The journey from financial advisers to tech entrepreneurs

Financial advisers have developed some of the most popular software in the industry, and they have the scars to show for it

Oct 2, 2016 @ 12:01 am

By Liz Skinner

David Lyon remembers the moment he realized that all the sophisticated analyses and detailed financial work that his advisory firm produced for clients actually made their lives more difficult instead of easier.

It was 2011, and Mr. Lyon was in a quarterly meeting with his firm's biggest client, a hedge fund manager who could easily have understood the 30-page report that Main Street Financial had created. But he didn't want it.

“What's the bottom line?” he asked. “What are the opportunities and how can we get there?”

That sharp critique sparked Mr. Lyon's pursuit of a system that would generate a two-page “wealth and health” view for clients. Unable to find one, Mr. Lyon created a spreadsheet-based system for his rapidly growing registered investment advisory firm. He later sketched out the ideal client investment planning dashboard and hired a developer to produce it.

Within a few years, Mr. Lyon's adviser friends and competitors were begging to license Main Street Financial's technology, and in 2014 he founded Oranj. Today, it has 47 employees and last month moved into new offices in Chicago, where it nearly doubled its space.

Mr. Lyon's journey from adviser to tech entrepreneur has played out in different versions at many of the fintech companies that provide the software that the financial advice industry relies on today, including Junxure, Orion Advisor Services, Total Rebalance Expert, inStream, Riskalyze and Asset-Map.


The bulk of these companies found their genesis in the frustration of advisers who did not see any existing solutions to their business problems, and so took it upon themselves to create them. It may not be a coincidence that so many tech startups were founded by advisers.

“Independent advisers have a can-do spirit about them and are willing to take risks and build things,” said Eric Clarke, who was an adviser for his family-owned firm CLS Investments before starting Orion. “That's why a lot of fintech companies have an independent adviser as the entrepreneur.”

For advisers, by advisers
Company Adviser Software Financing
(Total Rebalance Expert)
Sheryl Rowling
Rowling & Associates
Portfolio rebalancing tool for advisory firms Self-funded
Oranj David Lyon
Main Street Financial
Investment planning dashboard and business development tool Self-funded
Junxure Greg Friedman
Private Ocean
Client relationship management system for advisers Self-funded
Capitect Edwin Choi
Mariposa Capital Management
Client portal for financial advisers Self-funded
Orion Advisor Services Eric Clarke
CLS Investments
Portfolio accounting system for advisers CLS Investments

These advisers-turned-techies, it turns out, carry some scars from their days of wearing two hats, but they also have useful advice for today's adviser tech entrepreneurs.

(Related read: 8 biggest adviser tech mistakes — and how to avoid them)

For one, they caution that these side tech businesses take a considerable amount of time and attention away from one's core business, and away from all the other important things in life.

Mr. Lyon lived on four hours of sleep a night, put up his own personal wealth to fund the business, and missed out on a lot of activities with his wife and two young daughters. At the end of 2015, he made the difficult decision to sell his $300 million RIA to devote his attention to the tech spinoff.

“If I had to do it again, I would have made the transition a little earlier,” he said. “I was spread too thin.”


“It's definitely been a huge time suck,” said Edwin Choi, founder of advisory firm Mariposa Capital Management and co-founder and chief executive of Capitect, which developed a client portal for advisers. “It takes away time from all the other things I would normally do.”

Capitect introduced its client portal in February 2016 after about 14 months under development. Mr. Choi recommends advisers talk with their colleagues who have spearheaded such startups before they agree to start one.

“You have to understand what you're getting into,” Mr. Choi said.

If I had to do it again, I would have made the transition a little earlier. I was spread too thin.—  David  Lyon,  founder Oranj

Sheryl Rowling, principal of Rowling & Associates, thought she understood the time commitment when she set out to create portfolio rebalancing software for her financial planning and tax firm in 2008.

But Ms. Rowling, who last year sold her Total Rebalance Expert to Morningstar Inc. for an undisclosed sum, said running both businesses felt like she was working through a nonstop tax season that lasted for almost seven years. She said it was difficult physically and emotionally to manage two full-time jobs.

When she sold the business, her technology company had about a dozen employees in two locations and had attracted a couple of hundred firms as clients. Under the agreement, she still spends about a third of her time working as a Morningstar consultant, but the change has allowed her to get back to exercising more and “living like a normal person again.”

Ms. Rowling said it wasn't the initial development that took her by surprise, but the time needed to constantly enhance the software to stay on top as technology rapidly changed.

“Tech is something that is always evolving,” she said. “Whatever idea you have, someone else can have that idea, too, and if that technology is valuable, other people will develop the same things.”

She admits she went into tech development very naively. “But in the end it worked out pretty nicely,” she said.


Because Ms. Rowling and these other adviser tech entrepreneurs are not trained technologists, many had to teach themselves or otherwise acquire basic knowledge of coding languages and other technology skills. They all also relied on partnerships or other relationships with those who have true tech expertise.

“My technical skills when we started Orion had to evolve,” Mr. Clarke said. “Advisers don't have to know everything there is to know to start a fintech company if they can pull together a talented staff.”

Advisers don't have to know everything there is to know to start a fintech company if they can pull together a talented staff.—  Eric Clarke,  CLS Investments

The path to Orion began with Mr. Clarke seeking a better portfolio accounting system to use at CLS Investments in the late 1990s. Unhappy with off-the-shelf options, he crafted a business plan to create a platform for fee-based advisory businesses like his own, a model that was unusual but growing at the time. Today CLS Investments manages $6 billion for clients.

The technology business split from CLS Investments in 1999, though the advisory firm essentially funded Orion's development, and it remains the oldest of Orion's 1,000-plus client relationships.

Having the benefit of hindsight, Mr. Clarke said he wishes he'd sought venture capital investment for Orion, which today helps planners' manage about $330 billion of assets.

“We were funded organically because we didn't really think of going out and bringing in outside sources of capital,” he said. “It would have allowed us to grow much quicker.”

Without saying how much it cost to develop Orion, Mr. Clarke said getting something developed to a point where other advisers can use it requires a seven-figure investment.

(Related read: What top advisory firms do right when it comes to technology)

Greg Friedman, co-founder of Private Ocean, an advisory firm with $1 billion in assets under management, also didn't think about seeking outside funding when he began working in the late 1990s on what would become Junxure, a client relationship management system designed for advisers.

I never anticipated it being a business...I wanted something for me. I thought it would give me a competitive advantage.—  Greg  Friedman,  founder Junxure

For him, it was imperative that he boost the efficiency of his firm, then Friedman & Associates, or hire about five more people to help serve its 75-plus clients.

“I never anticipated it being a business,” he said. “I wanted something for me. I thought it would give me a competitive advantage.”

Self-funding is not the way Mr. Friedman would seek to build a financial technology business today.

“There's way too much money and people going after fintech right now to compete as a self-funded startup running as a part-time business,” Mr. Friedman said.

Since 2010 about $50 billion has been spent investing in fintech companies, according to Accenture Consulting, though that total includes non-adviser-focused technologies, too.

Teaming with an existing fintech partner would be the first approach that Mr. Friedman would recommend to a budding adviser-tech entrepreneur with a unique idea today.

Mr. Friedman still splits his time between Private Ocean and Junxure, which employs 50 people. He doesn't rule out selling the technology firm one day, but says it won't be any time soon.

Even though the fintech industry has matured since many of these products emerged, many tech-minded advisers are still carrying on the traditions of losing sleep and risking their capital in pursuit of software and other tools that improve the experience of both the adviser and the client.

“The best new businesses come out of existing challenges you have in your current business,” Mr. Lyon said. “Yes, it was all worth it.”


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