Recent consolidation of RIA custodians and RIA technology firms may leave advisors seeking new partners, said Xu.
“TD Ameritrade, Motif, E*Trade all appealed to smaller advisors, and the mergers potentially leave 10,000 in limbo,” he said. “Schwab and Morgan Stanley can play with minimum AUM, but we feel like it’s a big uncertainty. We don’t want to go out to market with a service where you can’t serve everybody and anybody. That’s where fintech is moving towards.”
Independent advisors are challenged to keep up with wirehouses and other financial services firms launching their own direct-to-consumer roboadvisor platforms, said Xu, and it’s unreasonable to expect smaller advisors to put all of the pieces together to offer a similar service themselves.
Many of these advisors are looking for a “just right” solution, said Xu. They don’t want to incur the expenses of time, money and effort to build their own technology stack component by component, they want something very easy to use and set up out of the box, but many also seek an offering that allows them to more deeply personalize client experience than many of the other low-cost technology offerings on the market.
While Oranj, with its “freemium” service model, remains the least expensive end-to-end RIA technology offering on the market, Xu said that the new TradingFront solution offers advisors more by bundling brokerage and custodial services into its costs.
TradingFront beta tested the new platform in November and December of 2019, said Xu, and already has 35 RIAs on board.
“This was not a great time to start, but from what we’ve been hearing from advisors, quite a few more in February and January were reluctant to try new platforms or upgrade,” said Xu. “After that they got back to us in March, because now suddenly everyone is working from home, and they need new technology to facilitate communication while working remotely. Quite a few advisors see the need for an upgrade, the need to try a new platform to help them hold onto their clients and to make their lives a little easier.”