The recently concluded Technology Tools for Today (T3) Conference often serves as a showcase for what’s currently hot in advisor technology. It is the only time each year that virtually the whole advisor technology community gathers under one roof.

There were a number of hot topics this year, including the increased M&A activity taking place among financial software companies. There was also discussion about software that addresses the various dimensions of risk and about battling the robo-advisors.

When pondering this month’s column, I thought it might be interesting to focus on a single firm whose story involved all of these trends, Orion Advisor Services, which offers “software as a service” and portfolio accounting services to RIAs.

Orion has certainly been part of the M&A story. TA Associates, a large global private equity firm, has entered an agreement to acquire a majority stake in NorthStar Financial Services, Orion’s parent (NorthStar also owns CLS Investments, one of the largest ETF strategists in the United States, and Gemini Fund Services, a provider of mutual fund administration and pooled investment solutions).

According to Eric Clarke, the president of Orion, the sale primarily came about because one NorthStar owner wanted to retire, and the firm needed money to buy this person out. One option was to go public, another was a management buyout. A third was to seek investment from a private equity firm. The board decided that TA Associates offered the best option, and it allowed Orion to strengthen its balance sheet and stay private. It also left Orion in a better position to reinvest in its business or perhaps make acquisitions for growth.

Clarke says that Orion is growing at an unprecedented pace. Since opening its doors in 1999, the company has grown to serve approximately 570 advisory firms. It expects to add another 280 firms this year alone. To serve these new firms, Orion needs to invest and add resources.

(Edmond Walter, the CEO of eMoney, a firm recently acquired by Fidelity, cited similar reasons for his firm’s sale during his remarks at the T3 Conference.)

While it is encouraging to see these and other successful firms in the field growing rapidly, it is worth noting that for the first time in their history they have been challenged to fund growth organically. It remains to be seen how widespread this phenomenon is and what long-term impact there will be, if any, on advisors.

Orion has long helped advisors with their back-office needs and automation. The firm was originally established by the owners of an RIA firm to support their own RIA business. The firm’s robust portfolio accounting system includes a report builder that allows advisors to create highly customized client reports without any technical or programming knowledge. Not only can these reports access Orion data, they can also access and incorporate data elements from Orion partners such as AdvisoryWorld, MoneyGuidePro and Riskalyze, to name just a few. Advisors can also outsource their client billing to Orion, and the firm offers trading and rebalancing tools.

The firm’s scale and expertise allow it to perform many back-office tasks more efficiently and more cost effectively than a single advisory firm can on its own. The firm also innovates in ways that an individual RIA firm’s IT staff or consultant cannot. Orion was the first in its field to offer advisors their own private label mobile apps free of charge. One patent-pending technology allows advisors to incorporate video into their client reports. The list goes on.

A new back-office function the firm has created allows advisors to create “trading sleeves,” taking a single account and dividing it into multiple “virtual accounts.” Why might you want to do this? It might be to apply different model portfolios or a different fee schedule to a subset of the account’s assets. For example, if an account holds a client’s company stock that cannot be traded, or if a portion of the portfolio has to be held in cash at all times, this would be a way to segregate those assets. This new functionality also allows advisors to create rules for subsequent deposits and withdrawals. For example, you can specify that all new deposits be allocated to one sleeve, but that withdrawals come out of a different sleeve.

Of course, an advisor could also set up multiple accounts at a custodian, but this would be cumbersome, and moving money among the accounts would require more work. With virtual accounts, advisors can easily shuffle funds between virtual accounts as often as necessary. For many firms, the trading sleeve functionality will lower the cost of servicing accounts and improve efficiency.

For advisors trying to ensure that a client’s portfolios are aligned with their risk appetite, Orion offers deep integration with Riskalyze, a company that invented the “Risk Number.” Every night, Orion updates client portfolio data and Riskalyze computes a risk score for the portfolios. When a portfolio deviates from the client’s risk score, the advisor can take action to adjust the portfolio back into alignment.

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