0% returns while external banks could pay well over # 1; 1% means that consultants suddenly have a new value-added opportunity to help customers maximize their cash gains. Especially for high-value customers who could have six or even seven positions in cash. In this context, it is noteworthy that Dynasty Financial, which serves dozens of large teams of fleeing consultants focused on the highest quality space, has announced an agreement to make MaxMyInterest available to its consultants. The MaxMyInterest platform and the MaxForAdvisors offer are a tool that automatically transfers customers' cash on multiple online banking platforms based on the one that offers the best returns (and also managing the FDIC limits, if this is important for the customer) – a convincing option when MaxMyInterest connects to bank accounts up to 1.8% while most custodians pay less than 0.25% in their money market sweep accounts. Is "cash management" now more automated than ever with platforms like MaxMyInterest, once again becoming an added value for asset managers?

Wealthfront launches the planning module for sabbatics and leisure time for travel. The traditional approach to social security planning is relatively simple: you save and invest constantly over several decades, and the combination of contributions plus growth can accumulate enough cash to retreat. Ideally, consumers will save a constant 15% + income annually, and the sooner they start, the better. The problem, however, is that while this "always being sparing and investing" aligns well with the traditional business model of the consultant (paid to collect, invest and manage a growing retirement portfolio), it does not necessarily align with the desired path. for today's workers – especially millennials – where a large percentage of reports would prefer an approach that allows them to periodically spend their free time to travel, for sabbatics and for other types of "temporary retirement". As with increasing longevity and the real possibility for the millennials to routinely live at 100, the idea of ​​spending 40 odd years working for the next 40 years of retirement "vacation" is not tempting. Yet unfortunately, few planning tools today – and none available to financial advisers – can easily model the consequences of such travel and help workers understand how much they will or will not impact in a prolonged period of 6-24 months. the long ride. As a result, Wealthfront's "Path" financial planning software has launched a "Time Off for Travel" module specifically to help its clients see the long-term impact of retirement by allowing them to enter their financial information and then see if their travel plans are "comfortable", "manageable" or "inaccessible". Undoubtedly, many financial advisors will punish the approach by encouraging fiscal irresponsibility by anticipating some savings, but with consumers' preferences for retirement, it is Wealthfront's "Time Off for Travel" that encourages irresponsible savings behavior. or does it simply reflect the new reality of the millennial retirement that simply will not conform to the traditional baby boomer approach? And to what extent is traditional industry financial planning software lagging behind the reality of what it takes to plan retirement for the next generation of customers?

The Treasury Paper encourages greater regulatory flexibility for non-bank Fintech innovation. The financial services sector has long been recognized as an industry that tends to lag behind when it comes to technological innovation. This is a somewhat understandable and even positive reality, given how important it is for consumers to be sure that their money is actually where it should be, especially in an increasingly digital banking world where "money" is still just a series of 1 and 0. However, at the same time, the slow pace of innovation risks undermining the efficiency of the long-term financial sector and makes the sector more prone to disruption when the new technology finally breaks down. As a result, in a new report by the Treasury that studies innovation in the financial sector, Treasury Secretary Steven Mnuchin calls for more help for fintech startups, especially in the non-banking sector, suggesting a "regulatory sandbox" approach in which startups operating within certain parameters is given greater regulatory flexibility and a single process to obtain licenses and permits (as opposed to today, where a large number of regulatory agencies overlap with a startup or fintech product, both at the federal level that state). In addition, the recommendations include the adjustment of the rules governing bank investments in technology companies to make it easier for large banks to invest in innovation. Of particular relevance to the community of financial advisors, given the growing popularity of account aggregation tools, it has been recommendations that consumers should have easy access to their data on demand, including providing account aggregators and more direct and safe scraping. They should also have simple means to revoke access to account and transaction data when they wish.

Watch new products: the next generation of real estate planning software. In the early days of financial planning, "estate planning" was a central theme with clients, which was not entirely surprising in an era of much lower tax exemptions ("just" $ 600,000 over the years & # 39; 90), where even having a basic family life insurance term could create a property tax problem. The broad scope of the property tax itself has caused liquidity problems that necessitated even greater life insurance (often held in an irrevocable life insurance fund). However, with the number of properties subject to succession tax declining by almost 95% from the early 2000s, and further reduced this year thanks to the doubling of the tax exemption property, and while states are increasingly moving away from state taxes, property tax planning is not simply the basis of once-for-all financial planning. Of course, the reality is that even without tax exposure, real estate planning is still needed to ensure that basic documents are in place – including wills, prosecution for financial and health matters, and perhaps revocable living trust. But for financial advisors, few tools have ever existed to help with any aspect of estate planning outside of the property tax planning part. Now, a series of new "new generation" real estate planning tools are emerging, designed to help consultants help their clients overcome "basic" (but not always simple) property planning documents, or better to link them to lawyers who can (and work proactively with consultants, so that consultants do not simply have to direct customers to LegalZoom). Among the new prominent participants in this space are: Yourefolio, which can help consultants work with clients through the succession planning process, including creating an inventory of resources and flowcharts where they will go (and calculating the 39; tax exposure of the property if applicable) and even exporting relevant customer information directly into the InterActive Legal System for lawyers who have used ILS to draft their own estate planning documents; and EstateGuru, which created a technology platform for consultants to work directly and in collaboration with a list of attorneys available to help clients overcome the real estate planning process (where lawyers work directly with EstateGuru, and consultants work through companies EPCloud or EPNavigator partners). In the end, consultants will continue not to draft legal documents, but to the extent that more and more consultants are advertised as "financial quarterback" or "family CFO" that helps to coordinate the financial situation of a client with the client's accountant and lawyer, such as Yourefolio and EPCloud / EPNavigator, appear to be well positioned to capitalize on the trend.

In the meantime, we have updated the latest version of our FinTech financial solution map with several new companies, including the highlights of the "New Category Inventions" in each area to highlight the new fintech innovation !

Quindi cosa ne pensi? I wirehouse potrebbero davvero diventare i driver delle innovazioni fintech per l'efficienza del consulente? Era appropriato per il SEC reprimere le recensioni di Yelp come testimonianze quando i consulenti sollecitavano quelle recensioni? Gli strumenti di gestione del contante come MaxMyInterest acquisteranno slancio? Il software di pianificazione finanziaria dovrebbe aiutare i clienti che lavorano a prendere i sabbatici o il tempo libero per viaggiare? Per favore condividi i tuoi pensieri nei commenti qui sotto

Michael Kitces è socio e direttore della gestione patrimoniale di Pinnacle Advisory Group, co-fondatore di XY Planning Network e AdvicePay e editore di un blog di formazione continua per i pianificatori finanziari, Nerd's Eye View. Seguilo su @MichaelKitces.

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