2019 Innovation Issue

Honoring innovation

Investmentnews recognizes firms' inventive concepts and tools for the financial advice industry

By Vanessa Drucker and Ellie Zhu — May 11, 2019

For the first time, InvestmentNews is highlighting and honoring firms that have developed innovative approaches to the opportunities and challenges facing the financial advice profession.

These 19 Innovation Award finalists, including six winners, have helped to improve how advisers take care of their clients, run their businesses and enhance client outcomes.

The firm finalists were chosen by a panel of InvestmentNews reporters, editors and other staff out of several hundred nominations submitted online earlier this year. The winners in each of the six categories were selected by the InvestmentNews Innovation Summit advisory board, which consisted of individuals recognized as InvestmentNews Icons & Innovators in 2016 and 2017.

The six winning firms were announced at the 2019 Icons & Innovators awards dinner April 17 in New York.

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2019 Innovation Award Finalists & Winners
Investing Solutions

More than five years ago, Envestnet introduced its Quantitative Portfolios in a systematically constructed separate account format. Clients continue to own the underlying securities and can therefore tax-manage and customize their portfolios. QPs also deliver factor-enhanced strategies, such as value, momentum or quality, which attempt to deliver excess returns through tilts. In 2018, three new QPs added exposure to small caps, international and emerging markets. Before, such strategies would only have been available through mutual funds or smart-beta ETFs. Plus, each of the series of QPs is suitable for a low investment minimum.

Envestnet recently added tax overlay services to the QPs, letting investors control unrealized gains. Since the client owns the individual positions of the tax lots in the QP, loss-harvesting programs can be tailored to their unique circumstances, with losses harvested at any point throughout the year.  Moreover, Envestnet's overlay services program can manage the portfolio while adhering to a client's specified capital gains budget.

Its QPs also can screen out certain securities to align with specific client values. Envestnet's allocation to best-in-class companies provides impactful exposure while managing environmental, social and governance risk. 

Finally, Envestnet has met the challenge of balancing a combination of parameters through an iterative formulation involving hundreds of tests. Multiple dimensions include investment minimums, the number of positions, tracking error, sector neutrality, frequency of rebalancing and turnover.

TD Ameritrade launched its Institutional Model Market Center in 2017, the first to offer advisers free access to institutional-grade money-manager models. The product allows advisers pull strategies “off the shelf” from prominent asset managers like Goldman Sachs, Russell Investments, State Street Global Advisors and WisdomTree Investments.

With one click, advisers can subscribe to the models, using characteristics like risk category, asset class, security type and past performance. They can then implement one or multiple models, with tax-efficient rebalancing. As the industry's first investment model supermarket, the Model Market Center has broken new ground on regulatory compliance, legal and pricing structure.

Outsourcing investment management can help advisers create efficiencies and scalability and even give human RIAs a hand as they compete against robo-advisers. The structure also lets advisers bypass hiring an overlay manager. Until now, that would have demanded significant fees and ceding control — which does not always sit well with fiercely independent RIAs.

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The flexible VestmarkONE platform allows advisers to access and tailor investment solutions that are curated from a network of RIAs and portfolio strategists. The platform, which incorporates multiple programs and custodians, each with different nuances, seamlessly runs all the programs together — from onboarding accounts, through allocations and funding. Advisers can model, trade and rebalance with tax efficiency across a range of asset classes.

As a breakthrough feature, Vestmark offers comprehensive block trading at the sleeve, account or practice levels. A first in the industry, block-trading capabilities encompass widely used option strategies like covered calls and protective puts. These tools can include automated encumbrances to create guardrails, and hard stops to prevent the sale of underlying securities.

Six of the top 10 broker-dealers now use this Vestmark software. That level of adoption has helped clarify solutions, lowering costs for end investors. The capability to build tailored portfolios at scale allows an adviser to change an allocation in thousands of portfolios with one instruction.

Alerts and visual heat maps help monitor portfolio drift, restriction violations, cash requests and performance outliers.

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Retirement Solutions

Retiree Inc. pioneered the first robo for retirement income with IncomeStrategy.com, which was launched in 2018 for consumers. Its other main platform, IncomeSolver.com, is designed for financial advisers. Both these platforms focus on withdrawal strategies during the decumulation stage.

The Retiree solution coordinates the impact of withdrawal sequences, collating ingredients from Social Security, Medicare, dynamic Roth conversions and tax minimization.

The software platform follows research published in the Financial Analyst Journal and the Journal of Financial Planning. Empirical evidence indicates that smart withdrawal sequences can add approximately seven extra years to a retiree's financial solvency and make the average person's money last longer. Much of the rest of the industry, including major financial planning apps, still relies on generalized modeling and conventional rules of thumb.

The software can help retirement advisers move beyond product solutions to embrace comprehensive strategies that can generate increased income for clients. It can account for complex details and the interdependency of key elements such as details of the tax code. For example, Roth conversions can affect Medicare premiums and Social Security taxes. Retiree's software can help advisers extend retirement resources for clients and showcase their own alpha.

Raymond James recognized the need to assemble and provide a central repository for longevity planning, so the firm leveraged insights from 40 financial advisers on its retirement solutions advisory board and its partnership with the MIT Age Lab to better understand the longevity-related needs of advisers and their clients. Those include housing, caregiving, transportation and health care.

The premise is that since retirees are living longer, they must save and plan more effectively to live comfortably into the future. Starting with education, Raymond James has broadened out to develop business relationships that navigate age-related topics, with programs such as a Medicare consultation service, geriatric care management, concierge health services, elder fraud protection and end-of-life planning.

All of these issues are nuanced and unique to each individual. Raymond James has made it a priority to ensure these resources are available to advisers on a national level, regardless of location or asset level. That took time, feedback and diligence to ensure that advisers would have access to well-vetted business relationships based on rigorous assessments of legal, security and supervision requirements.

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Betterment for Business has revolutionized the traditional 401(k) for both plan sponsors and participants. More than 400 plan sponsors benefit from a digital, low-cost option for administration, record keeping, customer service and compliance. Employees receive an easy-to-use, transparent option that includes automatic enrollment. They also obtain personalized, on-demand retirement advice about savings rates, account types and investment selection.

The company selects best-in-class ETFs for participants, while optimizing the allocation of portfolios according to each individual's needs.

Betterment also developed its RetireGuide to allow users to calculate and track their saving and spending during retirement. By inputting information on marital status, location, planned retirement dates, income, current savings accounts and holdings, they can gather a holistic view of their financial wellness. Participants can also consult directly with a financial adviser. The program examines what employees already are saving in their 401(k) plans, and how those existing accounts might correlate with other investments.

Betterment has improved participants' lives by allowing them to maximize their money through smarter technology and better advice.

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Education Materials

Whealthcare Planning has created two cloud-based resources to aid financial planners with issues related to aging, cognitive impairment, financial abuse and decision-making. For advisers, the Whealthcare Academy is offered on a paid subscription basis. It comprises over 100 educational videos, white papers and research authored by internationally acclaimed experts in financial planning, psychiatry and geriatrics.

It is complemented by the Whealthcare Education Center, which houses free, similar content for the general public. Subjects range from health-care costs, family agreements and technological support to patient empowerment and loneliness.

Cases of senior fraud and abuse have doubled over the past five years and financial advisers are on the front lines in protecting older adults and their families from suboptimal financial decisions and elder manipulation. Agencies at both the state and local levels are actively regulating advisers to encourage them to be more vigilant about diminished capacity and exploitation.

Consider that a Harvard study has concluded that financial decision-making capacity peaks at age 53 and often declines rapidly thereafter. Whealthcare Planning has identified four age-related areas of transition: finances, daily living, health care and driving. Ignoring any or all of these issues can blow a hole in the best-intended financial plans. Advisers report that despite an instinctive reluctance to discuss these sensitive topics, clients are grateful for an opening to explore them.

There is a free lunch after all! Chepenik Financial has demonstrated, with a novel twist on an old idea, that educating employees about retirement can actually be enjoyable. It proved that employees are more likely to engage, and ultimately participate, if companies can lower anxiety levels about a stressful topic like saving for retirement.

To create interest, Chepenik partners with a local food truck, which is wrapped with amusing signage and slogans like “Let's Taco-Bout Retirement.” Employees are given meal vouchers as an inducement to explore retirement programs. Typical topics for discussion include the importance of saving, budgeting and debt management. Print materials are available, and educational counselors ready to answer questions in a laid-back, unpressured fashion.

The program is expanding, with plans for an Asian bao truck in the works, as well as parties with games, music and hot dogs. Since the program is provider-agnostic, the employer gets all the credit for the fun and entertainment.

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Heritage Financial Advisory Group built its educational “Ask the Advisor” brand as a weekly digital platform produced in various formats, including long-form videos and shorter YouTube videos, podcasts, blogs and social media posts. The financial literacy program creates short shows that tackle engaging topics at the intersection of finance and current events. The show's producers discovered that a three- to four-minute format is optimal for engaging attention in a digital framework and that a sprinkling of current events helps spark more interest than do the more vanilla financial topics.

The target audience represents an underserved market of 35- to 55-year-olds with assets under $250,000. Heritage attempts to dispel conventional wisdom and alter the mindset that financial advisers are only suitable for the wealthy. Its mission is to educate younger people about money in a convenient digital/social media format.

It is challenging for a smaller, digitally driven platform on a limited budget to compete in a 24-hour news cycle and also follow compliance guidelines. The goal is to provide listeners and viewers with free, thoughtful material that will encourage them to develop positive lifelong financial behaviors and spending habits.

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Adviser Fintech

EMoney Advisor's end-to-end client portal offers advisers a fully integrated mobile solution, providing a unified experience across all devices and making it easy for clients to access accounts on the go. Originally launched in 2001, eMoney Advisor aggregates more than 12 million accounts and $2 trillion in assets for over 3.1 million investors, all in real time.

The product provides a host of critical functions, from interactive charts and detailed summaries of accounts to an unlimited digital-document storage vault. Clients can create budgets, track spending and set alerts for key financial events. Moreover, the full-spectrum portal assembles a collection of tools to enhance collaboration between clients and their advisers.

For instance, virtual conferencing and screen sharing allows clients to meet with advisers from any location, and client tasking helps them to keep on top of goals. Additionally, automatic onboarding lets clients add their financial information to the portal in their own time. They can populate the system by providing answers to a set of dynamic questions that adjust based on prior responses.

These solutions together have boosted client satisfaction and improved retention for advisers. Specifically, advisers using eMoney Advisor with clients cite significantly increased assets under management, an ability to deliver more holistic advice, the capture of newly discovered assets, improved time efficiencies and higher recurring revenue.

The FinLife CX suite of tools incorporates United Capital's technology and investment management platforms, which recently have been enhanced with best-in-breed defensive strategies. These tools bring together on-demand, 24/7 staff training and coaching, a mobile-enabled client portal, and access to a central hub that syncs an adviser's existing CRM, portfolio accounting system and planning software.

This confluence of asset and financial life management support allows RIAs to add value, while preserving their own brands and independence. Advisers can help their clients solve big-picture, highly complex issues. By understanding their clients' ultimate goals, advisers can identify acceptable trade-offs and consolidate a plan for a holistic financial life.

Firms have been signing up rapidly with FinLife CX, with collective assets under management reaching over $20 billion. In the past three years, United Capital has diversified into fintech and financial life management. Seamless compatibility with a variety of CRMs has required significant development resources, but the ease of adoption for RIAs has justified these efforts, the firm said. The ultimate benefit is that the system enables clients to gain clarity, confidence and control.

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The Impact Financial Systems automation platform provides a multicustodian suite of tools for advisers for onboarding clients, moving assets and maintaining client accounts. This digital ecosystem covers the entire client lifecycle, from prospecting, risk-profiling, goal-setting and portfolio construction to account funding and account maintenance.

Clients can choose between self-service accounts and using traditional or electronic access to advisers. Such a digital transformation would normally require expensive tech resources and years to put together.

The system liberates advisers from routine paperwork and manual processes, saving time and eliminating redundancies. These advances represent a leap in thinking for the benefit of the entire advisory industry. Best practices spur improvements for all players, so that the spirit of collaboration promotes a win-win across the board.

Although IFS is a relatively small group of just 40 people, it has gained the trust of some of the world's largest brokerage and wealth organizations, such as LPL, Ameriprise, Advisor Group, Envestnet and FutureAdvisor/BlackRock, which have used its platform to win clients and achieve efficiencies.

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Adviser Fintech-platforms

RBC BLACK is the first custodian-driven adviser platform that fully integrates five independent financial tools — account aggregation, CRM, risk analysis, goal-based financial planning and trading/rebalancing — into one suite. RBC Correspondent and Advisor Services' RBC BLACK, which provides small advisers with economies of scale usually only enjoyed by giant wirehouses, costs firms 80% less than the price of purchasing its five technologies separately.

While many other platforms integrate technologies, and many custodians offer “open architecture,” RBC BLACK represents a distinctive approach. Others let users toggle among technology providers, but RBC actually displays all tools on one primary dashboard.

Advisers save time otherwise wasted on troubleshooting aggregation, or double-keeping information. This close collaboration with the five fintech partners has generated new solutions around identity verification, security, data flows, data presentation, data syncing and compliance reporting.

The RBC BLACK platform provides multiple benefits, allowing advisers to aggregate and advise on held-away assets, collaborate with clients to build a financial plan, anchor client expectations on a shared understanding of risk, and engage clients with targeted and relevant content. It can demonstrate to clients a clear rationale for why particular investments are being made.

Morgan Stanley's WealthDesk advisory platform combines client relationships and portfolios with planning, advice and implementation in one dashboard. WealthDesk, which was developed in-house, assembles applications in four cornerstone areas. First, goal-planning, portfolio construction and implementation have been integrated. Second, institutional-caliber risk analytics reveal the potential impact of any contemplated portfolio changes. Third, new tools help advisers align their pricing with value delivered. Finally, a consolidated summary for clients streamlines planning goals with information on portfolios, performance and profiles.

An overarching theme is that the product enables advisers to be more personal and high-touch with clients across their financial lives. Each enhancement contributes to a fuller discussion about goals and lifestyles, going well beyond investment performance. And a scalable and consistent risk-management process refines conversations with clients about risk tolerance.

On the technology front, the cross-platform approach propelled Morgan Stanley to centralize functionality.

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What makes Folio Financial's Digital Wealth Platform unique is its flexibility, modularity and personalized investment capabilities for all levels and types of clients at a low cost. The DWP platform empowers advisers and investors through both stand-alone robo-advice and outsourced turnkey asset management.

Investments run the gamut from stocks, ETFs, ETNs, ADRs, REITs and mutual funds to bonds and alternatives. Interactive, goals-based investor questionnaires capture essential information from clients. An automated portfolio construction engine supports each firm's advice methodology, capital market assumptions, and preferred investment products.

Predictive analytics examine goals, while scenarios and stress tests help fine-tune recommendations. Other functionalities include streamlined and paperless account management, low-cost window-trading, automated tax management, sustainable and impact investment options, private placements and alternatives.

Folio Financial has built its platform with maximum flexibility, allowing firms to maintain their hallmark brands and advice methodology. They can use DWP as a white-labeled custom solution or control it through a robust suite of software interfaces.

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Practice Management

Advisers use Pershing's Business Metrics Tool to track key performance indicators, such as productivity, profitability and client ratios. This interactive tool helps them reduce risk, measure capacity and results, and gauge trends. The hands-on benchmarking is particularly valuable for viewing the status quo relative to future plans, or comparing the firm against the industry. Users can compare themselves to similar firms by revenue size, business model or practice structure.

Pershing's benchmarking, unlike those of its competitors, is not derived only from its own clients but from the entire span of RIAs, broker-dealers and hybrids.

Pershing clients can input and manipulate their own information with real-time access. From strategic direction to succession planning, clients sharpen their understanding of their position in the space, and clarify their evolving needs.

A rapid succession of mergers is driving the industry toward an RIA model. The Business Metrics Tool can play a key role in educating advisers and clients who are involved in that process, such as wirehouse partners that are creating their own RIA from several locations. It enables them to analyze appropriate economics and initiatives to drive profitable growth.

Charles Schwab's Digital Account Open tools have completely eliminated paper forms from the account opening process. The streamlined product, launched in 2018, enhances efficiency and information safety, with faster and more secure processes and less potential for fraud.

Moreover, it is intuitive and exceptionally easy to use — transforming an onerous chore into a simple process that can be completed in less than 10 minutes. Clients can even provide approvals from their mobile devices, without requiring a “wet”signature or third-party electronic signature. The system employs smart field technology to automatically prefill available client information.

The transition to digitization will require behavioral and attitudinal changes as advisers shift away from ingrained processes and offline workflows. Schwab said it believes the transition will pay off, as DAO's end-to-end digital process reduces errors on allocations compared to paper forms, helps to eliminate the need for follow-up calls from client to advisers, and dramatically reduces the amount of work that has to be redone.

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LPL financial launched its Virtual Services in 2018 to help advisers focus on clients while continuing to generate revenue. The aim is to save advisers time and to keep them from getting caught in the weeds of routine management, such as administrative tasks and marketing. LPL's size, scale and range of tools distinguish this offering from those of competitors.

Additionally, since none of the work is outsourced, it can be tailored directly to each particular client's requirements. Advisory firms can select from one or all of the four types of support to fit their desired cost structure: Virtual Admin, Virtual Chief Marketing Officer, Virtual Chief Financial Officer and Virtual Chief Technology Officer.

Virtual Services are a work in progress. Whenever advisers give feedback, LPL adapts and responds to their needs. It can be challenging to anticipate market appetite for such services and then staff and train accordingly. So far, however, staffing and demand are tracking according to plan. LPL said it's committed to helping advisers handle the back-end tasks of running a practice and providing them with more freedom to engage meaningfully with their clients.

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XY Planning Network has created an innovative model geared toward next-generation clients, namely the underserved Gen X and Gen Y investors who lack access to financial planning under traditional service models. While the industry may lament the difficulties of serving that segment profitably, XYPN is committed to carving out a viable offering for an audience that extends beyond baby boomers.

The firm's Turnkey Financial Planning Platform was developed to support independent financial advisers who are paid through a monthly retainer. The system runs from soup to nuts, providing advisers with compliance support, a versatile set of software products, customized practice management coaching, facilitated study groups and lead-generation opportunities. Membership also provides a sense of community, which many isolated independent advisers lack.

One notable challenge for this group of advisers has been the absence of payment processors that allow them to bill monthly retainer clients in a compliant way. XYPN therefore developed AdvicePay to solve that problem.

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