Why have established asset managers like Fidelity, Schwab, BlackRock, or Vanguard not entered the RIA TAMP or technology platform markets?

Let’s start with RIA turnkey asset management platforms. Fidelity and Schwab do have an advisor platform where they allow RIAs to manage their custody of the assets of their clients. That's their version of the technology piece. They let them send documents to clients and other pieces there. But when we do customer calls, we typically ask advisors, "What would you grade those platforms and other software you might use?" Relatively consistently, everyone arrives at a C-. So they have something, but the quality could be better.

From a TAMP perspective, these custodians support “separately managed accounts,” or SMAs. What that means is they allow advisors to come in with third-party software—that is, these turnkey asset management platforms—and hook into them to manage those assets using this external software. I think these players might eventually evolve on the TAMP side. The way these brokerages are structured (they think of investments and assets first) might actually make them pretty good at creating a TAMP of their own.

You can see the aggregation already. A lot of robo-advisors have been acquired by banks. On top of that, there's been a huge acquisition spree in TAMPs. A bunch of names that probably aren't as well-known in the industry—Parametric, Aperio, Just Invest—all have been picked up by these big brokerage houses because they want to enhance their asset management capability internally and offer easy access. So there's some good stuff happening for these larger players, but we still don't feel like they're ultimately going to enter and crush us. What they're not focused on is how to improve advisor efficacy and give them the tools to relentlessly grow their books, which is their main KPI. I think it would take an RIA who is much closer to that customer, because the incentives are so tightly aligned: if we improve the operational efficiency of our advisors and also top-line revenue, they win and we win. It takes that level of integration. Whereas Schwab doesn't necessarily need to get into that game, and that's not what their goal is. They're okay just being a platform. That's why we don’t look at them as that big of a threat. 

We’ve spent a lot of time thinking about this and studying the hot-swap model (Compass Real Estate, Lemonade, Newfront). What we’ve found over and over again is that the traditional firms are not going to be the ones attracting top talent from Silicon Valley-type companies, and that's what's required. You need to have a relentless focus on product, technology, marketing, etc. By attracting that top talent and taking that technology-first approach, you can have a much higher velocity in getting the right products out, versus banks that are spread too thin across other priorities.