In 2018, Chicago-based Oranj became the financial service industry’s first wealth management platform available to advisors and end-clients at no cost.

Since then, the fintech industry has continued its fast-paced evolution, but few entrants have followed Oranj in launching software using a “freemium” model in which the initial install and basic features are free, but upgrades and additional features may come at a price.

Nevertheless, Oranj’s experiment in offering an end-to-end wealth management solution for advisors has been a success, said CEO David Lyon.

“It took some time for advisors to acclimate,” said Lyon. “I think we’ve developed a robust feature set so that advisors have seen over the years that Oranj is not just a cheap, inexpensive technology platform. We have the same capabilities that other leading platforms have. Advisors have signed up with us, seen that, and it’s helped us gain more traction and attract more advisors.”

Fintech For Advisors, By Advisors
But Oranj, launched in 2013, wasn’t always an end-to-end solution, and it wasn’t always free. It has its origins as an advisor’s advisory platform: Lyon founded his own RIA and multi-family office, Main St. Financial, in 2011, two years before he founded Oranj as a digital practice management tool for advisors with a client portal.

After working nearly a decade in the music industry, Lyon discovered that advisors struggled with technology in ways similar to major music companies – just as record companies struggled to keep up with technology as it shifted from vinyl records to tape to digital downloads, advisors have also been challenged by the move to a more fully digital, online environment.

Lyon realized that he, like many advisors, was spending too much time, effort and money doing the day-to-day work of providing financial advice, which left him unable to step back and take a broader perspective on his business and the industry as a whole – a dangerous problem when the industry’s rate of change is accelerating.

Today, advisors are expected to do more with less, said Lyon, a trend evident in the ongoing margin compression within the industry. Margin compression in financial advice is mostly a product of increasing overhead, including technology costs and new services demanded by the end-client, said Lyon. With more advisors opting to remain independent from larger firms, more of the responsibility for evolving and growing the business ends up falling on their shoulders.

So in 2013 and 2014 Oranj rolled out what was essentially the underpinnings of a business-to-business roboadvisor platform – a web portal for clients that included well-functioning account aggregation, communications and marketing tools, and a streamlined, app-like account opening process. Since then, the company has grown the Oranj platform through internal innovation and acquisition into a more complete offering for advisors.

“What you’re seeing is a shift in thinking from a kind of best-in-breed mentality where, in order to truly have best-in-breed, you have to piece together five to six different disparate pieces of software that individually might be great, but by cobbling them together you lose a significant amount of efficiency in the form of cost savings and time savings,” said Lyon. “We’re able to save advisors time. The more applications you have to log into, the more time it’s going to take to do things – and integrations are never as seamless as they are on a platform like Oranj, which does a number of the things those disparate software platforms do, combined in one place.”

Advisors have been responsive, said Lyon, especially during the outbreak of Covid-19. In April, he said that Oranj had seen a 75% year-over-year growth of rebalancing activity on the platform.

While it has held to its goal of providing a low-cost, end-to-end tech stack for advisors, Oranj has also augmented its capabilities with integrations over the years, including integrations with CRM tools like Redtail; financial planning software like MoneyGuide Pro; intelligence, data and information providers like Zillow; and other trading and investment platforms like Vestmark.

Setting Technology Free
In 2017, Oranj launched a free-to-use wealth management platform that encompassed all of its onboarding, advisor dashboard and client portal tools as well as a portion of its rebalancing tools. An upgrade to a premium service included goal tracking, a document vault with unlimited storage, compliant messaging capabilities and reporting tools. The free service has since been rebranded as Oranj.

The traditional business model for fintech has involved layered fees – often a blend of onboarding costs and basis points for AUM administered via the technology platform or a monthly, quarterly or annual subscription and then additional fees or costs for certain products, enhancements or functionality. Oranj receives revenue from asset managers whose funds and ETFs are distributed via the platform’s model marketplace.

“When we initially launched our free platform three years ago, there was a bit of skepticism,” said Lyon. “Our industry is conditioned – meaning advisors are conditioned – to believe that everything has to come with a price tag, usually a very big price tag, and you have to give up a portion of your revenue to use software, and quite directly in terms of basis points.”

Lyon has spent the last two years explaining to advisors that cost and quality are not necessarily linked – and the industry may be getting the message.

Consumers have become acclimated to free or low-cost software that is often connected to more paid services, as that is the model that most social media, email and document storage companies have moved towards over the past decade. Lyon points out that consumers use free services from companies like Google, Adobe and Microsoft with few questions about quality or robustness.

To convince advisors, it’s been more a matter of engagement and continuously updating and upgrading the Oranj platform, said Lyon. The company releases new features on the platform every two weeks, so users can watch the technology evolve and improve over time.

Lyon also believes that freemium services could help more consumers access and engage with the financial services industry in general, as those consumers are already comfortable using free digital services in other areas of their lives.

Moving forward, small- and mid-sized advisory firms will begin to struggle to keep up with the technology offerings of larger competitors, said Lyon, but that also technology is a big differentiator when it comes to a firm’s ability to grow. Offering advisor software at free and low cost is, in part, Oranj’s way of leveling the playing field.

In 2018, Lyon supported Oranj’s new freemium model with research showing that a free end-to-end wealth management platform can reduce an advisor’s software costs by up to 30% per year.

The Revenue Engine That Could
Lyon says that the growth of Oranj’s model marketplace is further evidence of the freemium model’s success.

“Another way we look at growth is the number of participation asset managers in our model marketplace,” said Lyon. “That has also grown fairly significantly, and we’ve seen about an 84% increase in advisors utilizing the marketplace.”

More impressive is the influx of new asset managers onto the platform – the marketplace launched in tandem with Oranj in late 2017 with four asset manager partners offering approximately 40 products via the platform. The platform now has 24 asset manager partners and over 1,000 products. Advisors can select from strategist’s models, custom models they create themselves, and subadvised models.

The custodian-agnostic marketplace includes asset manager partners such as Allianz Global Investors, Value Line Funds, SpiderRock Advisors, BlackRock, Pimco, WisdomTree, Direxion, Oppenheimer Funds, Aberdeen, Invesco, Calamos, Nationwide, Anchor Capital, Natixis, Putnam, First Ascent Asset Management and Frost Investment Advisors.

“Strategist models, as they have been typically commercialized in the industry, have included overlay fees,” said Lyon. “Those overlay fees have typically prohibited a lot of advisors, particularly independent RIAs, from adopting models because they’re fee conscious. Now, the emergence of low-cost model marketplaces and the growth of models that populate these market places have kind of stripped away some of the friction that prohibited a lot of advisors from being early adopters.”

In Oranj’s 2018 research, the company was able to show that eliminating TAMP fees and overlay costs created an average annual savings of $1,375 for a $250,000 client.

Lyon said the Covid-19 pandemic has driven more advisors to use automated investment services like TAMPs and model marketplaces.

“As it relates to the pandemic, we’ve definitely seen an increase in interest over the past eight weeks and more advisors taking advantage of the marketplace – but it’s still too early to be sure that it is directly caused by the pandemic,” said Lyon. “We look at certain aspects of our business, things like the adoption of strategist models provided by asset managers, which have increased by about 7% year to date.”

Once a client’s assets are invested, advisors use Oranj’s portfolio management capabilities to follow their progress, with access to trading and rebalancing tools acquired via the company’s 2017 acquisition of TradeWarrior.

TradeWarrior was integrated into the Oranj platform so that even advisors on the free-to-use services can access all of the rebalancing tools relevant to the Model Marketplace. The rebalancing capability uses algorithms to help advisors monitor accounts and identify tax-harvesting opportunities.

“Over the past two years we’ve invested heavily into the technology that we acquired from TradeWarrior,” said Lyon. “It was a 10-year-old rebalancing application that started as a desktop application for a single firm. It was eventually marketed to additional firms and moved to the cloud, but it still needed a significant investment to modernize it. We invested heavily into it spearheaded by our chief technology officer (Perry Moutzouros), head of product development (Lauri Hofherr) and head of engineering (Mike Johnson), and have really brought the rebalancing engine in line with some of the larger players you know of in the space like Tamarac.”

Emphasizing Ease Of Use
But Oranj has one more differentiator relevant to advisors and their clients, said Lyon: It’s easy for advisors and end investors to come on board the platform.

“We have to reduce the friction to adopt new, modern software,” said Lyon. “Technology evolves things, quickly, and we help advisors adopt our platform not just by offering standalone application that does a lot of different things, but also with direct assistance getting it up and running and making it an integrated part of their overall business.”

One of the reasons so many advisors remain on installed, obsolete legacy technology is that moving between platforms is costly, time-consuming and effort-intensive, said Lyon.

In 2019, Oranj created a five-member client success team to offer white-glove service to advisors coming onto their platform, giving them a hands-on alternative to Oranj’s automated offerings.

Today, the company offers two different styles of advisor onboarding, tailored to each firm’s needs. In what Lyon calls a “quick serve” program, advisors take more of a self-driven approach, assisted by intuitive technology, that allows them to get on board, customize Oranj’s platform and learn best practices for using  the software with clients and prospects. The company also offers what Lyon calls a “quick start” program, where the client success team can intervene with one-on-one assistance.

But the firm’s efforts don’t stop there, said Lyon. Oranj monitors data and analytics of how different advisory firms use the platform and proactively reaches out to them with information and education about how features they’re under-using – or not using at all – might benefit their practices, using co-browsing capabilities to demonstrate capabilities for advisors.

Adjusting To A New Normal
Being a fintech company, Oranj adjusted quickly to the need to shelter-in-place and allow its employees to work from home, said Lyon.

Lyon has strived to keep Oranj’s culture intact, even while working remotely. In 2019, the company was named among the best places to work in financial technology by SourceMedia and the Best Companies Group. While the criteria for the award included surveys to determine the employee workplace experience, Oranj was also recognized for the perks it regularly provides to its employees, like free tickets to Chicago’s annual Lollapalooza music festival. The company also keeps an ongoing collection of vinyl records, asking new hires to name five records of their own choosing to add to the collection.

Maintaining our culture requires a lot of creativity and helping everybody stay connected,” said Lyon. “The way we’ve been doing that is having lunch hour hangouts – where everyone can get together via Google Hangouts and we virtually eat lunch with each other. We do happy hours once a week, kind of virtually, together, and that has also helped us, I think.

“We’re doing little things, nothing over the top,” said Lyon. “We’re making sure that everyone still has the opportunity to connect with their teammates and connect on non-work-related items. When everybody is in the same office, that kind of stuff happens organically, but today, you actually have to make it part of your overall business operations. It has to be intentional. Make sure you’re scheduling some time for people to socialize.”

Oranj has also strived to support employee wellness – according to SourceMedia and the Best Companies Group, it offers activities and services, including a chair masseuse, to keep workers relaxed and healthy.

It shouldn’t surprise anyone, then, that employee health and safety was top of mind as Lyon contemplated how the firm would return to its offices.

“As a business, we have a plan to get back to normal when we have the ability to do that,” said Lyon. “We’re waiting for the order to be lifted – it’s in place through the end of May, so right now we’re looking at reopening our office in June. It’s difficult from my vantage point because you have to do the right thing for employees regardless of what the state or city is saying about opening the doors again – what’s important is the wellbeing of everyone who works at Oranj.”

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