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Riskalyze Fintech Report Card: March 2020

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

Snappy Kraken Waives Fees Due to COVID-19

thumbs up What Happened: Digital marketing platform Snappy Kraken announced it is waiving setup fees and introducing discounts on some fees for new and existing advisors.

 Why It Matters: In a crisis like the one we’re in, the first thing many businesses look to cut is marketing, which is usually one of the last things they should cut. The firms that continue to deliver consistent and effective communication are the ones who will exit the crisis stronger than how they entered it. Kudos to Robert Sofia and the team at Snappy Kraken for helping to make it easier for advisors to make the right decision in tough times.

(Disclosure: I’m a board member at Snappy Kraken.)

Wealthfront Risk Parity Fund Takes Investors for a Ride

thumbs down What Happened: Wealthfront’s Risk Parity Fund was heralded by the company as a way to help their clients earn superior risk-adjusted returns. On March 18, the fund’s value was down 40% year to date, compared to 27% with the S&P 500 index.

 Why It Matters: This fund was a PR disaster for Wealthfront when it launched, with automatic opt-in and sky-high expense ratios of 0.5%, tripling the overall cost of the service for dollars in the fund (the expense ratio was later cut in half to 0.25% after the uproar). The pushback from Wealthfront was that they had engineered a unique way to reduce risk, but they nearly delivered 1.5x the losses as the S&P 500 during the coronavirus crash.

The fund has since recovered some ground, and year-to-date losses are about the same as the S&P 500 index. Fees, though, are still some two to six times higher than SPY, IVV or VOO—and I’m pretty sure investors thought they were paying more for a smoother ride.

eMoney Expands Marketing Kit for Advisors

thumbs up What Happened: eMoney has expanded its branded marketing kit for advisors to include more pre-built marketing campaigns to enhance its advisors’ websites and social media efforts.

 Why It Matters: Communicating their value to a new audience can be an overwhelming task for many financial advisors, especially in the current moment when their time is best spent making sure existing clients don't live with a fearful mindset. Financial planning is a critical step in the client relationship; marketing focused on that outcome can often be a natural and effective way for advisors to start conversations.

(Disclosure: eMoney is a Riskalyze integration partner.)

Robinhood Goes Down

thumbs down What Happened: In the middle of the market’s most volatile period since 2008, Robinhood, a popular DIY trading app, had several days of total and intermittent system failure in early March. The downtime left users unable to place trades or access the app. Additionally, the company maxed out its entire $200 million line of credit—perhaps indicating it already knew it could be running into problems as the pandemic began to grow.

 Why It Matters: When you’re a consumer investing on your own and something goes wrong, who do you turn to? For Robinhood users, the answer was, unfortunately, no one. In a time when markets are volatile, fear reigns for many and only grows stronger when the only method you have to trade goes down. It is incredibly important that you build redundancy and backup methods into mission-critical fintech, and Robinhood has really missed the mark on this.

Betterment Passes a Half Million Accounts

thumbs up What Happened: Robo-advisor Betterment announced that it had surpassed 500,000 user accounts and now manages more than $22 billion in assets.

 Why It Matters: A robo-advisor like Betterment can be an important first step for mass affluent, likely younger investors, who are dipping their toes into investing. It’s a major feat for any company to reach such a large number of users, and congratulations to the team at Betterment. It’s going to be interesting to see what comes next: will clients upgrade to real advice as their lives become more complex? Or will the technology somehow reach a new level that makes people want to manage the complexity on their own? Count me in the camp of being bullish on real financial advice, but the digital-first user experience should be a constant call-to-action for advisors. They have to be ever-vigilant to ensure they have the right technology to support those investors' expectations once they’re ready to upgrade to the real deal.

Twenty Over Ten Integrates with Redtail CRM

thumbs up What Happened: Advisors using Redtail CRM to manage their client relationships can now sync their contact information into Lead Pilot, the new marketing automation platform from Twenty Over Ten.

 Why It Matters: Redtail and Twenty Over Ten are both long-time friends of Riskalyze, but the big story here is the speed with which great integrations are being built. It’s also a testament to the power of Redtail in the advisor space—it’s the first CRM targeted for integration by the wave of marketing tools focused on advisors.

Remote Meeting Platforms See Service Interruptions

thumbs down What Happened: GoToMeeting and Microsoft Teams have both reported recent downtime, after much of the country (and world) began to work from home amid COVID-19 shelter-in-place orders.

 Why It Matters: The COVID-19 pandemic has forced the vast majority of businesses, including financial advisory firms, to work from home. As such, advisors everywhere are relying on apps like Slack, Zoom, GoToMeeting, and Microsoft Teams to power their client and team communication. When an app goes down, it’s more than a nuisance right now—it’s a business continuity issue. Do advisors need a secondary set of tools to have a working business continuity plan? That seems like overkill, but it’s sobering to see these struggles by large, established firms.

Addepar Raises $40 Million in Funding

thumbs up What Happened: WestCap Group, a private equity firm, has invested $40 million into Addepar, a technology platform for RIAs and family offices serving high net worth clients.

 Why It Matters: Private equity has been racing to invest in wealthtech companies for the last five years. Is this deal a sign of more investment to come, or was it the previous deal that squeaked through before the capital markets started freezing up with COVID-19?

The big question for companies is what they need the funding for. If you are out over your skis and must raise another round or two of cash before you plan to hit profitability, the COVID crisis could be an existential problem. If you’ve been investing prudently, have a strong balance sheet, and can slow your burn rate and grow into your shoes, you should be just fine. Another six months of quarantine, and we won’t have to wonder which companies have followed which strategy.

YCharts Adds Tool to Track Spread of COVID-19

thinking face emoji What Happened: YCharts, an investment research platform, has added a tool that uses data collected from Johns Hopkins University and Medicine Coronavirus Resource Center to chart COVID-19 confirmed cases and related deaths. The tracking can be used to evaluate portfolio performance against the spread of the virus.

 Why It Matters: The US economy notwithstanding, there’s perhaps nothing more at the forefront in the minds of advisors and their clients than COVID-19 right now. It’s interesting to think about whether there are interesting correlations between this COVID data and some of the funds or stocks advisors are researching.

Square to Add Banking Services

thinking face emoji What Happened: Payment processing platform Square, which owns Cash App for peer-to-peer transactions and self-directed investing, received FDIC approval to add banking services.

 Why It Matters: One more step on Square’s push to become the millennial bank you don’t even realize you have. From zipping payments with a tap, to debit cards, to basic investing, Square’s ubiquitous Cash app has become the de facto bank for many. Watch for them to leverage their bank status to roll out one-tap loans next. You heard it here first!

(Disclosure: I’m an investor in Square.)


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