"In the old world of monolithic systems, there are no open APIs and people do not facilitate any rapid integration of best of breed systems. Where there's a volatile market, you need to be able to move quickly. So I think advisors need to control the user experience and the client experience much more than say, the vendor."
–Brian Ross, CEO, FIX Flyer
Brian is a leader in wealth management systems, securities trading systems, and financial messaging software. With over 20 years experience at leading Wall Street software firms and major technology initiatives, Brian has worked at Thomson ILX, Blackrock, Trepp and FIX Flyer.
A frequent speaker at financial service industry events, Brian has degrees in science, engineering and business from University of Oregon, Johns Hopkins, and Claremont Graduate School with additional graduate studies in mathematics from the Courant Institute of NYU.
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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.
- AdvisorEngine [30:18]
- Amazon Web Services [32:45]
- Archer [04:45]
- AutoPilot [17:13]
- BlackRock [04:18]
- Bloomberg [21:57]
- Envestnet [16:16]
- Fidelity [34:35]
- Invesco [30:09]
- Morningstar [15:54]
- NASA [04:17]
- Orion Advisor Technology [15:55]
- Plaid [06:48]
- Portfolio Pathway [30:16]
- Riskalyze [09:23]
- Stripe [06:49]
- SunGard [34:31]
- Tamarac [15:54]
- Tradeweb [22:49]
Topics Covered in this Episode
- Why is Now the Time for the API Economy? [06:10]
- Why FIX Flyer? [15:45]
- Additional Asset Classes & Fixed Income Trading [18:15]
- The Fastest Growing Network in Wealth Management [23:05]
- Mergers & Acquisitions [30:20]
- Simulations & Testing as a Service [33:15]
- #ItzOnWealthTech Ep. 51: The Future of Enterprise Wealthtech Webinar
- 47 Portfolio Management Systems Can't Possibly Survive
- #ItzOnWealthTech Ep. 52: Bitcoin Apathy is No Longer Kosher with Sunayna Tuteja
Complete Episode Transcript
Craig: When Brian Ross worked as a systems engineer for NASA, he spent almost a decade building software simulations for the Galileo and Voyager space probes, as well as the Hubble Space Telescope, testing was of critical importance since even a single bug could turn a billion dollars of hardware into a lump of useless space, junk. Little did he know that one day he'd be running a company that also relies on simulators to test their software, but instead of controlling scientific equipment like plasma spectrometers and planetary radio receivers, FIX Flyer is routing trillions of dollars of trades through their order management system and advanced trading network. I spoke to Brian about how the API economy is forcing a shift in how firms build software, how his firm is supplying the core plumbing of some of the biggest technology vendors in wealth management, as well as a whole lot more on this episode of the Wealth Management Today podcast.
It's always nice to spend some time with all of you here in the world of wealth tech. This is the phase two reopening version of the WMToday podcast. I'm your host Craig Iskowitz, I run a consulting company called Ezra Group. We help wealth management firms and wealth tech vendors make better business and technology decisions through our advice and research. On this podcast, I speak with some of the smartest people in our industry who are on the leading edge of technology and innovation. And before I forget, please remember to subscribe wherever you're listening to this podcast and leave us a five star review, as well as share on your social media. We really, really appreciate it.
I'd like to welcome my guest for this episode of the Wealth Management Today podcast. I have Brian Ross, CEO of FIX Flyer. Hey Brian, how you doing?
Brian: Good to be here, Craig. Appreciate you taking the time with me today.
Craig: Likewise, I'm glad you're here. So we're here to talk about a lot of interesting stuff and we've been talking about getting this podcast going for some time, so I'm glad you could make it as well. Can you give people who are listening a quick overview of FIX Flyer?
Brian: FIX Flyer is a provider of wealthtech. We really help a lot of participants in the marketplace achieve a lot of efficiency with regard to middle and back office, with regard to trading, with regard to cloud services, and leveraging the new tools that are available to people. We're big providers of APIs, big believers in that marketplace, and big believers that there's a new opportunity today to try to bring new services to the marketplace at a very high level. We believe that the way most advisors have been taught to work is perfectly suited to a world that no longer exists. Those are the on-prem monolithic closed systems that don't respond well in volatile markets and don't work well in a world of rapidly evolving tech. So we've taken a new approach to all that, we do have a modern tech platform, very SaaS-based platform, open APIs for portfolio trading and connecting to all the participants in the marketplace, whether they're advisors or broker dealers or custodians.
Craig: Talk a little bit, bit about the history of FIX Flyer, this firm, you've been around a long time.
Brian: Yeah, we have been around a while, and I personally have been around a while. I spent some time at NASA, I spent some time at BlackRock, nine years at BlackRock developing some of the trading systems over there back in the late 90s and early 2000s. We started FIX Flyer around 2006 and originally a little bit more capital markets facing in terms of infrastructure. But we did get some early wealth management firms as clients, including Placemark, FolioDynamix, Market Street Advisors, now called Archer and others. And they helped us build out our trading network and some of our order management capabilities. So that's how we got started, we still have a capital markets business and a wealth management business that's really flourishing these days. So that's the fastest growing part of our market today is wealth management.
Why is Now the Time for the API Economy?
Craig: How did your time at NASA help you? How are you leveraging the time at NASA with working at FIX Flyer, building one of the largest trading networks in the industry and one of the biggest order management products, how'd you leverage that? Any lessons you learned at NASA you're using?
Brian: Well, one of the things you had to do at NASA is really work on good specifications and really get things right so that when you do a fly by of Neptune, you only get one shot. And the world of Wall Street was different. It was much more agile and much more "get it done right now". But I learned a lot about organizing meetings and teams to really move forward and build robust platforms and advanced technology to try to be efficient. Things like simulations are very important at NASA, and we do a very good job of that at that FIX Flyer as well, because we can simulate any connection to any counter-party and help people with their workflows and such. I think I learned a lot there. Also picked up two master's degrees while I was there.
Craig: Oh, excellent. So let's talk a bit about the API economy, this is something I know you wanted to discuss. So why is now the time for the API economy? Why didn't this happen five years ago?
Brian: I think it's an interesting question. I think there are firms that did attempt it five years ago, and I think one of the things they tried to do was the APIs they were creating were all about bringing the user of the API into their monolithic systems. They weren't about trying to do the kinds of things that you see Plaid or Stripe doing where they're more focused on the end customer. So in the old world of monolithic systems, I think you see this closed world where there are no open APIs and people do not facilitate any rapid integration of best of breed systems and in a world where there's a volatile market, you need to be able to move quickly. So I think advisors need to control the user experience and the client experience much more than say the vendor.
And in these old systems five, six years ago, I think you saw vendors trying to just use an API to bring people into a closed system. That's very different than what you see with someone like Plaid or Stripe, where they're really trying to create a developer tool set that allows the tech person either at a vendor or at an advisor, create a user or advisor experience for the end client, for the end customer. So we're taking a different approach at this, at the APIs. We have REST based APIs, we're building all sorts of tools, but in particular we've been focusing on portfolio trading.
Craig: So I've got a programming background, but I'm not sure all the audience does. Can you explain what a RESTful API is versus non-RESTful?
Craig: There's one thing I've read a lot about where they're talking about banking as a service, where APIs are enabling banking to no longer be somewhere you go, but a service you can provide. And would you say that order management would also become a service if it could be access via APIs?
Brian: Well, we certainly hope so, and we think it goes beyond that. We believe that it extends to all of wealth management, which could include portfolio management, it could include compliance management, position management certainly already is. We've helped firms like Riskalyze build order management tools, Connected Trading is an example of that, the Riskalyze platform that we helped. So I think that's exactly right. Firms like Stripe kind of enabled a lot of the internet commerce tools out there. Website tools, firms like Plaid really built on top of APIs, again, REST APIs to connect banking to millennial apps. It's time for wealthtech to embrace APIs and it hasn't happened yet. People are still stuck in this older world.
Craig: Why is that important? Why can't firms just use a big vendor and say, look, you guys handle it all. We don't want to deal with that, it's not our business. What's the advantage that a wealth management firm would have by accessing the API versus just giving it all to a vendor?
Brian: I think the most immediate thing is you control the advisor experience. You control the user experience and the UI and the UX, so you're not stuck with whatever the vendor is providing you. And a lot of them, the big vendors, are not very reactive because they have so many clients that they have to respond to, it can take a long time to get new features. If you control the advisor experience, you control the UI. You know, you can move pretty quickly to add new features as long as the API has a lot of power behind it in terms of functionality. We're getting a little more techie than I expected.
Craig: Why do why do you think vendors having too much control over the experience is a bad thing?
Brian: Well, I think there was a time of place and historically I think it was really required to create efficiencies and to bring the full breadth of tools to the marketplace. There's been a lot of really cool stuff done with financial planning and portfolio management and such over the course of the last 10 years, and a lot of firms are very embedded in the marketplace and do a great job. And if you're happy and content with all that, that's great. But I think in this marketplace, a lot of those, some monolithic, or even on-prem or closed systems, don't allow you to be very reactive, and you might have to have someone in the office, in the middle of a pandemic rebooting systems and controlling doing some sys admin.
This is a new world that we're in. I think things have shifted. And it's a time when SaaS and API providers can really help bring new ecosystems in the marketplace that give a chance for tech leaders within advisor firms or developers there to showcase best of breed tools that they can assemble into their own ecosystem and they can control. And they can swap out one API provider for another if they want, they're not beholden forever to a vendor, which is really what happens.
Craig: But that's not best for everyone. I know we talked to a lot of companies and say, look, it's better for you to use a monolithic platform, because it's one throat to choke. So APIs can have a downside as well.
Brian: I think you don't want too many. I think that's very true. So yeah, they can have a downside if there's too many, or the integration's not clean. You have to be leveraging some of the newer APIs out there if you really want to have easy ability to kind of swap in and out. But I think you make a good point, and I think there's a lot of great providers out there, we work with a lot of them, and we help support a lot of them and try to deliver new capabilities to a lot of them. And that could include additional asset classes that we facilitate trading, could include connectivity, could include order management and other features as well.
Why Not Build Your Own OMS?
Craig: That's a good segue to my next question. Your partners are impressive. Okay. So on your website, we have Riskalyze and Morningstar and Tamarac and Orion, and these are firms that are very smart, have very strong technology teams. Why didn't they just build this themselves? Why would they go to you for the order management system?
Brian: I think that maybe you can look at each of them individually and come up with reasons why we were a good solution for them. So someone like Envestnet we've been with a very long time, we do a lot of managed service for them, they bought firms that had been our longtime clients like FolioDynamix and Placemark. And indeed they're on our network, Envestnet who did those acquisitions, so they've been using our order management system for trading for a very long time.
And we do some very good things. When you need to block orders up very rapidly, get them traded, then execute in the marketplace and allocated back out to tens of thousands of accounts. We really do that very fast. So we help someone like Envestnet, get their investment strategies implemented in the marketplace quicker than other providers. And so that's an example. They take our whole OMS and network, use it. Someone like Riskalyze had a different need, they had AutoPilo doing some rebalancing, but out of AutoPilot and Tamarac was kind of like this as well, they would create order files. You actually had to go and manually upload to custodian sites in order to get them executed, you wouldn't get real time information back. So a lot going on in the tech world with these firms and they have all sorts of initiatives underway, like could be financial planning or BI, or something else.
And so leveraging a firm that has already been through all this creation of order management functionality, and had open APIs connected to all the brokers and custodians, it was almost like a no brainer for them to either take our platform as a GUI like Tamarac did, or take our API like Riskalyze did, and rolled out Connected Trading. It took both of those firms only a couple of months to introduce new features from us into their worlds. So that's the power that you get with APIs and the power you get with technology that's agile and can integrate quickly into other systems.
Additional Asset Classes & Fixed Income Trading
Craig: Let's move on to something you mentioned before, additional asset classes. So a lot of firms are thinking about adding asset classes to help their advisors differentiate, and also with low interest rates they're looking for opportunities to increase returns. So what are some of the asset classes you're seeing firms adding that they didn't have access to before?
Brian: I think the most obvious there are things like fixed income, all types of fixed income. Munis, corporates, treasuries, high yield, other kinds of mortgage bonds, as well as options, futures, things like multi-leg swaps. We handle things like that in our trading platform, and our network is really asset class agnostic. So we handle even swaps, it could be an interest rate swap, credit default swaps, could be structured products. We do a lot of work on our network that is agnostic of asset class other than workflow changes between asset classes. So we kind of had a really good foundation in that, based on our network, and from that, we started layering in more functionality, more advanced functionality into our OMS and our tool sets so that people could quickly do things like fixed income or options or multi-leg trading. So we're going to see very soon here an announcement from Tamarac where we're rolling out more fixed income order management capabilities for them. And I think as well, we'll see additional related asset classes with some of our other providers over time.
Craig: So talking about fixed income, what are you seeing in terms of advisors trading fixed income? They could always do it through an ETF or mutual fund, are more advisors trading individual bonds?
Brian: I think you certainly see that with the larger advisors. I think ETFs and mutual funds are maybe the most common way to address it, particularly if you're midsize or smaller. So almost all of them do that, looking for specialized applications in some portfolios, you may need muni bonds in Kentucky or muni bonds in California or something like that for some tax advantage reason. So there are lots of accounts out there that need specialized attention and certainly fixed income can help in the world about tax management, but it's also important just in terms of reducing and controlling risk, reducing and controlling your income, if you're more income focused and older, maybe you don't want too much in equities. A lot of the wealth management firms are very focused on equities, ETFs and mutual funds without addressing the other asset classes, which can really be used to control risk and hedge risk and provide additional return.
And I think we see it a lot in from mid-size on up. I think as well, the tool sets haven't really been there, but as far as Flyer coming to the marketplace to really try to help wealth managers block up fixed income orders in different accounts that need to be traded, you get to a size that becomes more reasonable in the fixed income world to trade and then allocate back to all the accounts. So part of it's technology I think, and part of it is need, in terms of income and risk control and things like that.
Craig: A lot of the vendors that I see, even the bigger platforms don't really support individual bonds. I see people that, I won't mention the platform, with the platform screen, and then they've got Bloomberg next to them and they're switching back and forth. Is that world going away?
Brian: I think over time, it will. I think some of the initial implementations that we're rolling out are going to still require you to get them executed through your home office or MarketAxess, TradeWeb or Bloomberg. But I think over time, you'll see more and more functionality going right into the platform in terms of RFQ and actual trading. But the initial release that's slated for next week is going to be a little bit like that in terms of lots of orders from say, Tamarac, and being able to do something with that asset that's in your blotter. And if you want to do it through Bloomberg or TradeWeb or MarketAxess or your custodian's portal or whatever, you can, and some of those platforms will allow feedback directly into the blotter so you can see it. You still need to allocate it out to all your accounts. So that's part of the order management system as well.
The Fastest Growing Network in Wealth Management
Craig: Well, how about different connections? I think connections are one of the most important things about having a network, are you guys growing a lot of connections and what are you seeing in terms of trends with connecting between vendors, custodians, advisors, wealth management firms?
Brian: We have the fastest growing network in wealth management today. Over $4 trillion traded in the last 12 months, over 1500 advisors, we're adding almost 60 connections a month to the platform. So the platform is really going quickly and of the reason for that is because single API in, and you can get mutual funds, equities, or any asset class you want. So we simplified it in again –
Craig: I'm sorry, let me interrupt you a second, Brian, so you say single API in, what does that mean?
Brian: Well, we offer a couple different APIs into our network, but a firm, let's just take an example Orion uses our network and they previously were using another network provider and they had a different connection for mutual funds, a different connections for equities, and if they wanted to add another asset class it would have been yet another API. So with us it's a single API. It makes the implementation and provides a single pipe in, and that's important. And then on the other side, we're connected to all the brokers and custodians you can imagine, it's all the big four wealth management custodians, and everybody else kind of below that as well really, a lot of retail platforms, a lot of wirehouses, a lot of broker dealers and asset managers as well. So the network is really quite important and handles more than just orders, executions, and allocations. It has some Start of Day capabilities as well as End of Day capabilities, and we're adding things like risk controls as well. It's an important piece to our service, and all of our Co-Pilot tools for order management, compliance management, position management and such, are built on top of the network, which makes it very quick in terms of getting things processed and out to the execution venue and back into the account.
One of the big focuses there is really trying to especially in a volatile market where the market's moving pretty rapidly, you need to shrink the time between the portfolio manager's decision to do something and the actual implementation of that. So you don't want delays where rebalancing takes a long time and where blocking up all the orders takes a long time, and then getting it to the right place in the market takes a long time, and the allocations back take too long. So you need to condense that, and we've been very efficient in that regard and with our platform all that can be done in a matter of minutes. If you just want to do the training piece, it's really just a single click and it can get done extremely quickly.
Craig: One of the reasons why I think a lot of people haven't heard about you necessarily, is because you're kind of in the plumbing layer. If your house didn't have plumbing, you'd be out of luck, right? But everyone sort of takes it for granted that that just happens, I place a trade and it just goes. How do you see that becoming more of an important part of the way wealth management firms are working?
Brian: Well again, I think API has played a key role. So you do have the network layer and as we roll out more functionality on top of the network, so order management, position management, portfolio management, compliance management, these sorts of tools, all available through APIs, then you start to expose a lot of functionality to advisor firms and their developers and as you do that, I think you really empower a lot of the advisors and their developers to start to build new tools and new ways to control the advisor's experience with the whole process. So it's really a critical piece, and it's one of the unique things about us.
We've got this rapidly growing network and this tool set of functionality around workflows that are important to wealth management, such as trading and portfolio management, compliance management, position management. On a platform like ours you can, if you're a portfolio manager and you want to swap out Pepsi for Coke or Microsoft for Apple, a single click, even though you have tax lots across all sorts of accounts, you can actually get it done very quickly. Swap out one asset into another asset and have it proceed without doing some massive rebalance and then a set of manual uploads to various locations. We have tried in some ways, and maybe it's coming a little bit from some of my experience with BlackRock, to try to bring some of the tool sets that you see at a place like BlackRock to try to bring efficiency there.
And they were very advanced and still are very advanced in a lot of core things like the message layer. They were very good at spreading information around the whole BlackRock community whether it's clients or support staff with a centralized data set or database. I don't want to turn this into a BlackRock ad, but I learned a fair amount there and we've tried to leverage some of that in our messaging layer and then our network layer and in our tool set, as we expand.
Craig: It's not a bad company to emulate.
Brian: I feel very lucky to have ended up there for nine years. When I joined them, it was the end of '94 actually, to date me, and they had about $22 billion under management and about 115 or 110 maybe employees. It was a really a boutique bond firm back then. It specialized a lot in mortgages and was expanding into munis and corp and other things. And the growth that they had, and continue to have, it's just been staggering and impressive.
Craig: Do you see the big firms getting bigger? Are they going to squeeze out all the smaller asset managers?
Brian: I think it's an interesting question. I think they're really all about efficiency and AUM and they are into model management and proliferation of I-Shares and ETFs they are really continuing to do well. I think it's an interesting question. I think there will be pressure on some of the smaller or midsize asset managers to build out tech and to find tech providers that allow them to be agile. I think it's why you see firms like Invesco buying firms that do tech. And that's happened a couple of times, Portfolio Pathway was acquired, AdvisorEngine was acquired. I don't think it's any coincidence.
Mergers & Acquisitions
Craig: So what's the pattern here? What are these firms going to do with what they're buying up? Why are they buying this tech?
Brian: Well, I think one of the reasons is because they want a proliferation of their ETFs and they want to grow their AUM. They know that it's hard to compete against a monolithic firm like BlackRock, and as I mentioned today they're really the big kahuna and they've got an advanced tech stack that's really continuing to aggregate assets and they're penetrating wealth management and doing a very effective job of that.
Even when I was at BlackRock 15 years ago, it was more than that actually 17, 18 years ago, they were focused on wealth management then. And it's one of the reasons why I wanted to develop my own tech company focused on wealth management. Although we started more capital markets facing, we really turned towards wealth management. A lot of that came from Larry Fink and his initiatives, and he's done it a lot through acquisition and through really sophisticated tech, and really building out risk management and tools, allow them to be very efficient, and very real time in regard to their assets under management.
Craig: So let me go back to sophisticated tech and talk about APIs again. So how do firms know how to evaluate a vendor's API stack to know whether it's good or not, if they're someone they should work with?
Brian: That's a really interesting question. I'm not sure I've got an answer off the top of my head. I think you do need to try and understand if they're trying to suck you into their monolithic world, or are they really trying to help you build an ecosystem that you control and manage? So I would caution against trying to take the entire stack from just a single vendor, if you really want control. You probably need to roll some of your own as well so you have a little bit more control. But you know, if it's not at least a web services or REST based API, you're probably dealing with an older vendor, and I think you want to be careful there. I think you can look around the marketplace and see what some of these guys like AWS and Plaid and Stripe, and these other guys are doing with regard to their platforms. And if your provider is not doing those sorts of things, then it would be maybe a concern.
Craig: One thing you mentioned earlier was simulation. We were talking about your experience at NASA and simulating, and I don't see a lot of vendors with decent simulation. Usually the testing is they go, they get a dummy account and they enter some trades in it, and then they get to see the trades run through, but there's really no automated simulation. How does that work and why is that important?
Simulations & Testing as a Service
Brian: Yeah, we do it and I think testing as a service in general is going to be a bigger and bigger field, and it's untapped right now. Anybody that is developing software needs to simulate the counter-parties that they're connected to and needs to simulate their own product before they do a big release. So that can be software that you build, that can be software that you license, that can be a service. So we have something that's testing as a service really. So we've got thousands of tests in this thing, it's on network and available through REST and if you want it through other ways, such as FIX connectivity, so you can access this test library and make sure that your new release of software is working.
So going back to Riskalyze, when they were really trying to lever our trading API or portfolio trading tools to get Connected Trading going, it really was very important to be able to simulate because if you want to try to get someone like, I hate to use names, but someone like SunGard on the line to do a certification with a company like Fidelity, you got to schedule it way out in the future. But if you've got a simulator immediately available 24/7 to test at any time the developer wants, you can move very quickly. So you save a huge amount of time. And then anytime you're doing a big release, you can run through a set of couple hundred tests or even 50 tests to make sure everything checks out, and you're in a much stronger position. So it really is a developer facing tool that really helps people be more efficient with regard to release cycles and agile development. We're really pleased with that.
Craig: So gives it gives programmers, I remember when I was programming, it makes you almost like a superhero, you can run all those tests before actually connecting to the custodian. Your code is gonna be really clean.
Brian: It's certainly got a much better chance of being very clean. So you know, that you know, the ability to simulate all the different brokers and custodians is really important to any tech provider on the buy side. So we also flip the whole thing around so that sell sides can test buy side incoming flow. So there's exchanges that want to simulate incoming from sell side. But it's a testing service that's really growing, not just a domestic service, but it has international and global capabilities as well.
Craig: Sure. Especially with volatility increasing the volume increasing.
Brian: Yeah. It's just been crazy. COVID has really brought this new era, almost this tectonic shift where you've gotta be agile and you need to be able to get your investments done quickly. Your strategies need to be implemented quickly, your new releases need to be tested and rolled out quickly. If you've got an API, you need to be able to get it implemented and rolled out quickly. You need to be agile in this marketplace. And certainly, you know the pandemic has accelerated a lot of trends, whether it's remote client management or remote sales or conferences that are now online, or the things we were talking about, which is more around implementation and portfolio strategy and trading and simulation, they're all tied to this boom we've seen and in remote tools and cloud based platforms have become now very important and make it much harder for those on-prem monolithic platforms to respond rapidly.
Craig: I think Brian, that you've hit all my questions. I think we're out of time, so I want to thank you for being on the program and sharing your expertise and your experience and your view of the market.
Brian: I appreciate it. Thanks for having me on Craig. I really do.