Orion adds behavioral finance to its adviser tech

Orion Advisor Solutions is embedding Brinker Capital’s behavioral finance resources into its adviser technology with a new tool that's designed to allow the 2,200 advisory firms on its platform to better understand investors' emotional reactions to market volatility.

The new technology, called 3D Risk Profile, is a questionnaire designed to infuse academic research and behavioral psychology into Orion’s risk profiling and financial planning tools, according to the announcement last Thursday. The launch represents the first major tech tool to incorporate Orion’s merger with Brinker Capital and its recent acquisition of risk management software HiddenLevers. 

The 3D Risk Profile tool starts like any standard questionnaire to assess an investor’s risk capacity. What’s different about Orion’s tool is that it incorporates a measure of “composure,” which gauges a client’s tendency to be anxious about volatility and provides key insight into their expected behaviors during periods of market elation or stress, according to the announcement. 

As a result, advisers that use the tool should be able to identify clients who will need more attention during market volatility by recognizing emotions and triggers that can derail their long-term investment goals.

“Using technology to augment human compassion and insight is the new frontier of fiduciary service,” Orion Chief Executive Eric Clarke said in a statement. 

Advisers who use behavioral finance reportedly have gained clients at almost twice the rate (66%) of those who don't use it (36%), according to a survey published by Charles Schwab Investment Management and the Investments & Wealth Institute and conducted by Cerulli Associates. 

“As they managed through this past year, advisers found that traditional measurements were not holding up during times of economic and market stress,” said Daniel Crosby, Orion’s chief behavioral officer. “There’s real value in helping clients understand their own psychology when it comes to evaluating individual risk profiles and how they think about protecting and growing their money, especially in volatile markets.”

The 3D Risk Profile is available for use with Orion’s financial planning tool, within HiddenLevers’ proposal capabilities and on the Orion Portfolio Solutions platform, according to the announcement. 

“Orion gets it. They clearly see where the future is headed for wealthtech,” said ­­­­­­­­­­­­­­­­­­­­­­­­­­Jack Sharry, executive vice president and chief marketing officer at LifeYield. “The big challenge for them, or any firm, is to coordinate all the pieces they have acquired, but now we're seeing how that is playing out in practice.”

Orion is a part of a recent string of technology platform builders racing to assemble wealthtech ecosystems, with formidable companies snapping up smaller fintechs to stay ahead of the pack. 

Other major players, like AssetMark Financial Holdings Inc. announced its $145 million purchase of financial planning software Voyant, SEI acquired defunct Oranj’s technology platform, and Envestnet announced a deal to purchase fintech Harvest Savings & Wealth Technologies. 

What these wealthtech giants are ultimately after is creating a unified managed household that coordinates wealthtech components to produce better financial outcomes for both advisers and investors, Sharry said.

Orion manages approximately $50 billion in assets, according to the announcement, making it a sizable competitor and the fourth largest turnkey asset management platforms by AUM, behind Envestnet, SEI and AssetMark.

“A unified managed household improves financial outcomes when it maximizes cost, risk, and tax. You can't get there without understanding your clients," Sharry said.

“By acquiring HiddenLevers, and now by folding behavioral finance into their risk calculation, Orion is showing they want to provide advisers with as much insight as possible to keep their clients on track to achieve those better outcomes," he said.

The product launch comes on the heels of Orion and HiddenLevers' first post-acquisition deal with Atlanta-based Cardea Capital, an RIA that manages $3 billion in assets, to use both firms’ technologies.