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.