How COVID19 is challenging adviser technology


The financial adviser technology world hasn’t been immune to the spreading COVID-19 virus.

The normally swiftly moving industry feels as if it has been brought to a grinding halt over the past few weeks.

The most obvious example is the cancellation of Envestnet’s annual Advisor Summit, which was scheduled for late April. Anecdotally, this reporter can attest to an email inbox, normally crammed full this time of year with announcements of new products and integration partners, that has fallen fallow.

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The plight of a tech reporter is nothing in the face of the real hardships and tragedies many people are facing around the world. (I’m beyond thankful to still have a job, which can’t be said for many of my friends and family working in education or the service industry, and a beat to keep writing about, unlike folks making a living as sports reporters.)

Tech vendors have a unique advantage, however, in carrying on business as usual through a prolonged international quarantine. Much of their work is digital already, and some companies (eMoney Advisor comes to mind) have long used their remote work capabilities to hire talent from around the country, rather than just Silicon Valley or major cities.

“Technology already collaborates in a distributed environment, so working from home isn’t an unusual aspect,” said Gurinder Ahluwalia, CEO of 280 CapMarkets, a startup providing a digital marketplace for bonds. He notes that adding new business in the short term will be challenging.

But, it’s not all business as usual. Startups, like 280 CapMarkets, often rely on industry conferences to meet advisers and get out the word about their companies.

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The belt-tightening in response to crashing markets is squeezing the flow of new business. No one wants to purchase, onboard and undergo training on a new technology platform while the world around seems to be falling apart.

It’s also halted the M&A market, which was flying at a breakneck speed before the coronavirus outbreak. Would-be buyers just three weeks ago now have reason to keep a much tighter grip on assets.

For larger vendors, moving hundreds of employees from an office to working remotely is still a challenge — even if the company is a cloud-based technology provider. The shift is also putting stress on domestic internet providers, hampering the work of some who rely on the high-speed connections an office provides, such as software developers and IT professionals.

For Orion Advisor Services CEO Eric Clarke, the coronavirus outbreak feels like a perfect storm hitting from all angles.

“It’s quite a wild ride,” Mr. Clarke said. “Nobody really knows what is going on with the virus. It feels very much like the 2008 correction to me.”

While the company plans to continue pushing product development and innovation, he admits that some projects are taking a backseat as resources shift to supporting core products and service.

“You do have to pull back a little bit on those fringe or on-the-edge projects,” Mr. Clarke said.

Orion was the subject of speculation about an upcoming sale, but those discussions are on hold for now. Mr. Clarke wouldn’t comment beyond saying the current owners, private equity firm TA Associates, are “believers and backers in our business and that will continue,” but does expect M&A activity to slow across the board.

However, Mr. Clarke did not agree that the coronavirus was drastically impacting business growth at adviser tech vendors. While some large enterprise deals have been delayed, Orion is still winning a couple of new contracts a day from independent advisers, Mr. Clarke said.

In fact, the Corona Crash of 2020 could be an opportunity for technology firms as advisers look for ways to manage client panic and keep them invested toward their goals through crazy volatility. Orion users are signing up to use the company’s portfolio optimization, tax-loss harvesting and financial planning tools, Mr. Clarke said.

Similarly, Riskalyze co-founder and CEO Aaron Klein says the market crisis is driving advisers who had “new technology” on their to-do list to finally pull the trigger. Though the company has faced its own challenges and has had to postpone its own in-person training camps, Mr. Klein said Riskalyze has been flooded with phone calls from current customers and advisers looking to sign up.

“By virtue of what we do, we are behind the men and women who are on the front lines of this battle,” he said. “There’s a lot of tools out there that try to stoke fear by modeling horrible scenarios, and we’re built around behavioral finance principles to try to stoke good decision making.”

“We didn’t make our plan for 2020 based off of three weeks of data, and we’re not going to undo our plan for 2020 based on three weeks of data,” he added.

But even optimists like Mr. Klein are uncertain. Advisers have seen revenues drop 15% to 20% in just two weeks, and that could eventually lead some advisers to start cutting back their technology budget.

“It’s a challenging time for the whole industry” Mr. Klein added. “We had a great week last week, but does that continue?”

All companies can do is focus on what they control within their own four walls — or within the walls of employees’ home, as it were.

“To me, the calculus becomes — you’re developing capabilities to improve adviser experiences. Why would you hold that back?” said Mr. Ahluwalia. 

Written by Investors Wallets

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