Wealthtechs merge to build ‘ecosystems’ for advisers

As technology platform builders race to assemble wealthtech ecosystems, formidable companies are snapping up smaller fintechs to stay ahead of the pack. 

Wealthtechs have been busy with merger and acquisition activity in 2021, and it’s not even midyear. AssetMark Financial Holdings Inc. announced its $145 million purchase of financial planning software Voyant, SEI acquired defunct Oranj’s technology platform, and Orion Advisor Solutions announced its acquisition of risk management fintech HiddenLevers

Envestnet, which added $30 million to its operating expenses this year to build its wellness ecosystem, announced a deal for fintech Harvest Savings & Wealth Technologies. 

“These acquisitions will allow for the largest companies in wealth management to provide the ecosystem to their audience, increasing their wallet share of the tech spend,” said ­­­­­­­­­­­­­­­­­­­­­­­­­­Jack Sharry, executive vice president and chief marketing officer at LifeYield. “The holy grail they’re after is the unified managed household, a way to seamlessly coordinate wealthtech components to produce better financial outcomes for both advisers and investors.”

The endgame is to get these levers working in unison and articulate their impact, through a scoring system, basis points, or pure dollars and cents, Sharry said. This opens the door for advisers to easily recommend “next best actions” for their clients and show exactly how much value those actions will create, he said. 

Global technology platform InvestCloud is building its seat at the table with the fintech giants. On Wednesday, it announced the purchase of financial planning software developer Advicent and its NaviPlan. The acquisition follows InvestCloud’s merger with Tegra118 in February, which pushed it to unicorn status with a $1 billion valuation. 

Historically, the wealthtech space has been fairly fragmented, which made it challenging for advisers to connect and integrate disparate technologies effectively. Today, there’s an increasing recognition that fully end-to-end platforms can make advisers’ lives easier and allow them to focus on the most valuable aspects of advice and growing their practices, said Rich Aneser, chief strategy officer of Envestnet. 

“We expect wealthtech M&A activity to continue given the increasing importance of offering comprehensive, yet open and flexible technology, along with the growing importance of scale,” Aneser said. “More and more players are emulating the Envestnet playbook, it’s flattering and we’re focused on continuing to enhance our offering as others try to catch up.”

Catching up to the likes of Envestnet is no small feat. To get there, platform tools and app contributors like InvestCloud need to demonstrate they can provide and coordinate financial planning tools, data aggregation and flow, proposal generation, portfolio management, household-level rebalancing, income generation and trading tech, Sharry said. Moreover, this all has to be done in a way that can sync across multiple account types and investment vehicles.

Naviplan was the last planning tool of its size that was available, making it a smart choice for InvestCloud in terms of competing with Envestnet’s MoneyGuidePro and Fidelity’s eMoney, Sharry said. 

“This could almost be looked at as a giant ideas lab where the winners that have gained popularity and market share are being acquired,” he said. “Decision fatigue is real, and advisers are becoming overwhelmed with the choices they have around technology.”

The driving force of this broad trend toward the development of coordinated ecosystems is that the wealthtech market has exploded with innovation over the past decade. The number of choices advisers and firms have are through the roof. All of these platform builders want enterprise-level deals because the direct to adviser market is saturated at this point. 

“If they want to keep growing, they will need to replace incumbent systems, and work with large wirehouses and other big institutions, and that means providing the tools to build an API-friendly, end-to-end ecosystem,” Sharry said. 

The organic growth in the RIA market, not just in the number of advisers, but the amount of assets managed, increases the spending power in that segment, Sharry said. RIAs are traditionally faster to make decisions and try new technology, and large wirehouses and wealth managers are mindful of this and want to stay competitive.


Tech is the catalyst for RIAs to gain organic growth because they can provide better client experiences and stronger training for advisers that expands their ability to serve more clients, said Angie Herbers, CEO of Herbers & Co.

“Independent advisory firms are doubling down on organic growth objectives,” she said. “It would only be natural that the tech firms integrate together to service the demand of independent advisers focused on organic growth in this environment.”

Now that the industry is realizing that the value in fintech is found at the client engagement level, innovation, integrations and now M&A are occurring at a breakneck pace, said Aaron Klein, CEO of Riskalyze. 

“There are a number of players building really interesting platforms … both long-standing companies in the space and new private equity-backed entrants,” Klein said. “The winners are really the advisers who nail client engagement, capturing efficiencies and changing lives for the better.” 

The financial services marketplace has increasingly seen a focus on more digital engagement between adviser and client, said Brian McLaughlin, chief executive and chief technology officer at Redtail Technologies.

“Financial planning tools are the cornerstone of a client engagement and so we are not surprised to see all the players getting acquired,” McLaughlin said. “With nearly all of the financial planning companies acquired, it will be interesting to see what the next moves are for some of these acquirers.” 

Financial planning is often the primary value proposition touted by wealth management firms, but on average, advisers provide multigoal planning to fewer than half of clients, said Sophie Schmitt, senior analyst with Aite Group.

“Planning adoption has been challenging in part because of the monolithic nature of planning tools,” she said. “Planning tech providers have been working on decoupling their application to allow for lighter or modular planning, but they could benefit from being integrated with providers with an API-first approach to deliver technology.” 

Tech providers focused on customer relationship management and financial planning, the two most critical front-office single-point solutions, could be the next to be acquired, said Chip Roame, managing partner at Tiburon Strategic Advisors. 

“In the CRM category, many financial advisers use Salesforce,” Roame said. “I also hear of Redtail, maybe it is the next hot single-point solution to be gobbled up.”

The post Wealthtechs merge to build ‘ecosystems’ for advisers appeared first on InvestmentNews.

As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.

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