Competition is increasing among wealth management technology vendors for advisor business, and an emerging strategy is to use their software platforms to give advisors direct access to asset managers.
Morningstar announced plans to launch a “model marketplace” in 2018 to help advisors research third-party investment strategies, and TD Ameritrade Institutional plans a similar product on iRebal to pair the strategies with automated rebalancing. In August, Riskalyze launched a “partner store” to let asset managers load their investment models onto its Autopilot digital advice product.
Now Oranj is throwing its hat into the ring with MAX, which stands for “Manage, Advice, eXperience”, a new software that combines Oranj’s client-facing tools and account aggregation with the trading and rebalancing technology from TradeWarrior, which Oranj acquired in April.
In addition to many standard digital advice features like client portal, online account opening, eSignature, risk assessment and a document vault, MAX includes an investment marketplace populated with asset allocation models and funds from BlackRock, Direxion, Morningstar, ETF Securities and Frost Investment Advisors. Oranj founder and CEO David Lyon said the company plans to announce more partnerships with asset managers in the coming weeks.
The strategies and funds from these partner firms will be accessible to advisors for free, as well as MAX's suite of digital advice tools. For a premium, advisors can access other third-party strategies through the marketplace and access advanced tools to allow for goal-setting and real-time client messaging.
“The software model is broken. We’re the only industry that is out there charging advisors a percent of their revenue to use [our products],” Lyon said. “Look at the landscape of what Oranj would fit into—some [technology companies] charge $5,000 to onboard and five basis points to use their software. Advisors have largely rejected that model.”
He compares Oranj’s strategy to traditional technology companies like Adobe, who offer several of their core products for free and charge a premium for more advanced software like Photoshop. Lyon said there are many advisors not looking for a full technology suite, but want some features like rebalancing, which are quickly becoming table stakes for the industry. The hope is that if Oranj can provide enough value with its free robo technology, advisors will quickly decide to upgrade to the premium products.
Lyon said MAX’s marketplace will provide sophisticated strategies that independent advisors don’t typically use, like the unique exchange traded funds from Direxion.
“A lot of advisors don’t have those types of products in their portfolios. With MAX being free, we’re going to educate them on some other ways to construct portfolios and maximized returns for clients,” Lyon said.
He added that MAX’s rebalancing isn’t just a calculator, but something embedded into the advisor’s everyday workflow that takes into account the client’s entire financial picture. This can get even more powerful when tied into the premium goal-setting features.
MAX is custodian-agnostic and can send trades to any custodian for execution.
“By offering advisors free world-class technology and direct access to best-of-breed investment managers, MAX can eliminate some of the product and technology fees that, in many cases, are factored into the cost of investing with an advisor—giving advisors the power to help more Americans avoid the DIY investing approach which often leads to underperformance and emotion-based decisions,” Lyon said.