LISTEN TO THE LATEST PODCAST

#ItzOnWealthTech Ep. 76: Standing on the Edge of a TAMP Revolution with Matt Regan, Wealthcare

“TAMPs are often the first thing that advisors outsource.  They know that they aren’t very good at investments and they were very happy to turn to somebody who had some expertise in there. So what’s happened is that they’ve had to adopt and integrate more tools such as  onboarding and proposal generation. I think the next generation will be the integration of planning into the TAMP solution so that the plan is linked to the investment solution. Then any change to the plan immediately kick off instructions to change the investment portfolio.”

— Matt Regan, President, Wealthcare Capital Management

Matt Regan is currently president of Wealthcare. Prior to Wealthcare, Matt served as the Chief Operating Officer of Wescott Financial, a $2 billion RIA based in Philadelphia. With more than two decades in the financial services industry, Matt has been involved in a number of transformative business models and has remained focused on building world class organizations with a focus on the client.

As a founding partner of WR Hambrecht+Co, Matt launched the retail brokerage offering and helped to design and launch the auction-based OpenIPO system. As a consultant to Vanguard, Matt was involved in the technology and business transformation that created the infrastructure that underlies the firm’s Personal Advisor Services offering. Matt is a graduate of the University of Toronto and resides outside Philadelphia with his wife and three children.

Now hit the Play button!

Click here and schedule a free Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.

Companies Mentioned:

Topics Covered in this Episode

  • Wealthcare Background [03:00]
  • Why Are TAMPs Being Forced to Deliver More Tech Solutions? [08:30]
  • Big Players Snapping Up Planning Tools [11:00]
  • What Is United Capital’s Future at Goldman? [15:00]
  • Wealthcare Competition [20:30]
  • Next Steps for the Proprietary Technology Stack [22:35]

Complete Episode Transcript:

Craig: And I’m happy to introduce our guest for this episode of the Wealth Management Today podcast. I have Matt Regan, President of Wealthcare, Matt, welcome to the program.

Matt: Thanks Craig. Great to be with you.

Craig: I’m glad for you to be here, Matt. Just so you know, I’m recording this, I’m actually in London, here for family business, so I hope my audio doesn’t cut out. Where are you calling from, Matt?

Matt: Outside of Philadelphia, the firm’s based in Richmond, Virginia, but we’ve got a small satellite office here in the Western suburbs of Philadelphia.

Wealthcare Background

Craig: I love Philadelphia. I grew up in the in the New Jersey suburbs, in Cherry Hill. Yep. So Matt, can you give us a 30 second elevator pitch for Wealthcare?

turnkey asset management platform

Matt: Sure. So we call ourselves a technology enabled RIA. The firm was founded in Richmond, Virginia in 1999 by Dave Loeper who invented the industry’s first goals-based financial planning software, known in the marketplace as Financeware or Envision, or we call it GDX 360 for the goals driven experience. And on top of that goals based planning software, we’ve created a fully integrated technology platform that includes goals-based planning and investment framework. So a TAMP that we manage about $3.5 billion on behalf of our advisors, as well as a trading and rebalancing engine. This fully integrated technology stack is surrounded by human capital, so we provide advisors compliance, operations, marketing, trading and rebalancing, billing services, and what it all adds up to is an end to end platform that advisors can use as a complete outsource solution to run their practices on. Today we support 150 advisors across the country, many of whom use their own DBHs some of whom use the Wealthcare brand, but all of whom are our partners and we provide them the services that they need to grow.

Craig: Love hearing that story Matt. So, before we get into the details of what you just said and ask you some questions that I want to ask you about the market, the industry, and what’s going on, you’ve got a long background in financial services. Can you just give us a quick overview of how you got to where you are now?

Matt: Sure. I actually started out on the clearing end of the business in the securities lending department of a clearance firm, but really my first you know, engagement on the client side was I helped banks in the in the early 2000s build their online brokerage businesses. So we had a joint venture with Wells Fargo. We started WellsTrade for them, PNC, T. Rowe Price this when all the firms were getting into online trading. From there I joined Bill Hambrecht as one of the early employees there and we built the open IPO auction IPO system, which democratized initial public offerings. And I ran the broker dealer there. And after that, I worked for a few years at Vanguard, helping them to to build the infrastructure that supports their roboadvisor. So it all kind of adds up to a career where technology and operations intersect and we provide as we do today at Wealthcare, innovative and disruptive tools to support the growth of alternatives to kind of the mainstream wealth management business.

Craig: I just wanted to touch base on the Vanguard part. That’s really interesting. And I also think the Hambrecht and Quist experience is interesting as well, but what do you think about Vanguard’s robo-advisor having built it and what did you learn from that?

Matt: Well I I’ve said many times before and we would like to emulate what they’ve built there. I think of all the solutions in the marketplace that are leveraging digital technology, planning, investments as well as trading and rebalancing, Vanguard’s probably got the business model, right. You know Dave Loeper in the late 90s, early 2000s had this vision and that’s what Wealthcare was really founded on was the idea that the technology platform supports the advisor, and that advisor can be somebody that’s more of a social worker than a high priced financial wiz, and the technology itself is really the key to delivering the services. And that’s where Vanguard is. I mean, they’ve got hundreds and hundreds of CFPs that are delivering great service through an integrated technology platform. Now, I think Vanguard will probably screw it up as only Vanguard can. I mean, their call times will be way too long and their clients will get frustrated. Their website will be hard to navigate, their security system will be overly complicated, but the business model itself, I think is perfect.

Why Are TAMPs Being Forced to Deliver More Tech Solutions?

Craig: Well, they haven’t screwed it up yet. They seem to be gathering assets at a pretty fast clip. So that hasn’t happened yet. Another thing I wanted to talk about, which I think is interesting is the move of TAMPs from what we used to call pure TAMPs or the TAMPs that are offering really more investment related services, as you mentioned, a fully integrated technology stack, what was driving that, why suddenly is every TAMP being able to being forced to deliver more technology solutions to the market?turnkey asset management platform

Matt: Well TAMPs really, if you think about where SEI started and where the mega TAMPs came from, that was the first thing to outsource. That was the first thing that made sense to advisors to outsource. I mean, they knew that they weren’t very good at investments and they were very happy to turn to somebody who had some expertise in there. Certainly that’s where Brinker built their business, and again, SEI as well. The idea that an advisor or a wealth management firm would be comfortable with outsourcing that piece of it was really the beginning. But what I think has happened is particularly the investment-only TAMPs, the ones that are providing proprietary investment solutions, there’s a challenge there if you’re not at scale. They’re getting pinched just like everybody else in the chain, as far as fee compression is concerned.

So it becomes a scale business, and what we’ve seen is the emergence of, of mega players there. I mean, certainly Orion’s acquisition of Brinker is a validation of that. Envestnet, SEI, Assetmark. I mean, these are, these are enormous 50, 60, 100 billion dollar businesses. So it’s gotten to be really challenging for the smaller TAMPs, particularly ones that only offer their own proprietary solutions. Leave aside the fact that nobody can beat the S & P you know, for the last 15 years and active management has been a challenge until recently. So what’s happened is they’ve had to, and I think this is a really good thing for the end clients, is they’ve had to adopt and include and integrate more tools.

First it was, you needed to have a good onboarding solution. Well, now it’s onboarding proposal generation. I think the next generation, the next turn here will be the integration of planning into theTAMP solution so that the plan is linked to the investment solution. So that any change to the plan immediately kicks off instructions to change the investment portfolio. And that’s how we built Wealthcare. That’s how we started under that same premise. I think we would humbly say that things are coming in our direction after all these years.

Big Players Snapping Up Planning Tools

Craig: You would very humbly state that as a humble person. That’s interesting. We are seeing a lot more planning tools being snapped up by bigger players with the plans – the plans for planning – their plans are to integrate them more tightly into their infrastructure Fidelity and eMoney, integrating into Wealthscape and Envestnet and MoneyGuidePro integrating into their ENV2 enterprise platform, and maybe Tamarac as well, as well as integrating into insurance, their insurance exchange. So it’s becoming a more of a seamless solution.turnkey asset management platforms

It’s one thing I’ve written about that there’s no reason for the financial planning data to be in a silo like it is, in a separate app. It is just, that’s the way we’ve always done it. It’s like why is CRM in a separate silo? Because we always had a separate CRM app. So do you see this as sort of going full circle where everything started out as one, like on a mainframe computer, as one system then broke it out into PC based software where every app was its own, now kind of moving back to its own one database for everything?

Matt: Well I would also put Orion’s acquisition of Advizr in there too. I mean, that’s really a validation of the model because ultimately to have the plan exist independently from the investment portfolio, I think does a tremendous disservice to the end client. And as you describe it, I mean, that was literally the way that advisors did it was you went over here and did the plan, and then you turned over here and said, Okay, well, let me go pick a 60/40, or a 65/35 and then never the twain shall meet, those two decisions never really intersected. And if you think about it United Capital did a great job of bringing those two together. That approach the FinLife conversation, the honest conversation, FinLife was really one of the early examples of the integration of planning and investments. And interestingly, United Capital is a user of our planning software, it was kind of built on our planning software. So there’s some parallels there, but I think it’s, unquestionable that Envestnet’s acquisition of MoneyGuide, everything that’s going on with eMoney and Orion and Advizr, validate the fact that these two activities can’t be separated if you’re doing right by the client.

Craig: Mhm, and we forgot Tegra118 buying RetireUp.

Matt: Absolutely.

Craig: So everyone seems to be picking up planning tools with the hopes of integrating. But when you mentioned United Capital, so I love what they’ve done with FinLife and their MoneyMind and those tools, and they really seem to do the right thing where they say, Well, look, where can we add the most value and the investing side isn’t where the value is. We’re not going to build a better portfolio rebalancer a better you know, other types of trading tools or order management. Let’s focus on the areas where we can add value, which is the client interaction, the onboarding part, where you’re learning about the client. And that’s where FinLife and those MoneyMind tools focus is. Do you see that as where they went and why they use Wealthcare for that?

Matt: I do. Yeah. And I mean, look, if it comes down to another discussion on active management, I mean Jack Bogle’s got $6 trillion that says that we’re wrong and we can’t beat it. And so I think once you get to that point and you say, well, what really matters? I think to your point, it’s the client experience. Mark Ciucci who’s who probably was as important as anybody at United Capital in telling the story and kind of proselytizing, has great thoughts and has done a lot of deep thinking about the user experience where the client sees value in the conversation. And that’s really the special sauce of United Capital. And we aspire to that. You know, I have my own concerns about where United Capital ends up existing in the Goldman firmament, if at all. But I do think that part of the conversation, the front end where you’re putting goals, where you’re prioritizing goals, where you’re creating ideal and acceptable, having the big conversation, that’s what our software is built on, and that’s what the United Capital built, and I think that’s what really is going to win the game. In the end.

Invest In Others

What Is United Capital’s Future at Goldman?

Craig: So you’re leading me into another question here. So, so where do you see Goldman fitting United capital into their overall infrastructure?

Matt: I can’t say for sure. But I do think one way to look at it is that the acquisition of Folio may be more important at Goldman than the acquisition of United Capital at the end of the day. Because I think that they can quickly monetize Folio and fractional share trading, and direct indexing to create investment products. And that’s certainly going on in the industry, there’s a lot of you know, the acquisition of Parametric last week. I mean, I see that as something that Goldman can monetize quickly with the asset management business. Where UC is going to end up in there, I don’t know. I mean we compete against them to recruit advisors to the platform, we haven’t seen as much of them. I don’t know if that’s a pause or if that’s a conscious business decision, but I think we’ll have to see.

Craig: We will have to see that there’s been a lot of speculation about where they’re going to fit that in. So back up a sec, you mentioned that FinLife they use part of your technology, which part do they use and why?

Matt: Well when UCP put their stack together it was built on Salesforce, was the original super integration that they did, which again, that’s the client facing piece. And in the middle of that at the outset, they they embraced our financial planning software, which they knew as Financeware, as the goals-based solution. So United Capital advisors would go through the honest conversation, goal prioritization, and then they would move over and use our planning software. I think along the way, they kind of appropriately broadened their offering to include eMoney and MoneyGuidePro as solutions because advisors were coming to them you know, with that as their planning software. So we’re one of the solutions there, but I think the spirit of goal prioritization some of the work that we did around creating multiple goals has been integral to to the success of FinLife.

Look, we give them all the credit in the world. We think they did Wealthcare better than we did in some cases, they were better marketers of the solution. You know, at the same time we were focusing on a little bit of a different model providing kind of a full outsource solution to advisors that were seeking independence and keeping their own brands. And the reason is, Craig, is because you’ve written about this quite effectively, you know, if advisors aren’t creating repeatable, scalable businesses that have a framework, a philosophy and an approach, they’re not creating true enterprise value.

We have advisors come to us all the time, we support quite a few ensemble practices. And when they talk about the valuation of their firm, we have to tell them, look, if you have seven advisors that are all doing seven different things, seven different ways, you don’t have a lot of enterprise value in your practice. It’s only when you can create a repeatable practice, a scalable practice. Mark Tibergien will tell you about this better than anybody else, that’s where you create true enterprise value.

Wealthcare’s Competition

Craig: Indeed. Talking about how you compete. So can you explain a little bit about how Wealthcare competes in the market? When you say you compete against United Capital, you probably compete against Carson Group, there’s a lot of firms out there offering platforms. You probably compete independent broker dealers, they offer technology platforms and compliance solutions. What’s your messaging and how do you compete? What types of firms you’re looking at?

Matt: You’re spot on. Those are the people that we that we compete against. Our story’s a little bit different in the sense that we actually have, for better or for worse, a proprietary technology stack, that is our own. And the one, the only one at this point, that’s completely integrated so that one ticket runs through the process from the planning to the investments, to the implementation trading and rebalancing. We call it the IPT process or the investment policy ticket. So it is one fully integrated technology stack from end to end. Now I’ll give our competitors props, they’ve done a really nice job of integrating best in class tools. So a planning software can be integrated with a TAMP solution and stuck on top of a portfolio management record keeping system.

And you can put sugar CRM in front of it, and you’ve got a nice solution.but ours is different because it’s proprietary. At the same time you know, there are other parts of the market that we don’t compete with. In other words, we’re not writing checks like Wells Fargo to get the next group from UBS for 330 times trailing 12. I mean, that’s not the game that we play in. And likewise if an advisor is looking for a desk, a warm desk and a compliance officer that doesn’t pay very much attention and the highest possible payout, that’s not the game that we’re playing either. That’s a different part of the market.

Next Steps for the Proprietary Technology Stack

Craig: Indeed. So the proprietary technology stack, we’d mentioned that earlier that more TAMPs are building those out. So what is the next step for these? Where do you see these technology stacks going? Envestnet was one of the first ones to merge a TAMP and technology, and a lot of firms have followed on, but once everyone has that, what’s the next piece of technology that becomes table stakes?

Matt: Well I might take that in a little bit of a different direction. I think it might be kind of yelling into the wind where the technology goes, because I do see the consolidation of the TAMP industry as more important than anything else. I think you’re going to get down to a handful of players and they will have great technology. I mean, Assetmark has great technology already Envestnet, I think is a little bit distracted right now because the lowest hanging fruit there is what they can do with the insurance side, and they can really monetize that marketplace. So the integration of money guide and the investment TAMP I think is the next thing, I don’t think it’s there now. But I think the emergence of a handful of large players in the TAMP world is going to be more important than the technology improvements that come around the edges.

I’ll be interested to see what firms like Adhesion and Vestmark do because they’ve taken the fateful step of being TAMP technology providers that have a TAMP. Not everybody goes in that direction. Tegra is happy to provide TAMP technology and not be a TAMP for instance, to use an example that you talked about. But no, I think table stakes are going to be very, very you know, strong planning front end that integrates the plan with the investments, slick onboarding, digital delivery system. Maybe the last thing that will come along is that user experience that we talked about. But I think proposal generation, and then ultimately I think it has to back into a household based trading and rebalancing, that has the logic of a Wealthcare or a LifeYield in it, because that’s the other piece of this that we’re never going to go back to is running portfolios at the account level. The household level just has way too much tax alpha associated with it. So I think all of that together means that you’re going to get an end-to-end solution that serves clients at the household level.

Craig: So you mentioned LifeYield, do you guys work with them?

Matt: No it’s interesting. We know them well, and what’s interesting is, again, to go back to Dave Loeper who founded this company he started with the premise that the implementation of an investment solution has to be done at the household level, because of tax location and smart withdraws, tax loss harvesting that can create so much tax alpha within the household that it’s the best way to do it. And we’ve had that as a philosophy all the way along. LifeYield, I think has done an awesome job of creating a tool that tracks and quantifies the tax alpha that’s created. The Morningstar study from 2014, that talks about alpha, beta, now gamma, talks about the whole approach, the whole household approach that the advisor needs to take into consideration.

And they came up with a rough back of the envelope estimate of 140 basis points can be created. LifeYield has created an algorithm that actually puts a score on that. We’ve looked under the hood together and the logic that we used in our process is almost identical to theirs. But I think they’ve done a great job of kind of communicating the value in a numeric fashion, the implementation and the rebalancing can provide.

Craig: Matt, this has been a great conversation, we’re just about out of time. can you let everyone know where they can find a Wealthcare? How can they reach out to you if they’re interested in learning more?

Matt: Absolutely. So WealthcareGDX.com is our website. We are always happy to talk to advisors, advisory firms, those that are interested in the goals-based approach or interested in our outsource solution. If anybody wants to reach out to me directly mregan@wealthcarecapital.com, I’m happy to take any and all inquiries and tell our story, but we really appreciate the time.

Craig: Oh, I appreciate you being here.

Matt: Thanks a lot.

Click here and schedule a free Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.

%d bloggers like this: