Fintech competitors seek opportunity in Envestnet Tamarac acquisition of Schwab PortfolioCenter

Orion and Morningstar launch efforts to lure 3,000 advisers on the aging portfolio accounting software

Feb 27, 2019 @ 3:00 pm

By Ryan W. Neal

News of Charles Schwab selling PortfolioCenter to Envestnet Tamarac has been like blood in the water for competing technology vendors hoping to lure away the 3,000 advisers still using the aging portfolio accounting technology.

In the days following the announcement, Orion Advisor Services and Morningstar have made efforts to distinguish their platforms as viable alternatives for advisers looking to leave PortfolioCenter.

On Sunday, Morningstar announced a webinar to educate advisers about its portfolio management and reporting technology, Morningstar Office, and to demonstrate its skill in transitioning advisers from other platforms. The company even mentioned how it's already transitioned 400 advisers from PortfolioCenter to Morningstar Office.

(More: Morningstar study says advisory clients are stuck on investment performance)

Morningstar is also offering PortfolioCenter users who attend the webinar a free ticket to its annual Investment Conference.

"The adviser-client relationship requires the deepest trust and confidence, which begins when advisers are confident that their investment decisions and recommendations are based exclusively on the independent interests of their clients," wrote Dermot O'Mahony, Morningstar head of software products, in a blog post about the transaction. "We do not aspire to own the market on independent options; in fact, we think choice is good for investors and advisers. But the recent acquisition of Schwab PortfolioCenter by Envestnet Tamarac reduces the number of independent options available to RIAs, and we feel it is important to emphasize that our commitment to independence will not waver."

According to Mr. O'Mahony, Morningstar has fielded "dozens" of calls from advisers with questions such as about Envestnet's relationship with asset managers, what the fees will be to use Tamarac and how long Tamarac will support an older software like PortfolioCenter. There's also the issue of Envestnet Yodlee's data aggregation.

"Does the platform make money by monetizing the adviser data or client data? Envestnet Yodlee has a large business monetizing data flow," Mr. O'Mahony told InvestmentNews.

These are questions Mr. O'Mahony said he'd expect advisers to ask Morningstar regarding its own data aggregation technology, which is called ByAllAccounts.

Mr. O'Mahony also questioned whether PortfolioCenter users, many of whom are smaller independent advisers, will fit with Tamarac, which traditionally works with large RIAs. While Tamarac says it works with firms with as little as $10 million AUM, it also serves more than a third of RIAs that have AUM of more than $1 billion.

Meanwhile, Orion Adviser Services is offering advisers nine months of free access to its suite of portfolio accounting technology, including its Eclipse trading platform, if they switch from PortfolioCenter. Orion also is providing free access to its conference, Ascent on the Road.

(More: T3 fintech conference opens with blast of Orion news)

"We've helped hundreds of firms convert from PortfolioCenter," Kyle Hiatt, head of sales at Orion, said in a statement. "For firms using legacy tech, switching to a new system is inevitable. That's why we've devoted significant resources to a painless conversion and ongoing training and service experience."

Orion founder and CEO Eric Clarke chose a different path into the conversation, suggesting PortfolioCenter users may not receive the same level of support at a technology giant like Envestnet.

"More and more, we're hearing from advisers that they simply aren't receiving the level of support they expect from their tech provider, but how could they when in some cases they are one of 100,000 and working with a company trying to integrate over a dozen acquisitions?" Mr. Clarke said in a statement.

He said advisers coming from PortfolioCenter will get free data conversion, customized implementation, training and ongoing support.

But will advisers actually make the switch?

PortfolioCenter has been the engine powering Tamarac's portfolio accounting capabilities for years, and both Schwab and Envestnet pledge the transition will be an easy one.

Envestnet Tamarac did not comment today.

Tim Welsh, president of Nexus Strategy, said the biggest issue with PortfolioCenter is that it's a desktop product. With the entire industry moving to the cloud, advisers will have to switch to something else eventually.

"Tamarac will not support a desktop product long-term, so the advisers' fear on PortfolioCenter is that they will be forced to upgrade to Tamarac, a much, much more expensive platform," Mr. Welsh said. "They are now holding these 3,000 firms hostage!"

Susan Glover, president of consulting firm Susan Glover & Associates, said many advisers were considering leaving PortfolioCenter before the announcement in favor of a more modern portfolio accounting tool. But she's cautioning her clients against making a hasty decision based on questions about Tamarac and deals offered by competitors.

"Once I saw the [blog] post about Morningstar's webinar, I thought, 'oh my God I hope people aren't just jumping ship because of some perception that isn't true,'" Ms. Glover said.

(More:How to choose good tech, rather than costly and complex tech)

Migrating to a new portfolio accounting system is often a painful process, Ms. Glover said, and Tamarac could be a fit for advisers who don't want to go through such a process. She is urging clients to take a measured approach and consider how each option will fit into their overall firm and other important technologies.

"For those who were already thinking of moving, maybe now is the time to elevate that priority, but remember that portfolio accounting software is the hub of your data," Ms. Glover said. "That's what feeds everything from your billing to your client portal to your CRM."

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