WisdomTree Investments has lent $30 million to white-labeled digital advice firm AdvisorEngine, the majority of which will fund AdvisorEngine’s acquisition of the awarded CRM company Junxure, announced earlier today. The exchange traded product sponsor gave AdvisorEngine an initial $22 million in a move that could get the asset manager’s products in front of more advisors.
“The future of asset management distribution is moving towards the technology pipes, versus the advisor-direct or the custodians or the TAMPs,” said Tim Welsh, president and CEO of Nexus Strategy. (Junxure is a client of Nexus Strategy.) “It all goes back to, what do I login into in the morning when I walk in the office? If I’m an asset manager, how do I get into that conversation?”
“It’s all about access to the users, which are the advisors, who control trillions of assets under management. They’re the decision-makers, so if you can get, somehow, in there, it’s extremely valuable, and that’s probably why they wrote the check for all that money to buy Junxure.”
WisdomTree also secured a one-year option to purchase the remaining equity interests of AdvisorEngine. WisdomTree now owns a 41 percent equity stake on a fully diluted basis.
About a year ago, WisdomTree invested $20 million in AdvisorEngine (then known as Vanare) to acquire a 36 percent equity stake in the company and introduce the technology to its own fund distribution network. Last April, the asset manager invested an additional $5 million when AdvisorEngine acquired Kredible, a practice management firm that uses technology and research to help advisors acquire new clients by modernizing and enhancing their online presence.
Some say the investment is a distribution play and follows on the heels of other asset management firms buying or taking stakes in robo-like portfolio construction platforms for advisors. Invesco purchased robo advisor Jemstep in January 2016. BlackRock got into the robo advice business with its purchase of FutureAdvisor in August 2015.
While the AdvisorEngine platform is “open architecture,” WisdomTree has made its asset allocation models easily available there.
Craig Iskowitz, the founder and CEO of fintech consultancy firm Ezra Group, says they’re not going to turn away other investment products, but they are going to make it easier and possibly cheaper to invest in WisdomTree’s products.
“There’s no reason for them to buy this except to push their own ETFs, and Invesco will do the same,” he said. “They’ll do it quietly, smoothly, seamlessly, not to rock the boat. But they will definitely want to work their product into the mix.”
“The current distribution channels are changing, if you will, so to me it’s somewhat of a distribution play,” said Joel Bruckenstein, the producer of the Technology Tools for Today (T3) conferences. “But traditionally asset management firms have used wholesalers to reach investment advisors. I think it’s fair to say in many cases, advisors are not seeing the value of that, or there’s less expensive ways to deliver that sort of information through the web. So asset managers are looking for opportunity to add value to the advisor relationship and support advisors, and number two, they’re looking for new distribution channels. AdvisorEngine sort of checks both of those boxes.”
Iskowitz says it’s hard to differentiate digital advice providers from one another, but AdvisorEngine’s acquisition of Junxure sets them apart in the space.
“The digital advice space is becoming so tight and so commoditized,” he said. “And the digital advice platforms are realizing they can’t just offer the digital advice piece. They have to build out entire wealth management offerings—end-to-end. And CRM is a glaring hole, where they all just integrate, or they offer very, very light CRM, which is almost useless.”
It could also be an opportunity for AdvisorEngine to cross-sell its services to Junxure clients, which include 12,000 users managing over $600 billion in assets.
AdvisorEngine said it plans to retain Junxure employees, something that was important to Junxure President and Co-founder Greg Friedman.
The acquisition was not due to cost synergies, said AdvisorEngine Founder and CEO Rich Cancro.
“This is a full growth acquisition,” he said. “And when you think about CRM, that’s the heart of a wealth management technology platform, or at least it should be.”
The platform will keep its open architecture model, integrating with other third-party tech providers, including other CRMs.
“We think the acquisition of Junxure actually will make us learn a lot about CRMs and help us better and deeper integrate with other CRM providers,” Cancro said.