The steady migration of independent brokers to a fee-based model has created a large universe of advisers whose revenue is a mix of fees and commissions. This hybrid market presents opportunities for vendors of systems that can deal with the particular needs of both revenue models.
Bringing what it believes is a unique solution to the challenges of the market is Envestnet Inc., a Chicago-based adviser platform provider. As an outgrowth of the company's "sizable" investment in Fetter Logic Inc. of Denver, the two companies created Envestnet Quadron Data Solutions and recently introduced Quadron DataPro. The offering — essentially a repackaging of adviser technology from Envestnet and broker-dealer technology from Fetter Logic — works seamlessly to meet the data management and client reporting needs of broker-dealers with hybrid brokers, the firms said.
"We've been working on putting this together for nine months," said David Fetter, president and chief executive of Fetter Logic, which he founded in 1997. "It took dozens of people, and we integrated people and processes."
A LA CARTE MIX
Quadron DataPro is an a la carte mix of five tool sets that handle account opening and management, account portfolio and performance reporting, compliance monitoring and reporting, compensation tracking and reporting, and an overall reporting function.
"Users can buy a variable mix of things," said Mr. Fetter. "They can use the data and commission solution, account aggregation or data reports, and everything can plug into legacy systems."
Since registered investment advisers and brokers fall under different regulatory umbrellas and have different compliance requirements, systems that try to solve problems in both worlds often come up short, notes Tim Welsh, president of Nexus Strategy LLC in Larkspur, Calif.
"I don't think anyone has bridged the gap, except maybe Pershing and Fidelity, which offer hybrid platforms," Mr. Welsh said. "The problem is that the two pieces don't always integrate, and data winds up missing."
Another adviser technology expert, Greg Friedman, owner of Friedman & Associates in Novato, Calif., said it's very difficult for one solution to handle a variety of complex adviser tasks well.
"I'm glad people are out there trying to come up with solutions. And I don't want to be negative, because I haven't seen the system, but I'm curious about how well it all works," said Mr. Friedman, whose firm manages $250 million in assets. He was a founder of CRM Software Inc. of Palm Beach Gardens, Fla., and the head of Your Silver Bullet, a consortium of software companies serving advisers.
Envestnet believes it overcomes integration issues and other potential problems by combining tested technology and trained people. The company has a large facility in Trivandrum, India — in addition to offices in New York, Los Angeles, Denver and Sunnyvale, Calif. — where registered advisers review and correct data from the multiple reporting sources to make sure the information is accurate, compatible and complete.
"We've learned that to serve advisers, even the best technology has to be supplemented by trained people," said Judson Bergman, Envestnet's chairman.
'TIMING IS GOOD'
Since Quadron is intended for purchase and installation on the enterprise level, its sales team will be targeting independent broker-dealers and the clearing firms that serve them. The recession and the shrinkage of assets under management at independent firms actually may work in the company's favor in garnering acceptance, Envestnet president Bill Crager suggested.
"The timing is good because every company is looking at its fixed costs, and there probably will be some significant decisions to cut those costs by outsourcing components of the infrastructure," Mr. Crager said. "We can collapse the number of systems being used, cut costs and help firms compete in a rapidly transitioning business."
In addition to reining in ex-penses, the new product is designed to enhance adviser productivity and simplify compliance, he said.
E-mail Evan Cooper at [email protected].
