What's at stake for advisers if Salesforce is bought out?

Speculation about a takeover has some advisers reconsidering their CRM options

May 21, 2015 @ 12:01 am

By Alessandra Malito

Amid rampant speculation about a possible sale of Salesforce, advisers that rely on the company's popular customer relationship management software are bracing for upheaval.

Though Salesforce is not specific to the financial services industry, it is the third most widely used CRM software by advisers. According to the InvestmentNews 2015 Adviser Technology Study, 9% use Salesforce, compared with Redtail at 27% and Junxure at 26%.

If advisers were to become dissatisfied with a new Salesforce product, they would be forced to spend their time and money switching providers and transferring client data..

Which vendor and product does your firm use for CRM?

Source: 2015 InvestmentNews Adviser Technology Study

Saleforce's rivals also are keeping an ear on the rumors. Indeed, a change in ownership would likely put hundreds of relationships with advisers in play.

That's because a sale could spur advisers using Salesforce to consider switching to software developed by Redtail or Junxure, both of which are designed exclusively for advisers.

“These are folks devoted to us,” said Blane Warrene, co-founder of QuonWarrene, a financial service technology consulting firm, of Redtail and Junxure. “They may not have all the bells and whistles of a $50 billion company, but they're serving our market directly."

Salesforce's stock was trading at $73 Thursday afternoon, up significantly from about $67 at the end of April, before rumors of an impending sale became widespread.

While the rumors may be good news for investors, they aren't for advisers.

"Rumors of potential sales of technology providers, particularly for the big general business systems that require customization, overlays and expensive maintenance to work for an adviser, will cause them to worry if that big firm really is in it for the long haul," said Greg Friedman, president and chief executive of competitor Junxure, as well as co-founder and chief executive of Private Ocean, an advisory firm.

Salesforce CEO Marc Benioff dismissed rumors of a sale during the company's earning call Wednesday.

Still, advisers are wondering what's next for their CRM.

"The last thing you want as an adviser is a core system that you rely on every day to be subject to the whims of executives and boards of directors that are not grounded here in the adviser industry," Mr. Friedman said.

ADVISERS ON THE LOOKOUT

Carolyn McClanahan, director of financial planning at Life Planning Partners, which uses Salesforce, wouldn't be surprised if Salesforce changes hands. It happens all the time, she said. Companies get launched with great products, attract users and get sold.

Ultimately, she said, the "software gets ruined by whoever takes them over."

If Salesforce is sold, and service declines, she would shop for a new CRM.

"I have been through a number of changes," Ms. McClanahan said. “It forces you to look for the next best thing out there."

For Adam Zuercher, a financial adviser at HZ Capital, the ownership of a company is an important factor to consider when choosing a CRM provider.

“We want to be sure a company is going to be around for a while,” he added.

WHAT'S AT STAKE

Whether Salesforce's appeal to advisers rises or falls after a deal depends largely on who is sitting on the other side of the table. Among companies rumored to be interested in Salesforce are Microsoft Corp., Google Inc., IBM Corp. and Oracle Corp. Each one presents a different challenge — or opportunity — for advisers.

For example, a buyout by Google or IBM would likely mean a big focus on obtaining data for the tech giants.

"We know IBM wants to get in the financial services space," said Aaron Guidotti, CEO of Grendel, another CRM for advisers. Watson, IBM's super computer, is being used by financial services companies and would be the perfect benefactor of a Salesforce acquisition, mostly because of all the data the system carries.

Lowell Putnam, chief executive of Quovo, a big-data company, said Salesforce's data is its specialty.

"What makes them a powerful platform is that they really are a database engine," Mr. Putnam said.

Meanwhile, Microsoft would be able to leverage Salesforce's system for its own CRM, Microsoft Dynamics, which 5% of advisers use, according to the InvestmentNews 2015 Adviser Technology Study.

Brian McLaughlin, CEO of competitor Redtail, said a new parent company may try to transition its financial services clients onto a common platform. But the wealth management portion of the business could be up in the air.

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