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Welcome to the June edition of thenbspRiskalyzenbspFinTechnbspReview where we give a snapshot of the month39s technology news for advisors and judge the merits of said news with a quick thumbs upnbspthumbs down andnbspoccasionallynbspa noncommittal thumbs sidewaysnbspnbspnbsp

Riskalyze Fintech Report Card: December 2019

Riskalyze CEO Aaron Klein gives the thumbs-up or thumbs-down on the biggest news to hit advisor technology in the previous month.

Robinhood Gets a Big Fine

thumbs downWhat Happened: Robinhood was fined $1.25 million by FINRA for best execution failures. The firm, which routes trades to four broker/dealers, was ruled to not have adequate review procedures in place to make sure each order was meeting best execution requirements.

Why It Matters: There’s no free lunch in investing, and if you think trading is expensive with commissions, you should see how expensive it can get when it’s “free.” The thing about payment for order flow is that you really don’t know how much money you might be losing in exchange for saving $7 on a trade. Bottom line: It feels like the first rule of running a company called Robinhood is not to make it look like you’re robbing the poor to make your VCs rich.

PNC Bank and Venmo Disconnect Reveals a Larger Issue

thumbs down What Happened: Recently, Venmo customers found that their PNC Bank accounts were no longer connecting. The restricted access appears to be due to updated security added by PNC—and the breakdown has lasted for weeks.

Why It Matters: Financial professionals everywhere make holistic reporting a key tenet of the value they provide to investors, leveraging account aggregation to see all of their accounts in one place.

The first step toward asset movement is visibility, so many of the top financial institutions feel like they have a vested interest in putting up barriers to visibility in the name of security. This will not be the last time that thousands of clients and their advisors are caught in the crosshairs by big bank strategy.

JP Morgan Chase Teams Up With Envestnet | Yodlee

thumbs up What Happened: JP Morgan Chase announced a data-sharing agreement with Envestnet | Yodlee that will give its bank customers access to financial applications available through Yodlee.

Why It Matters: Here’s the antithesis of the PNC story above, and from an unexpected spot too. It wasn’t long ago that CEO Jamie Dimon and JPMorgan Chase were making similar noises about eliminating access to data in the name of security. Now they’re doing direct data-sharing deals with Yodlee … and it’s great to see.

Goldman Sachs Is Ready to Robo 

thinking face emoji What Happened: Goldman Sachs announced a new, so-far-untitled, robo advisor scheduled to launch in 2020. Initially, the automated advice platform, or so-called robo advisor, will be available to United Capital clients and may see a broader rollout later. The offering will require a $5,000 minimum investment.

Why It Matters: Does the world really need another robo advisor? We’ll soon find out. Interestingly, this one will apparently be packaged with FinLife, the software platform United Capital originally built for their own advisors and now licenses to outside registered investment advisors. I’m still not a believer that RIAs are looking for a way to strap a mass-market online platform onto the side of their business, but if anyone can make this approach start to scale, it would probably be United Capital founder Joe Duran.

Wells Fargo Drops Commissions

thumbs up What Happened: Following the lead of Schwab, TD Ameritrade and others, Wells Fargo Advisors announced it is eliminating commissions from equity and ETFs from its self-directed investing platform, WellsTrade.

Why It Matters: The race to zero is almost complete. What does it all tell us? The shift toward reducing the importance that trades have for a firm’s bottom line validates the independent advisor model, where it’s more important to think strategically about portfolio rebalancing and trade with discretion, rather than simply take orders and rack up the dollars.

But it’s also going to drive interesting changes in strategy for a lot of firms, and it could start driving asset flows. With commissions still intact for mutual funds, will the race to ETFs accelerate? Or will custodians roll out fractional trading and drive adoption of direct indexing for accounts of all sizes? 2020 will be a fascinating year!

Fiserv Sells Majority Stake to Private Equity

thumbs up What Happened: Fiserv announced it is selling 60% of its Investment Services division to Motive Partners, a private equity firm. The sale will allow the company to invest more in its user experience and building out APIs.

Why It Matters: Cheryl Nash, Fiserv president of Investment Services, and crew have built an incredible business providing institutional-class trading and platform solutions to large financial services firms. As the parent company shifts more of its focus toward payments with the acquisition of First Data, this deal allows the wealthtech arm of Fiserv to focus and innovate under new majority ownership.

Junxure and LifeYield Integrate With Schwab

thumbs up What Happened: During the Schwab IMPACT 2019 conference, LifeYield and Junxure CRM both announced new integrations with Schwab Advisor Center. AdvisorEngine’s Junxure CRM becomes the first CRM to take advantage of Schwab’s digital account opening workflow, and LifeYield’s customers can now use a single sign-on directly from their Advantage Suite into Schwab Advisor Center.

Why It Matters: With Schwab’s impending takeover of TD Ameritrade, they’ll have more advisors than ever in their ecosystem, and driving technology integrations will only help retain the advisory business they’ve acquired. Congratulations to our friends at Junxure and LifeYield (Disclosure: Both of them and Schwab are Riskalyze integration partners).

LPL Halves the Time It Takes to Open an Account

thumbs up What Happened: LPL announced its New Account Opening 2.0 tool, which it says will take the average time it takes for its advisors to open a new account down from nine minutes to four minutes per account.

Why It Matters: There’s a new arms race in wealth management, and it’s to see who can make account opening faster. Schwab has introduced digital account opening to get rid of paper, LPL has made these improvements, and new digital custodian Altruist is also wading in with fast account opening as a key differentiator. Will the time it takes to open an account sway advisors on who they work with? That may be a generous reading, but one thing’s for sure: Competition like this will result in more efficient technology for all advisors as everyone makes improvements to keep up.

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