Importance of Being Up to Date With Tech

During my firm’s national conference, I was on stage with some of the brightest technology minds in the business: Aaron Klein of Riskalyze, Ed O’Brien of eMoney, and Brian McLaughlin of Redtail. We discussed how advisors embrace technology for their firm, from new purchase decisions to best practices to getting the most out of everything they already own. Here are highlights of the ideas and advice that these tech company CEOs shared during the session.

Your People and Technology: Great technology success doesn’t happen without employees being well-trained on how to best utilize the products. Be sure to allocate a significant amount of time and resources on regular training for your staff. A variety of training styles are important, too, from classroom sessions, to on-line training, to one-on-one calls with the help desk, to “ask the expert” forums. Great firms always are learning.

Users Voices: Make sure to consistently receive feedback from the primary users of each technology product. This includes for the systems used by your staff as well as the products directly used by your clients. Too often, the user’s input is muted or non-existent, or the “known” feedback is actually out of date because the technology product has been updated or changed.

Technology Sacred Cows: Is there technology at your firm that truly is irreplaceable? If so, that in itself could be a problem. Be honest with what really needs to happen with products that fall under this category. Avoiding addressing the situation or making a change is not an effective strategy, and gets more difficult to deal with as time passes.

Technology Innovation: Technology companies must continue to innovate to stay competitive and relevant. However, who on your staff is responsible for making sure that your firm does the same? Technology innovation starts at your firm with a staff member being aware of the new features and benefits available from your current technology partners. Regularly ask “what’s next?” and look closely at how to expand your technology stack.

Overcoming Technology Scars: We all have technology scars. Products that didn’t meet our expectations, terrible support experiences, costs that spiraled out of control, etc. But learn from these experiences and move on. You don’t want a technology scar to be the primary reason why your firm isn’t willing to try a new technology product. If your first response tends to be “been there, tried that,” then perhaps your viewpoint is based on old information. Maybe now is the time to give it another shot.

Technology Value Proposition: Any new technology purchase must align with your current technology value proposition and strategy. Specifically, when a new technology product is added, it is important that it utilizes your existing technology infrastructure and fits within the “DNA” of your firm. The opportunity for achieving greater efficiency and productivity gains occurs when your technology operates like building blocks.

Technology Security: Technology companies spend tremendous money and resources on technology security. But even with the best security, advisors need to have a culture where their staff is watching for fraud attacks, security issues, and the constantly changing risks from cyber threats. Unfortunately, too often a successful fraud attack occurs not because of a technology problem but because a staff member is inattentive or does not follow the firm’s documented security policies and procedures.

Finally, the panel shared our “crystal ball” predictions for the profession and technology. These included ideas about how automation will transform the business, how technology will be further in the forefront playing a role throughout the entire lifecycle of the client relationship, and how the days of “static” information and reports will be long gone. One universal viewpoint was that the demand for independent advice and guidance will continue to grow — the strongest reason why these leaders will continue to innovate and deliver great technology for the benefit of the advisors.

Dan Skiles is the president of Shareholders Service Group in San Diego. He can be reached at dskiles@ssginstitutional.com.

Broadridge Acquiring RPM Technologies to Expand Canadian Presence

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In an effort to further strengthen its Canadian wealth management business, Broadridge Financial Solutions entered into a purchase agreement to acquire RPM Technologies, a provider of enterprise wealth management software solutions and services, for about $300 million, Broadridge announced this week.

The transaction is expected to close in early June, Donna Bristow, managing director of North American Wealth at Broadridge, told ThinkAdvisor on Wednesday.

“Wealth represents a significant portion” of revenue in Canada for Broadridge and is “a growing segment” for it in the U.S., she said.

The acquisition will provide “important new capabilities and next-generation technology” to each company’s clients, according to Broadridge’s announcement. Broadridge expects its latest acquisition to contribute $40 million to $50 million in revenue for fiscal 2020, but said adjusted earnings per share won’t be materially affected.

“Broadridge and RPM have a footprint that is very complementary,” Bristow said, adding: “This acquisition will accelerate Broadridge’s retail wealth strategy in the Canadian market, expanding Broadridge’s footprint to include bank branch-based retail wealth” there. The purchase will also: expand its product suite and “growth runway”; “deepen” its relationships with “key” clients; and complement its “core brokerage position with expansion into retail wealth including mutual fund dealer distribution, term manufacturing and mutual fund transfer agency capabilities,” she said.

RPM, whose current owners include Bayshore Capital, has “proven capabilities” in the Mutual Fund Dealers Association of Canada marketplace and a “successful track record of winning and on-boarding new clients,” Broadridge said. RPM’s technology platforms now support more than 15 million customer accounts, according to the announcement.

“We are very pleased to add RPM’s state-of-the-art platforms and blue-chip client roster,” said Tom Carey, Broadridge’s president of Global Technology and Operations, in a statement. “This investment underscores our commitment to bring value-added technology solutions to the industry, and it supports our longer-term strategy of building a strong North American Wealth business.”

With the companies’ “combined technology and innovation capabilities, clients will gain deep product expansion opportunities, superior digital channel capabilities and seamless enterprise solutions,” according to Dave Poppleton, RPM’s CEO and president.

The purchase is subject to the completion of an intercompany reorganization by RPM and standard customary closing conditions.

Asked if the purchase will result in any job losses or management changes, Bristow said only: “Broadridge has full confidence in the RPM team given the tremendous accomplishments achieved to date and how we view both organizations aligning well culturally. Over time, we will leverage the strengths of both organizations for our go-to-market approach and client relationships.”

Other recent acquisitions by Broadridge included Rockall.

SEC Urges Advisors to Look Beyond AML

Suspicious activity goes beyond traditional money laundering, and includes activity associated with “potential securities fraud, insider trading and a wide variety of manipulative trading schemes,” according to Pete Driscoll, the Securities and Exchange Commission’s exam chief.

Such financial crimes may be carried out through account intrusions and other cyber-related crimes as well as identity theft, Driscoll stated in a recent speech, in which he highlighted key exam priorities for the agency this year.

In releasing its exam priorities in January, the SEC’s Office of Compliance Inspections and Examinations said examiners will review firms’ compliance and anti-money laundering requirements, including whether firms are appropriately adapting their AML programs to address their regulatory obligations.

Broker-dealers and mutual funds, he stated, “should consider their size, location and activities — including the types of transactions customers engage in, the products and services offered to customers, and the means by which those are offered — when determining whether an AML program and related internal controls are reasonably designed to mitigate the risks associated with their businesses.”

As firms evolve, Driscoll stated, “they need to reassess their AML programs to address new and emerging risks and business practices.”

He stressed, however, that the exam office “is not here to second-guess decisions firms have made regarding implementation of their AML compliance programs or whether to file Suspicious Activity Reports,” or SARs, “provided those decisions appear reasonable under existing regulatory guidance as well as the firms’ own business activities and risk-based policies and procedures.”

Firms, Driscoll continued, “need to take reasonable steps to follow up on red flags identified through their transaction monitoring in order to determine whether to file a SAR.”

If a firm spots possible weaknesses or failures in its AML compliance programs or transaction monitoring, “the firm must not ignore the problem, but rather take steps to address those weaknesses or failures,” Driscoll warned.

To the extent that firms are relying on automated systems for transaction monitoring, BDs and fund firms should make also sure that automated systems for transaction monitoring “are operating effectively in terms of the quality and integrity of the data flowing into the systems as well as the quality of the transaction alerts generated for additional review.”

This, Driscoll stated, “is where a firm’s obligation to conduct independent testing to assess its compliance can be especially useful in identifying weaknesses and failures of the firm’s AML program.”

OCIE examiners continue to identify firms that are not conducting independent tests, are not conducting tests on a timely basis, or conduct ineffective tests that cannot identify failures in the firm’s AML program, Driscoll said.

— Check out FINRA Reminds BDs of Their Anti-Money Laundering Duties on ThinkAdvisor.

JMP Launches an Opportunity Zone Platform: Portfolio Products

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JMP OppZone Services has launched an opportunity zone platform. The administrative platform is designed for investors, project sponsors and entrepreneurs who want to get involved in this new type of tax-advantaged investment.

“Navigating the regulations, creating workable investment structures and dealing with the investment timing requirements [of opportunity zones] can be challenging,” said Samuel Weiser, CEO of JMP OppZone Services, in a statement. “JMP’s primary goal is to create efficiency, transparency and scalability for OZ investors and sponsors looking to capitalize on the new law.”

The platform delivers due diligence, consulting, business support services, administration services and investor compliance for tax regulation.

It allows investors to identify opportunity zone investments and make direct investments across multiple zones, with options to self-direct investment or invest jointly with other families and individuals. Sponsors using the platform will have the ability to pool capital while reducing operational and compliance risk, according to Weiser.

RIA in a Box Launches Cybersecurity Platform

The new platform complements the firm’s MyRIA Compliance solution, empowering RIAs to design, implement and document a cybersecurity program within a single interface.

The platform is designed for firms of all sizes and is focused on the human side of cybersecurity, providing security awareness training, email phishing attack simulation, technology inventory and risk assessment. It also offers firms the ability to build a customized information security policy and includes a vendor due diligence tool announced previously at this year’s T3 conference.

“Helping firms strengthen their cybersecurity policies and awareness of vulnerabilities will not only help advisors sleep better at night but provide their clients added confidence that their personal information is security,” said GJ King, president at RIA in a Box.

The new cybersecurity platform can be purchased as a standalone subscription or bundled as part of a firm’s MyRIA Compliance subscription.

North Capital Introduces Evisor Platform

The Salt Lake City-based RIA, which provides financial planning and portfolio management to individuals, families, businesses and nonprofits has introduced a free financial planning platform for individual investors to access online called evisor.com.

Uses can create a customized financial review that incorporates the firm’s proprietary “Lifetime Financial Analysis” tool, but for a 0.25% annual fee the users can open an investment account for North Capital to manage and monitor. An additional fee is involved to access an investment advisor on planning questions not addressed by the online tool. All assets are custodied at Charles Schwab.

Long/Short ETF Debuts With Focus on Undervalued/Overvalued Stocks

The Acquirers Fund (ZIG) is marketing itself as a “true deep value” fund whose long positions are in stocks that “are much more than ‘cheap’ [but] “also have strong, liquid balance sheets, and a robust business capable of generating free cash flows, and more.”

The ETF will hold long positions in companies it deems deeply, truly undervalued and fundamentally strong targets of buyout firms and activist investors who want to force a major corporate change. It will also hold short positions in companies it deems overvalued and financially weak.

The 130/30 long/short strategy tracks the performance of The Acquirer’s Index, which consists of the 30 most deeply undervalued, fundamentally strong stocks and the 30 most overvalued and fundamentally weak stocks that are included in the rules-based index. The index chooses stocks from the largest 25% of U.S.-listed stocks by market cap. ZIG trades on the NYSE Arca and has an expense ratio of 0.94%.

VanEck Launches Muni ETF

The VanEck Vectors Municipal Bond ETF (MAAX) is the latest addition to the firm’s suite of Guided Allocation Funds.

MAXX is an actively managed ETF that seeks to reduce duration and/or credit risk during appropriate times by adjusting allocations primarily among VanEck Vectors municipal exchange-traded products, including the firm’s high-yield, short high-yield, AMT-free long, AMT-free intermediate and AMT-free short municipal index ETFs. Allocations are adjusted based on interest rate and credit opportunities.

The fund seeks maximum total return and income and has a total expense ratio of 0.36%.

 

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Ladenburg Rolling Out New Tax App for Indie Advisors

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Ladenburg Thalmann Financial Services discovered a new tool for its independent advisors last year: a web app that basically does the “busy work” of calculating payroll taxes, withholding them for the account and providing quarterly reminders and annual tax filings.

The firm decided invest in it and just announced plans to roll out Track Technologies’ tax-automation offering as a solution for the firm’s 4,300 affilated advisors, who work with its five independent firms — Securities America, Triad Advisors, Investacorp, Securities Service Network and KMS Financial Services.

The web app lets users calculate, withhold and submit estimated tax payments, according to Trent Bigelow, Track Technologies CEO. The launch will be staggered across the firm, he says.

“Then advisors can tell us what else we need to do, and the second chapter would be for them to offer it to their clients,” Bigelow explained in an interview, adding that these steps should take place by the fourth quarter.

The service is the brainchild of Bigelow and his partners, who consulted companies in Silicon Valley, many of which use freelance or 1099 workers.

Bigelow’s group realized this segment was “left out in the cold” as far as dealing with their taxes. They realized there was a “whole gig economy” that needed that kind of help, including financial advisors and real estate agents. “Our strategy is to partner with large organizations, who can provide the tool to independent workers who need to be compliant.”

Ladenburg is the first advisor-focused financial services firm working with Track, which also is partnering with AARP and a strategic venture fund.

“Our efforts to spur and nurture innovation in the financial advice space are already bearing fruit with the introduction of the availability of the Track Tax solutions for financial advisors,” said Dan Sacher, head of Ladenburg’s Innovation Lab, in a statement. “[It] came about because we recognized the potential benefits of the company’s solutions and helped Track develop its technology through our direct investment and collaboration.”

During the firm’s recent Innovation Symposium, several other new companies showcased their work, including Genivity, a technology platform that helps advisors project long-term healthcare costs for clients; Newday Impact, an app-based impact investing platform; and the website/matching service My Perfect Financial Advisor.

Related on ThinkAdvisor:

Mid-Year Market Lessons From Top Active Asset Managers

Overview

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One of the best ways to improve your business is by learning from others who have already unlocked success. The 2019 winners of the Envestnet/Investment Advisor Asset Managers of the Year Awards know how to consistently deliver alpha while minimizing beta for advisors and their investor clients in changing market climates. Hear how their processes and thinking can help you build better portfolios for your clients.

Join this complimentary webcast to discover disciplined, systematic and team-based ways to produce stellar results, and understand the opportunities and dangers that are on the horizon for the market. You will learn:

• What techniques, repeatable processes and creative methods are used to build highly competitive active strategies

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• How the best asset managers in the business build teams to conduct powerful research and curate data to structure powerful portfolios that strive to outperform their peers & benchmarks

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Speakers 

Robert Miller, CFA®, Managing Principal, Frontier Asset Management

Robert E. Miller, CFA®, is Managing Principal of Frontier Asset Management, LLC. He co-founded the firm in Sheridan, Wyoming in 2000. He became firm principal in 2006, and was named Managing Principal in 2015.

He is responsible for the vision, strategic direction, and performance of Frontier. Serving as a mentor for his leadership team, he helps ensure the proper resources are in place as the company grows. Rob spends time inspiring and positioning his staff for success. He manages the internal and day-to-day operations, offers ongoing support to the sales team, and continues to look for opportunities to better serve advisors and their clients.

Roy Behren, Managing Member & Portfolio Manager, Westchester Capital Management

Roy came to WCM in 1994 and became a Managing Partner as of December 31, 2010. He is co-portfolio manager for Westchester Capital Management, LLC and affiliates and Westchester Capital Partners, LLC. He was also their Chief Compliance Officer from September 2002 through June 2010. After earning a B.S. in Economics at The Wharton School, he received a J.D. degree from the University of Miami Law School and an LL.M. degree in corporate law from the New York University School of Law.

Tim Clift, Chief Investment Strategist, Envestnet

Mr. Clift serves as Chief Investment Strategist at Envestnet | PMC and is responsible for research and consulting services for the organization. He leads a team of analysts who are responsible for the selection and monitoring of investment managers and a team of consultants who support institutional and advisory clients. Mr. Clift serves on PMC’s Investment Committee and is instrumental in setting investment policy for the Company.

FA Match, a Digital Advisor Recruiter, Partners With 6 Firms

FA Match, a digital career management platform for financial advisors, this week launched FA Match Alliance, a partnership with six firms.

The FA Match Alliance’s mission, the announcement said, is to bring together industry innovators to facilitate connectivity between firms looking for top advisor talent and advisors wanting to take control of their career paths.

“Throughout my 20-year recruiting career and now at FA Match, there’s one important motto I live by and encourage firms to as well: ‘purpose before ego,’” the firm’s co-founder and CEO, Ryan Shanks, said.

“Our purpose is to create an industrywide culture of advisors who love what they do, at firms who have the right teams by their sides — but we can’t do it alone. That’s why we created the FA Match Alliance, so we can all lift the industry up together.”

Here are the founding members of the new partnership, which will promote FA Match to advisory firms on their respective suites of services:

• AdvisorAssist – Christopher Winn, CEO and lead consultant
• LifeYield – Mark Hoffman, CEO and co-founder
• Oranj – David Lyon, CEO and founder
• Orion Advisor Services – Eric Clarke, CEO and founder
• Redtail Technology – Brian McLaughlin, CEO
• Riskalyze – Aaron Klein, CEO

FA Match said the alliance is open to all service providers in the financial services industry that are aligned with its mission. Every firm that joins chooses how it wants to participate in promoting the platform to its network.

FA Match, which officially launched in January, enables advisors to discreetly search for job opportunities and build relationships with firms on the basis of mutual compatibility. It creates unique profiles for each advisor based on quantitative and qualitative criteria.

Firms that come on the platform can filter potential recruits by such things as revenue, assets under management, years of service and professional licensing. Advisor profiles are free and remain anonymous until both parties agree to connect with a “mutual match.”

Once they are connected, their first phone call is facilitated through the platform and transcription is sent to the firm for recordkeeping. FA Match does not charge firms to use the platform; they pay only for successful placements.

The announcement said Riskalyze and Redtail would host a webinar in partnership with FA Match on June 18, focused on the state of the advisor recruiting industry. Details were not yet available.

Data Privacy Drives Big Wedge in Advisor-Client Relationship

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“Transparency of data privacy practices will be the new and defining criteria that drives the industry’s successes,” says Morningstar CEO Kunal Kapoor.

Speaking at the annual Morningstar Investment conference in Chicago on Wednesday, Kapoor explained that Morningstar always asks its clients for permission to access their data and advisors should as well. “There is more opportunity in an open hand than a closed fist.”

The SEC recently highlighted the issue when its Office of Compliance Inspections and Examination issued an alert last month reminding advisors and broker-dealers to provide clients initial and annual notices of their privacy policies act as well as notices about clients’ ability to opt out of disclosure of their nonpublic personal information to third parties — all required under Regulation S-P. The agency issued the alert after its examiners discovered noncompliance among firms.

(Related: SEC Fires Off Warning on Privacy Regulation)

Data privacy is not the only issue that advisors and clients might view differently. Morningstar Research found that investors give advisors lower marks for understanding their needs than advisors do, while advisors feel investors don’t value their (the advisor’s)  behavioral support.

Kapoor sees a need to “bridge the gap between what we know investors value and what advisors think investors value.” To that end he said Morningstar is investing in software that includes for “behavioral nudges.”

The company is also building an HSA database that it expects to roll out later this year, adding more data to existing models, expanding capabilities on fixed income and alternative assets and broadening its credit rating analyses.

Morningstar will also be developing a single global digital platform for separate accounts as a result of its new partnership with Mercer, announced in late October, and expanding coverage of the private equity market, stemming from its late 2016 purchase of PitchBook, which tracks private capital deals.

(Related: Morningstar and Mercer Pair Up to Offer Data Platform)

Morningstar recently introduced its Model Marketplace allowing advisors to choose among multiple model strategies and portfolios for no additional fee.

Underlying all these and other offerings from Morningstar are three principles, according to Kapoor: independent research,i transparency and a long-term approach to investing.

(Related: Morningstar Launches a Single Platform for Multiple Model Portfolios)

Carson Group Goes All In on New Tech, Other Apps

Ron Carson, Founder and CEO of Carson Group.

Carson Group is rolling out more services and products to its 108 partner firms, including a new client-experience app and planned mobile-only banking service. The firm made the announcement during its Excell 2019 conference in Chicago, which has drawn 1,200 guests.

The new Carson CX application, for instance, relies on product design from Mineral Interactive (acquired by Carson last year) and advisor feedback. The online portal features account views, client goals and interactive tools, such as a risk-tolerance questionnaire; it also works with video conferencing and a single sign-on with Orion Advisor Services.

Carson Group also says its partner firms — who  have $9.6 billion in assets under management — will pay no fees for Orion platform technology within advisory accounts, which should save them an average of about  $22,000. It also aims to bring down the full cost of the Carson tech stack “to zero by 2020.”

In the third quarter, advisors who partner with Carson Group will be able to offer clients access to Galileo Money+, accounts that have market-based interest tied to the Effective Federal Funds Rate, a network of no-fee ATMs and no monthly service fees.

“It’s all about creating unmistakable value for our advisors, more benefits for their clients, and furthering our mission to make the complex simple for the more than 26,000 families we serve,” according to Ron Carson, founder and CEO of Carson Group.

Carson Group also says it is adding more services and support to its brokerage solution (which lets advisors drop their FINRA registration and work as Investment Advisor Representatives of its RIA), M&A and succession consulting, cash-management options and plans for a retirement-plan platform with back-office support and other services.

Its M&A team recently helped 16 firms look at possible business options, and, since January, it has signed transactions with firms that have $941 million in assets under management.

In late April,  Spectrum Management Group of Indianapolis became the fifth team with more than $500 million in assets to join Carson via its equity-swap option; under the arrangement, Bob Phillips and Leslie Thompson keep majority ownership of their firm and remain key decision-makers.

“We’ve made quite a leap today, both in terms of what we’re immediately delivering to our advisors and in what they’ll be able to offer to their clients,” said Aaron Schaben, executive vice president of Carson Group, in a statement. “It’s going to change the game and … is moving us a step closer to the future of financial advice and helping advisors articulate value that was once intangible.”

— Related on ThinkAdvisor:

Citi Bringing Credit Card Perks Like Miles to Bank Accounts

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As the world’s biggest credit-card issuer, Citigroup Inc. has enough plastic in American wallets to tile a path from its New York headquarters to the southern tip of Florida. Yet many of those 28 million clients park their savings elsewhere.

The gap between Citigroup’s credit-card strength and the rest of its retail banking franchise has grown starker in recent years: Citigroup’s deposits from U.S. consumers shrank by $5.4 billion in 2017 and 2018 as a slew of competitors launched or expanded digital platforms.

Goldman Sachs Group Inc., for example, has amassed tens of billions of dollars in retail deposits, mostly from the U.S., since opening an online bank dubbed Marcus in 2016.

Now, Citi is fighting back.

After quiet experiments, the firm is expanding perks designed for credit cards to encourage sales of other banking products. In recent months, the company privately offered some cardholders 30,000 airline points to sign up for an online checking account.

And this quarter, it plans to enhance its Thank You and Double Cash reward programs for select cardholders to encourage them to sign up for more products and services.

Executives are hoping Citigroup’s card dominance will propel a new digital banking platform, launched last year, to build it into a juggernaut.

“We go in already having these established Citi customers,” Chief Executive Officer Michael Corbat told investors on an April 15 conference call. “We know who they are, we know what they spend on, we know who their bank is, we’ve seen their payments come in if it’s not us. And we think we’ve got the ability around our value proposition to target them with offers.”

Citigroup’s strategy shows the advantages that large traditional banks wield as they look to fend off disruptors chasing billions of dollars in annual revenue.

While new entrants have proven it’s possible to snap up customers with lower-cost technology, giant banks have ample resources to roll out counter offers, as well as relationships with millions of Americans and decades of data on their habits.

Early Success

Early testing proved promising, Corbat said. Digital deposits — those gathered in accounts opened outside branches — jumped in the first quarter by about $1 billion, more than what it collected that way all of last year, Chief Financial Officer Mark Mason said.

More than half came from outside the six metropolitan areas where the bank operates most of its U.S. branches.

That drove a turnaround: Total U.S. consumer deposits rose 1 percent during the first quarter, after five straight quarters of declines.

Aside from Silicon Valley startups, an array of financial services firms born outside of traditional consumer banking have sought to mop up deposits in recent years, taking advantage of technology making it easier to verify and approve customers online.

Some of the largest entrants, such as Goldman Sachs and American Express Co., have lured consumers by offering competitive interest on savings. Others focus on perks. Discover Financial Services, for example, offers online accounts with a debit card generating 1 percent cash back on purchases.

Citigroup’s strategy may help it come closer to a target set in 2017 to boost revenue from the consumer division by $5.5 billion to about $38 billion by 2020. Last year the bank acknowledged it had fallen behind on that goal.

‘Buying’ Customers

Still, some analysts are skeptical that credit-card perks are a sensible way to lure consumers to a digital bank. Online customers are notorious for chasing rewards, shifting their money to other lenders once they’ve scored rich perks for signing up, or to nab a higher interest rate on their savings.

“All you’re doing is basically buying market share and buying customers, but if you can’t keep them, then the money you just spent is not worth it,” said Alyson Clarke, principal analyst at Forrester Research Inc.

Offering a higher interest rate, for example, may boost market share, she said. “But it’s not sustainable over the long term.”

When Citigroup launched its digital bank platform last year, its overhauled app let customers open an account within minutes. That came with normal bells and whistles, such as the ability to pay bills, make mobile check deposits and obtain free access to the bank’s 65,000 ATMs.

Citigroup also rolled out a high-yield savings account similar to offerings from Goldman Sachs and AmEx, making it available for depositors outside its branch footprint in New York, Chicago, Miami, Washington, Los Angeles and San Francisco.

The new account offers customers in certain zip codes 2.36 percent interest, according to data posted on Bankrate.com. The bank’s website shows branch customers, in contrast, may earn less than a 10th of that on standard savings accounts.

Harder to Leave

To be sure, branchless entrants aren’t the only ones making Citigroup compete for deposits.

Larger lender Bank of America Corp. launched its Preferred Rewards program in 2014, offering people who meet certain deposit criteria perks such as discounted stock trading and better interest rates.

JPMorgan Chase & Co. debuted Sapphire Banking last year, building on the success of its Sapphire Reserve Card.

“A lot of it is leveraging what they know about the customer, particularly on the credit-card side,” said Jesse Rosenthal, senior analyst at CreditSights. And “by building products on each other you make it cost the customer to leave.”

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Junxure Deepens Integrations With Orion, Constant Contact: Portfolio Products

Junxure – AdvisorEngine’s wholly-owned subsidiary CRM Software Inc – is deploying integrations with Orion Advisor Services, Constant Contact and MyRepChat.

They will power advisory firms’ marketing and communication to prospects and clients with the goal of creating a better user experience through simultaneous access of CRM and portfolio data.

“These integrations with Orion, Constant Contact and MyRepChat are examples of the investments being made to enhance the Junxure CRM and our commitment to open architecture,” said AdvisorEngine Founder and CEO, Rich Cancro, in a statement. “Additional integrations and user experience enhancements are already under development.”

Junxure’s integration with Orion, through its open architecture API, allows a seamless flow of data between the CRM and Orion’s portfolio accounting and rebalancing tools without advisors needing to leave the Junxure platform.

Contact changes made in Junxure will automatically update contact records in Orion, while data from Orion will automatically update portfolio data in Junxure, giving advisors accurate, instantly-updated client information at a glance.

The integration with Constant Contact allows advisors to export and import contact data to and from Junxure and Constant Contact through a modern API framework. Advisors can utilize the data that they have already entered into the Junxure CRM to power their email marketing campaigns.

The new API integration with MyRepChat offers Junxure users the ability to easily sync all of their client and prospect contacts into MyRepChat. Once synced, text messages sent through MyRepChat are then delivered into the Junxure CRM to create a unified communication hub for advisors. An advisor can access emails, texts and notes for all of their prospects and clients within one user-friendly location and texts received in Junxure can then be transitioned into smart workflows.

Dream Forward to Bring AI to Faircourt Partners’ Retirement Plan Assets

Dream Forward, a new 401(k) provider that sells SMBs low-cost, turnkey 401(k) plans, announced a partnership to bring their proprietary retirement-focused artificial intelligence technology to Chicago-based Faircourt Partners’ $500 million worth of retirement plan clients.

Dream Forward’s texting-based retirement-focused  chatbot AI can help employees stay on track for retirement. The chatbot is offered in its proprietary SMB 401(k) plan solution and can be licensed to third parties such as Faircourt Partners.

Faircourt Partners, a retirement plan advisor serving large and medium-sized retirement plans,  will offer their clients the AI-based chat tool to talk to employees about general retirement saving tenets, answer administrative questions, unpack industry terminology, and discuss competing financial goals.

This new texting-based AI technology, which clients can access 24/7 via texting a phone number,  will be rolled out to Faircourt Partners’ clients throughout the year.

FTSE Russell launches US Municipal Bond Index

FTSE Russel launched a new index that tracks the market for tax-exempt U.S. dollar-denominated bonds issued by municipalities domiciled in the U.S. and U.S. territories with an investment grade credit rating.

The FTSE Municipal Tax-Exempt Investment-Grade Bond Index is a new barometer for this large and diverse fixed income market and is compact by design to allow for ease of replication, without compromising representativeness. It can be used as the foundation for a wide range of custom solutions based on attributes, including credit quality, state, municipal sector classification and maturity.

The offering also includes granular sub-indexes to allow for greater visibility and analysis of the municipal bond market structure.

Allianz Life Adds a New Feature and Index to its Index Variable Annuities

To help clients lock in gains and limit losses on their Allianz Life index variable annuities (IVAs), Allianz Life Insurance Company of North America has announced a new automatic performance lock feature.

The new feature locks in the current value on any selected index option with a daily valuation, and gives clients the flexibility to capture increases and limit losses once each index year between index anniversaries. This enhancement is in addition to the manual performance lock feature that currently exists on Allianz Life IVAs.

In addition, clients with Allianz Life IVAs have access to a new index available with crediting methods (also known as index strategies), the iShares MSCI Emerging Markets ETF, in partnership with BlackRock.

FTJ FundChoice Adds Russell Investments’ Five Flagship Core Model Strategies to Platform

FTJ FundChoice, an open architecture Turnkey Asset Management Program (TAMP), added Russell Investments’ five flagship, Core Model Strategies onto the FTJ FundChoice platform.

These are the newly added Core Model Strategies:

• Russell Investments Conservative Model
• Russell Investments Moderate Model
• Russell Investments Balanced Model
• Russell Investments Growth Model
• Russell Investments Equity Growth Model

The five models will provide FTJ FundChoice users access to a series of dynamically managed, multi-asset portfolios with the goal of managing volatility through an active approach. Each model portfolio is catered to meet a specific set of needs and relative risk tolerance level.

The portfolio strategies will be available on the FTJ FundChoice platform in its strategic sleeve of the Market Movement Strategies platform, alongside five Russell Investments Tax-Managed Models already available to FTJ FundChoice taxable account users.

–Read the last portfolio product roundup here: Bank of America Launches HSA Digital Platform: Portfolio Products

Judge Greenlights NY Regulators' Lawsuit Against Federal Agency Over Fintech Charters

A customer uses an Apple iPhone to make a payment on a Square device. (Photo: David Paul Morris/Bloomberg)

A federal judge on Thursday rejected a motion from an office within the U.S. Treasury Department to dismiss a lawsuit from the New York State Department of Financial Services seeking to prevent the federal government from issuing certain bank charters to financial technology companies.

The state agency, which regulates financial institutions in New York, is suing the Office of the Comptroller of the Currency over a decision to essentially label fintech companies as banks, saying it will diminish its power to regulate the activities of those entities.

Acting DFS Superintendent Linda Lacewell celebrated the decision in a statement, saying it will give the agency an opportunity to argue why those companies should not be federally chartered as banks since federal regulations on those institutions haven’t been as comprehensive as state actions.

“The court has recognized the expertise of DFS and other state banking regulators and the significant role we play in regulating nonbank financial services, promoting innovative fintech products, helping to achieve a level playing field for regulated banking institutions, and most importantly, protecting consumers,” Lacewell said. “DFS, which was created in response to the financial crisis, will continue to lead and fill any and all voids that misguided federal policy decisions create.”

It’s the second time DFS has sued the OCC over its decision to allow fintech companies that do not receive deposits to seek special-purpose national bank charters. The first lawsuit was thrown out last year after a judge said it wasn’t ripe for review. The OCC had not started accepting applications from fintech companies for those charters at the time.

Now, U.S. District Judge Victor Marrero of the Southern District of New York wrote Thursday that the agency’s challenge to the OCC decision is ready for review since the office announced it would start accepting those applications last July.

“As a result of the Fintech Charter Decision, New York State’s regulations for over ‘600 non-bank financial services firms’ are all at risk of becoming null and void,” Marrero said.

The issue of the case is over how financial institutions are regulated between the federal government and the states. Entities chartered by a state are generally also subject to federal regulations. But those chartered by the federal government are largely supervised by the OCC alone, meaning that regulations promulgated by a state agency, like DFS, may not apply.

As of now, entities that do not receive deposits, like payday lenders and other fintech companies, are left largely up to the states to regulate. Marrero wrote that, based on the claims from DFS, there’s a real possibility that fintech companies could seek a federal charter to avoid state oversight because of the decision from the OCC.

“Based on DFS’s allegations about the threats of federal preemption and the unique characteristics of the dual banking system, DFS faces the current risk that entities may, at any moment, leave its supervision to seek greener pastures,” Marrero wrote.

The OCC has argued in filings seeking to dismiss the lawsuit that its decision to allow applications for federal charters from fintech companies was based on its interpretation of a section of the National Banking Act. The law says that a financial institution can apply for a federal charter if it’s in the “business of banking.”

DFS has argued that fintech companies are not in the “business of banking” because they don’t receive deposits. The OCC has argued that the “business of banking” definition is satisfied by other activities of those companies, like lending money. Marrero, in the decision, sided with the former argument.

“The Court finds that the term ‘business of banking,’ as used in the NBA, unambiguously requires receiving deposits as an aspect of the business,” Marrero wrote.

He noted in the decision that the OCC has never used the same argument regarding the “business of banking” to issue charters to other nondepository entities. In fact, Marrero wrote, when the OCC has sought to issue charters to such institutions in the past, Congress has amended the National Banking Act to allow the action.

Marrero did, however, dismiss one section of the lawsuit from DFS alleging that the fintech decision from the OCC violated the Tenth Amendment of the U.S. Constitution. He said that, while DFS had standing to raise such a claim, it had failed properly state one in its complaint.

A spokesman for the OCC said they were still reviewing the decision Tuesday and declined to comment further.

Apprise Labs Gives Advisors a Peek of New Retirement Planning Software

Edmond Walters, of eMoney fame, told a story: After he sold that company, he said to his wife, “Let’s move south.”

Her response: “And live on what?”

So he went to his investment advisor to find out how much they could live on and hit a brick wall. No software really existed that would help him and his wife visualize what they had for retirement.

So he created it.

In the Apprise Labs founder’s presentation at the Envestnet Advisor Summit in Austin, Texas, Walters highlighted the bells and whistles of his new software, for launch likely in fall, that provides the logistics, forecasts and tools to aid advisors in showing clients exactly where they stand with retirement income — or even current income — and how much they have to save or alter behavior to get to their goal.

The software, which will be white labeled to advisors and accessed through Envestnet’s platform, provides a Lifestyle Studio that uses stacked bar charts to show guaranteed income, additional income, investment income and retirement income. Current or future cash flow events — such as contributions or gifts or selling a home — can be entered.

The bar chart, which includes Envestnet | Tamarac’s real-time investment income data, will adjust automatically as income and expenses do. In addition, a Monte Carlo simulation will provide a look at a client’s progress toward their goal.

A spreadsheet can be accessed if a client wants to see the details.

The product, still in production as the company works out changes with feedback from advisors, also provides a click to its “legacy studio” to see how money is dispersed after a death, whether it’s to children (broken down per child) or charitable donations (to a college, for example) or other factors. This, too, can be changed and calculated automatically, and is a talking point for the advisors, Walters said.

Further, number changes can be spoken, and are kept in script form, Walters explained, which involves client interaction. The program also can be shared with the client to “play with,” although the advisor planning will be saved as the default.

Walters isn’t sure yet about pricing, but estimated they would charge about $100 to $150 per month

“Seventy percent of advisors get fired after a spouse dies,” Walters told the audience. “But advisors who have this tool that provides all the income/expenses won’t.”

— Related on ThinkAdvisor:

 

Envestnet Technology: Build-a-Bear Meets Netflix

Bill Crager at the Envestnet Advisor Summit in Austin on May 2. (Photo: Janet Levaux/ALM)

As Envestnet wound down its Advisor Summit in Austin on Thursday, key executives shared their vision of what the office of the future is set to look like, and how that office can drive client engagement and business growth for advisors.

“This is a game changer,” said Bill Crager, head of Envestnet wealth solutions, before a crowd of 100 or more attendees in the exhibit hall.

What makes a game changer, according to wealth-tech consultant Gavin Spitzner, is the way it directly engages clients.

“It’s like what [blogger and advisor] Michael Kitces said in his talk here [on Wednesday]. It’s the  Build-a-Bear model,” Spitzner explained.

“You can charge … more and get the client to do more of the work, if you give them more experience and interaction … like playing with sliders or trackbars, for instance, talking with their family members and having more complex legacy discussions,” he added.

Got Touchscreen?

To show what such interactive tools can do, wealth-tech innovator Edmond Walters demonstrated Apprise Labs’ latest retirement, cash flow and estate planning software on a large Dell touchscreen.

“This means presentations with no more paper,” Walters explained. “No one [else] can do this.”

(Envestnet and its just-acquired partner MoneyGuide/PIETech helped form the innovative venture in January.)

With a bit of data entry, “A husband and wife can — in 30 seconds — see their income sources … over a 12-month period. All the details are there. It’s pretty amazing,” Walters said.

The tech executive reminded the audience that clients “want an engaging experience” and not one involving paperwork. Clients “want to see how good you are” as an advisor at walking them through real-life issues, he added, “not at talking about products.”

“Advisors can talk with clients about downsizing their homes, selling a business, etc. Then clients can [immediately] see the impact of such decisions on the screen. … These are the tools of the future,” Walters added.

Kevin Hughes, chief growth officer of MoneyGuide, then showed the crowd the firm’s myBlocks platform. “Most Americans do not have a financial or retirement plan,” he said. “This is how to engage with them … on a screen that is familiar to them.”

The myBlock touchscreen has topics like Social Security and college loans that dynamically illustrate what income streams or payments will look like over the next five, 10 or more years and how clients can adjust these flows.  

“This is the office of the future and the future of planning,” Hughes said. “We couldn’t be more thrilled.”

For wealth-tech consultant Craig Iskowitz, the power of these tools is that advisors can use them to improve the client experience while also expanding their client and asset base.

Rather than the advisor being the only person involved directly in the financial planning, “This is gamification — the client can play it, too. And advisors can capture a larger base with this unique Netflix-style interface,” Iskowitz explained.

“By playing with tools, clients literally are taking control and can be involved” in wealth management and decision making, he said. “The tools also give advisors more time” for other business-building activities and stronger relationships with clients overall.

Boosting clients’ trust and confidence in advisors using this technology should enable advisors to collect more share of wallet — aka assets held by clients elsewhere. “You can get more of this business by differentiating yourself,” Iskowitz explained.

To win more of clients’ wealth business, “You have to to ‘wow’ them,” he added.

By digitally illustrating how they can save clients money on taxes, for instance, advisors enhance their value to clients. “It prompts the question, why would you keep your money elsewhere? ” Iskowitz said. “ It could be a game changer for wallet share.”

What’s Next?

After the demonstration, Crager gave more details on the deployment of these new tools. The myBLOCKs technology is generally available now, with more tools expected by early June. The Apprise Labs resources should be fully rolled out by year-end, he said.

Such plans show that “Envestnet recognizes that platforms with trading technology and the like are not enough,” Spitzner said. “You have to go deeper to empower advisors to have more digitally enabled client-engagement practices.”

“This is great vision in how they are bringing together different parts of the [wealth management] ecosystem, so advisors and firms don’t have to cobble it together for themselves,” he said.

But such systems require “great execution and clarity,” the consultant added. “It has to be really connected and seamless.”

At the same time, wealth firms “want to be able to do and add some of their own elements,” Spitzner said. “That’s the industry challenge — balancing tight integration across the ecosystem with differentiation.”  

AI Is Not a Priority for the Largest Advisory Firms: Pershing Poll

There’s a lot of talk about how artificial intelligence will transform the financial advisory business along with many others, but according to the 2019 Elite Advisor Poll, adoption of AI and other new “cool” technologies by advisory firms is not a priority.

Less than 10% of respondents to the poll of top executives at the nation’s largest advisory firms, conducted by BNY Mellon Pershing, are investing in such new technologies.

AI will be like robo-advisors, providing “transformative” technological abilities but not replacing traditional advisors, says Christina Townsend, director of advisor platform strategy at Pershing.

(Related: Where Harry Markowitz, Father of Modern Portfolio Theory, Is Invested Now)

But firms are investing heavily in technology. A supermajority of executives (80%) polled said they plan to increase investments in technology this year, with more than half (45%) identifying the creation of a better client experience as a top goal for those investments.

Implementing such new technologies or solutions, however, is a major challenge for advisory firms, according to the Pershing poll. Thirty-seven percent of firm executives identified technology implementation as their No. 1 challenge, trailing only hiring and developing talent, cited by 41% of respondents. Respondents represented some of the largest RIA firms, with a median AUM of $1.8 billion and average AUM of $9 billion.

The biggest hurdle for adoption of new technologies: individual advisors, cited by 44% of respondents. “Advisors are not adopting technology as much as they would like,” said Townsend, referring to the executives polled. “How do you change the behavior of advisors?”

That responsibility rests with management, said Townsend. “Management has to put a stake in the ground that they will be doing something different, moving forward” on new technologies and measuring their use. “Old habits die hard.”

The Pershing poll asked advisory firm executives about their priority list for investments in technology. While only 8% included AI and other new technologies on that list, 62% identified integration applications for connecting with clients (customer relationship management) and custodians and for account openings. Twenty-seven percent said they were focusing on building client portals or websites.

“Building the right technology framework is a challenge for many firms — especially as a growing number of them are looking to create a unique experience designed specifically for their optimal client,” said Townsend in a statement. To that end, Pershing is expanding its team of technology consultants that works with advisory firms, whether they use Pershing technology, third-party solutions or proprietary programs.

— Check out Pershing Advisor Solutions CEO Mark Tibergien’s latest column, What’s My Line?, on ThinkAdvisor.