GARDEN GROVE, Calif. — Flush with a $20 million injection from ETF sponsor WisdomTree, AdvisorEngine nabbed the assets of client-adviser collaboration tool Wealthminder in the kind of mature, big money deal many say can be expected in the wealth management fintech space this year.
The announcement was timed to coincide with the annual T3 conference here where the focus of many company founders, executives and investors is tightly trained on a deal flow that is expected to build strength this year.
Pushing this evolution is a drive to integrate a mind-numbingly broad number of services directly into the client experience, as well as a need to be able to serve clients under the Department of Labor fiduciary rule.
As AdvisorEngine Chief Executive Rich Cancro says, picking up Wealthminder's software technology is about "connecting advisers and clients."
"With this one technology stack, [advisers] can give us their models, their allocations," Cancro says, declining to disclose terms of the Wealthminder deal. "We digitize that. And it's incredibly flexible. There are some solutions where you kind of have to fit into their framework. We offer really super flexible options."
FURTHER MATURATION
Deals in 2015 and even last year were characterized by an irrational exuberance in which investors threw money somewhat haphazardly at more digital wealth management and software firms than was perhaps warranted, says Joel Bruckenstein, fintech columnist and T3 conference organizer.
The biggest names garnered the biggest amounts last year: Betterment raised $100 million in funding; Personal Capital gained $75 million, while robo adviser SigFig attracted $40 million from Eaton Vance, UBS and other financial institutions.
This month, other digital wealth players have gained additional investment. Digital 401(k) manager blooom raised $9 million from larger insurance firms, while advice software firm Trizic announced it received $3.3 million in venture capital.
Overall deals in the space trended up between 2015 and 2016, according to investment banking firm
Brian Stimpfl, head of advisor services of Scottrade — which was acquired by TD Ameritrade in October in a $4 billion deal — says his firm has more than 80 light integrations with different third party providers and a smaller number of heavy integrations with well-known brands like eMoney Advisor and RedTail.
"It's clear there is success to be had here" for investors, Stimpfl says. The increasing number of deals "is just a sign of the further maturation of this space, period."
PARTNERSHIPS KEY
As more firms look to add technology into their offerings, Bruckenstein says, players in the space have a better idea of what they are looking for.
Brian Edelman hopes that plays in his favor.
Edelman says he plans to sell his firm Edulence this year. A quiet firm that has not sought out publicity, Edulence provides the video and educational services that comprise many of the basic offerings of well-known brands like eMoney Advisor.
In all, his firm serves more than 400,000 advisers through partners like eMoney and other large companies, he says.
Edelman says he is selling so that he can switch his focus to another cybersecurity firm, Financial Computer, based in Bloomfield, New Jersey.
Michael Chochon, cofounder and CEO of Prairie Smarts, which provides a tool that generates a one-page analysis of any portfolio's risk profile, says "partnership is probably the key word in 2017."
"In the last three to five years, you see a lot of individual tool sets coming out," Chochon says. "But you can't log into ten different tools. You've got to log into one."
