Below is the August edition of the Fintech Report Card, a monthly piece by Riskalyze CEO Aaron Klein originally published in WealthManagement.com.
Redtail and Orion Announce Two-Way Sync; Redtail Adds Data Protections 👍
What happened: Orion and Redtail (two great partners of Riskalyze) enhanced their longtime integration to include a two-way sync to keep client data consistent between both systems. Redtail also announced enhancements to how it protects client data, following its data breach this past March.
Why it matters: More quality integrations between heavily used, innovative technology platforms give advisors more options in building a tech stack that efficiently works for them and their clients. Plus, it’s difficult to serve clients well if you don’t have confidence in the quality and security of your data. These updates make it much easier for advisors who use Redtail and Orion to have that peace of mind. (Disclosure: Orion and Redtail are both key partners and integrations for Riskalyze.)
AdvicePay Adds More Ways to Collect Digital Signatures 👍
What happened: AdvicePay, a billing and payment solution for fee-for-service advisors, added more capabilities to its existing eSignature functionality. Advisors can now create required templates for advisors to use and indicate the order in which signatures should be added between multiple parties.
Why it matters: The world of wealth management is making strides toward eliminating paperwork and wet signatures, and this development is another step in the right direction. While features like this are a nice efficiency boost for an advisory firm, the real winner is the client who gets to enjoy a much more enjoyable experience when signing a contract.
Two Young Advisors Launch Networking Community 👍
What happened: Two well-known social media personalities in the financial profession, Justin Castelli and Taylor Schulte, announced the launch of a closed advisor community, the Advisor Growth Community. The group requires paid membership with the intent of fostering collaborative conversations and communication between advisors looking to grow their firm with advice from their peers.
Why it matters: Two of the up-and-coming stars of “FinTwit” (financial Twitter) join forces to launch an opportunity for advisor growth and development. There are two approaches in this profession: Some advisors try to hoard knowledge out of a misguided perception that this increases their competitive advantage. Others, like Justin and Taylor, seek to share knowledge knowing that a rising tide lifts all boats. Bravo, gentlemen! (Disclosure: Both Justin and Taylor are Riskalyze clients, and we love serving both of them.)
Robo Advisors Drop Interest Rates on Cash Products 👎
What happened: The Fed cut rates and robo advisors followed. Betterment’s interest rate on cash accounts dipped to 2.44% from 2.60% APY. Wealthfront dropped its rate from 2.57% to 2.33% APY.
Why it matters: Everyone wants in on the cash yield wars. From automated advice platforms or so-called robo advisors like Betterment and Wealthfront to established giants like Vanguard and Fidelity, more and more consumer-facing investing services want to offer investors higher yields on their cash. But these firms have to invest the cash somewhere else to earn a profit margin above what they pay out to consumers, and in a falling rate environment, they’ll have to constantly make adjustments to stay in the black.
Capital One Buys United Income to Bolster Automated Investing 👎
What happened: After taking a 10% stake in robo United Income last year, Capital One has acquired the platform in full.
Why it matters: As more financial services companies try to ramp up their wealth management efforts, adding a robo appears to be the conventional wisdom. But the question remains: How big of a market is there for self-directed investing services, and can Capital One grow one profitably in ways that so many others have failed? Interestingly, Capital One already had an automated advice offering before this purchase, so perhaps this is just about tech or talent, but it makes little sense to me.
SS&C Black Diamond Adds Compliance Integration With RIA in a Box 👍
What happened: Client information from Black Diamond now syncs to RIA in a Box, allowing advisors who use both platforms to ensure that accurate Form ADV and registration are filed in the correct jurisdiction.
Why it matters: Financial professionals have a lot of information and requirements to keep track of, and according to the SEC’s Office of Compliance Inspections and Examinations, the exam rate for RIA firms has gone up to nearly 20% of firms. Automating these critical compliance tasks gives advisors more room to focus their attention on serving clients, rather than paperwork.
Wealthfront Buys San Francisco based RIA Firm 🤔
What happened: Wealthfront purchased Grove Advisors, but the firm’s clients will be referred to Facet Wealth for ongoing financial planning and account servicing.
Why it matters: This looks like a technology or talent acquisition to me, with Wealthfront immediately selling all Grove’s revenue off to Facet Wealth. What’s unclear is what they were buying. Wealthfront is the major holdout among the robos when it comes to adding in a hybrid approach with human telephone advisors, so how will they use Grove’s tech or people? Hard to say, but the clock is ticking for Wealthfront. Their venture investors will need their cash out eventually, and they have yet to build a business attractive to new owners.
Acorns Nabs Baseball All-Star and Pop Culture Icon as Investors 👍
What happened: Former pro baseball star Alex Rodriguez and actress and Grammy nominee Jennifer Lopez have invested in microinvesting service Acorns. In addition to their status as investors, the two may also help Acorns develop financial products customized to their interests.
Why it matters: I’m a fan of how Acorns’ self-directed investing service helps automate savings for its users by finding small amounts of leftover money in everyday transactions. What’s not small is the funding and valuation that Acorns now regularly sees. J. Lo herself sang she “used to have a little, now I have a lot,” and you have to think that between Acorns’ steady growth over the past five years and its ability to bring high-profile investors like Rodriguez and Lopez into the fold, its founders are singing the same tune.
Aaron Klein is CEO at Riskalyze.
Editors note: The views expressed in this column are Aaron Klein’s, and do not necessarily reflect the opinions of Wealthmanagement.com.
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