The dark side of technological consolidation

What would you like to know

  • The rapid success and disproportionate growth of the AI ​​segment has attracted larger tech players and private investors keen to join in on the action.
  • Does consolidation limit innovation and shrink the arena of wealth management?
  • History has taught that the more an industry consolidates, the more opportunities are created for innovators on the fringes.

Long ago, in a galaxy far, far away, lived a peaceful and harmonious group of independent software companies whose combined mission is to improve the lives of independent advisors and their clients.

The general emphasis on trust and collaboration led them to open up their systems through APIs to facilitate data flows that created efficiencies, allowing advisors to thrive and life was good for everyone. .

But like most things in business, it didn’t last. The rapid success and disproportionate growth of the independent advisor segment has attracted larger tech players and private equity investors eager to join in the action – and consolidation has begun. It accelerated with the creation of the first group of innovative cloud-based portfolio management platforms:

Envestnet bought Tamarac, Advent Software bought Black Diamond, which was then consumed by SS&C, and Orion sold to private equity.

Next came financial planning systems, with Fidelity starting out by buying electronic money for $ 250 million, an incredible amount at the time. Envestnet then responded with mega-deals for Finance Logix and $ 500 million for MoneyGuidePro, while Orion took over Advizr. AssetMark got into the action with a major purchase of Voyant, which just left the NaviPlan mercy murder by InvestCloud. And then InvestCloud was also consolidated by its backers with Finantix and Tegra118 to form a new fintech supermarket valued at $ 1 billion.

But we are not done with the agreements yet. While all of the above was going on, the popular Junxure CRM was purchased by AdvisorEngine, owned by Wisdom Tree, which was then sold to Franklin Templeton; SS&C took over Salentica, Morningstar bought TRX, Orion acquired two TAMPs and Hidden Levers, Schwab unloaded Portfolio Center on Envestnet, robotics advisors Jemstep and FutureAdvisor were acquired by large asset managers, and the list goes on. .

Rebel alliance

Despite this rampant consolidation, a rebel alliance has kept the spirit of collaboration alive in the wealth tech community and these emerging tech goliaths at a distance. It was TD Ameritrade, a technology and advisor-focused custodian. TDA’s open architecture for integration through its Veo platform has provided a secure ecosystem for small independent tech players to operate and thrive with TDA’s thousands of technology advisors.

But consolidation struck again and the light of ADD was stifled by Schwabitrade’s Death Star, creating a new era of angst in the independent advisor tech space.

Sure, consolidators and their backers will say it takes scale to keep investing in wealth tech – and that argument has merit with zero commissions and interest rates – but at what ultimate cost? Is consolidation limiting innovation and shrinking the wealth management arena so much that companies are starting to turn against each other due to competitive pressure or the desperation to distinguish themselves?

One example is the recent unsuccessful “marketing campaign” by Riskalyze.

In an unprecedented move in the industry, Riskalyze CEO Aaron Klein has called Orion-owned Hidden Levers and Rixtrema by name and said these companies provide “predictive guesses” that needlessly fuel fears. investors, leading to “largely inaccurate” results.

Through bold and direct communication, Riskalyze launched an orchestrated campaign that included a dedicated website, “”, inflammatory videos and talking points for journalists and industry influencers.

At the same time, the short-lived campaign promoted Riskalyze’s approach as the preferred route for trustees, and anyone serious about advising clients should stop using Orion and Rixtrema’s hidden levers immediately.

What could go wrong? Well, pretty much everything.

Oops! It does not matter

In particular, Orion and Rixtrema’s thoughtful response was swift and efficient, so much so that it took Riskalyze less than 48 hours to realize the strategic mistake he had made.

The company has reversed this communications disaster, removed the “” website and removed all references to the videos. These actions were followed by an even more public “mea culpa” due to all the attention the attack campaign garnered, which was humbly delivered via a Twitter thread from Klein wishing he could take it all back and do not directly name the competitors.

About William Stockman

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