AdvisorEngine, the provider of white-label digital advice technology for advisers, is kicking off 2018 with the acquisition of Junxure, a client relationship management (CRM) software for the wealth management industry.
Junxure supports 12,000 users managing a collective $600 billion in assets. The company said its users will not experience any change in service and will continue to be supported.
These users will now get access to AdvisorEngine's prospecting, client engagement, financial planning and portfolio construction tools, Junxure president and co-founder Greg Friedman said in a statement.
"As the companies are integrated, Junxure clients will gain access to a beautiful user experience that is unified across business management personnel, financial advisers and their clients," Mr. Friedman said.
WisdomTree, already AdvisorEngine's largest minority shareholder, is helping to fund the purchase with an additional $30 million infusion of capital. The asset manager invested $20 million in November 2016, when AdvisorEngine was known as Vanare, giving it a 36% share of the platform.
WisdomTree also finalized terms of an option to purchase the remaining equity interests in AdvisorEngine. "The purchase option is for a period of approximately one year, with the closing of the acquisition to occur no later than January 15, 2019," according to a statement from the company.
WisdomTree's executive vice president and head of emerging technologies, Jarrett Lilien, said that while WisdomTree intends to eventually bring AdvisorEngine in, the focus right now is on integrating AdvisorEngine and Junxure.
Mr. Lilien said macro-forces are driving asset managers like WisdomTree to provide adviser technology in addition to investment products. He added that WisdomTree is exploring how it could use AdvisorEngine's technology for its own direct-to-consumer robo-adviser, but doesn't yet have concrete plans.
"We're in a funny environment these days … Today, there's this whole thing where people sometimes partner with each other, and sometimes compete with each other," Mr. Lilien said. "At the moment, we don't have a big push on B2C, but it's totally possible and we've got the technology to do it. The market allows for it today."
The deal pushes AdvisorEngine closer to being a complete technology solution for independent advisers. Founder and CEO Rich Cancro said that building CRM software is "super complicated," and that the acquisition isn't just about technology, but bringing on Junxure's years of experience and support team.
Mr. Cancro said his company will invest significantly in improving Junxure's functionality and integration with the rest of AdvisorEngine's technology, but won't cease support for other CRMs.
"This acquisition does not change our mandate of open-architecture," Mr. Cancro told InvestmentNews, saying it's similar to when AdvisorEngine acquired Wealthminder in February but continued to support other financial planning tools. "We will continue to integrate with third parties across the industry."
He added that the acquisition is about growth, not "cost synergies." As a result, AdvisorEngine COO Craig Ramsey said, he expects to retain Junxure employees.
Junxure President Mike Sbrocco is AdvisorEngine's new chief financial officer. Junxure's chief information officer, Tim Betts, will take on the same position with the new company.
Mr. Friedman will join AdvisorEngine as a strategic adviser, and told InvestmentNews that it will help him focus more on running Private Ocean, his wealth management firm. He said the involvement of WisdomTree helped seal the deal for the technology company he launched in 2001 as a way to address what he saw as a need for advisor-focused CRM.
"What advisers want more and more is a platform experience. They've been clamoring for this for years," Mr. Friedman said. "While there's been improvement, it's still pretty rough out there."
Commenting on the deal on Twitter, Michael Kitces, director of wealth management at Pinnacle Advisory Group, tweeted that the acquisition puts pressure on other white-label digital advice providers to acquire their own solutions. He also wondered if these independent technology providers will be able to compete on price with platforms from custodians.
"Advisers are not accustomed to paying basis points (bps) for technology (we do via custodian platforms, but only indirectly thru [sic] scrapes from clients," Mr. Kitces said. "If @AdvisorEngine can't convince advisors to pay bps for technology, they'll own valuable adviser tech components but struggle to justify @WisdomTreeETFs capital investments. But that's a few years down the road to play out. Until then, @JunxureCRM users just get more features!"
Mr. Cancro said what differentiates his technology is a focus on user experience that can be used by advisers of all business models and by clients of all wealth levels. Mr. Lilien echoed these comments and it's why WisdomTree invested in AdvisorEngine rather than other solutions on the market.
"We're not looking for yesterday's technology; we're looking for tomorrow's technology driving tomorrow's user experience," Mr. Lilien added. "The center of it is what we are doing with AdvisorEngine."