Page 14 - Investment Advisor July/August 2021

INDUSTRY INSIGHTS

By Tim Welsh

The Dark Side of Technology Consolidation

What can firms learn from Riskalyze’s recent (and then retracted)
marketing campaign, which zeroed in on its competitors?

long time ago, in a galaxy far,
far away, there lived a peace-
A ful and harmonious group of
independent software companies with
a combined mission to make the lives
of independent advisors and their cli-
ents better. The general focus on trust
and collaboration led them to open up
their systems through APIs to facilitate
data flows that created efficiencies,
enabling advisors to thrive, and life was
good for everyone.
But like most things in business, it
didn’t last. The fast success and outsized
growth of the independent advisor seg-
ment attracted larger technology players
and private equity investors eager to AdvisorEngine, which was then sold Of course, the consolidators and their
get in on the action — and consolida- to Franklin Templeton; SS&C picked PE backers will argue that scale is needed
tion began. It accelerated as the first off Salentica, Morningstar bought TRX, to continue to invest in wealthtech — and
group of innovative, cloud-based portfo- Orion acquired two TAMPs and Hidden there is merit to that argument with
lio management platforms were scooped Levers, Schwab unloaded Portfolio commissions and interest rates going to
up: Envestnet bought Tamarac, Advent Center on Envestnet, robo advisors zero — but at what ultimate cost? Is
Software purchased Black Diamond, Jemstep and FutureAdvisor were consolidation limiting innovation and
which was then consumed by SS&C, and acquired by big asset managers, and the shrinking the wealth management arena
Orion sold itself to private equity. list goes on. so much that firms are starting to turn on
Next came financial planning systems, one another due to competitive pressure
with Fidelity starting it by buying eMon- REBEL ALLIANCE or desperation to distinguish themselves?
ey for $250 million, an unheard-of sum Despite this runaway consolidation, A case in point is Riskalyze’s recent
at the time. Envestnet then responded a rebel alliance kept the collaborative ill-fated “marketing campaign.”
with mega-deals for Finance Logix and spirit alive in the wealthtech community In an unprecedented industry move,
$500 million for MoneyGuidePro, while and these emerging technology goliaths Riskalyze CEO Aaron Klein called
Orion picked up Advizr. AssetMark got in at bay. That was TD Ameritrade, an out Orion-owned Hidden Levers
on the deal action with a large purchase advisor-technology-friendly custodian. and Rixtrema by name and declared
of Voyant, which just left the mercy TDA’s open architecture for integration that these firms provide “predictive
killing of NaviPlan by InvestCloud. And via its Veo platform provided a safe eco- guesswork” that unnecessarily flames
then InvestCloud was also consolidated system for small, independent technolo- investor fears, leading to “widely inac-
by its PE backers with Finantix and gy players to operate and thrive with the curate” outcomes. Through direct and
Tegra118 to form a new fintech super- thousands of TDA technology-forward bold communication, Riskalyze lashed
market valued at $1 billion. advisors. But consolidation struck again out with an orchestrated campaign
But we aren’t done with the deals and TDA’s light was snuffed out by the that included a dedicated website,
just yet. While all of the above was Schwabitrade Death Star, creating a new “Unhiddenlevers.com,” inflammatory
going on, the popular CRM Junxure era of angst in the independent advisor videos, and talking points for reporters Adobe Stock
was bought by Wisdom Tree-owned tech space. and industry influencers.

12 INVESTMENT ADVISOR JULY/AUGUST 2021 | ThinkAdvisor.com