InvestCloud interim CEO opens up about fintech’s recent leadership changes

Richard Lumb says that while InvestCloud is growing, a different set of skills are needed to take it to the next level.

What happened at InvestCloud?

That’s been one of the wealth management industry’s biggest questions in the weeks since a reported “sudden” shakeup resulted in 12 executive departures from the advisor technology company, including co-founder and CEO John Wise.

Without any official explanation from InvestCloud or its private equity backers — Motive Partners and Clearlake Capital, which acquired a combined 88% stake in InvestCloud in 2021 — speculation ran rampant. Some sources with knowledge of the company suggested that Motive and Clearlake were displeased with InvestCloud’s ability to combine its various acquisitions into a product that could win market share from industry leaders like Envestnet. Others said InvestCloud was unable to deliver the technology it advertises, or that there were regulatory issues happening behind the scenes.

Richard Lumb, a partner with Motive who was on InvestCloud’s board of directors and was named interim CEO in April, is ready to set the record straight.

To start, there is “absolutely no truth” to the claim that there’s a regulatory investigation into the company, Lumb told InvestmentNews. (An SEC spokesperson said the agency does not comment on the existence or nonexistence of a possible investigation). Second, this was not a sudden move by the board.

“This wasn’t triggered by us suddenly finding out some information we didn’t expect,” Lumb said. “Everything is good with the product, with the technology, with the strategy, and the board was very happy from that perspective.”

Lumb also said reports of departures were overexaggerated. Only four other executives left the company with Wise, not 11, as CityWire reported. InvestCloud declined to state which employees left and which stayed, citing California laws regarding employee privacy.

Nor was there a problem with InvestCloud’s ability to grow. The company ended 2022 with $360 million in revenue, up from $80 million in 2021, when Motive first bought in, Lumb said.

But while Wise and his team did an “absolutely fabulous” job getting the company to this point, a different set of leadership skills are needed to take the company to the next level, Lumb said. “The skills required when you’re kicking off a business in a garage are very different from the skills required when you’ve got a business that’s $400 million-plus and growing rapidly.”

Specifically, it’s having more structure in the company in terms of accountability, and more mature processes in terms of how to recruit, evaluate and deal with performance management, Lumb added. There’s also a need to be more mature about product implementation and building operations internationally.

“When you run a little company as chief executive, you rightly have to be very in control. You’re the individual making all the decisions,” he said. “As you get bigger, the chief executive has to be the chief team captain.”

While this sort of move is commonplace across all types of businesses, especially ones that attract outside funding, founders and executives typically stay in place during a transition and help find the next chief executive. For example, Eric Clarke recently announced his retirement from Orion Advisor Solutions, a competitor to InvestCloud in many respects, but plans to stay with the company through the succession process.

But Wise is an “all-in sort of guy,” and it would have been difficult to recruit a new person while he was still in place, Lumb said.

There was agreement on the board for the need to change, but that’s not what all the former leaders wanted,” Lumb said.

Cheryl Nash — the chief customer executive of InvestCloud, who joined in 2021 as part of a recapitalization deal that brought Nash’s former company, Tegra118, into the fold — added that the change in leadership will help the company “get to the next level” in terms of growth.

“I think people wanted to turn [the leadership change] into something it wasn’t,” Nash said. “It’s an exciting time for us.”

InvestmentNews reached out to Wise and the other 11 executives who have reportedly departed from InvestCloud, but hasn’t received any response.

Doug Fritz, the co-founder and CEO of F2 Strategy, which works with several large wealth management firms that use InvestCloud’s services and technology, said Wise had a reputation for overpromising on how easy it would be to implement his company’s technology. However, firms that did take the time and effort to implement the technology are generally happy with it, including some “very large” firms, Fritz said.

“[Wise] always spoke to what [the technology] could be, not what it realistically was, and from that standpoint he deserves some criticism,” Fritz said. “But on the other side of that exact same coin, what he said it could be, it could be.”

“By the way, InvestCloud is by no means the only, and I would say not even the worst, company in our industry with technology execs overpromising with a trail of not-great experiences behind them,” he added.

But InvestCloud can take firms years to fully implement, and this has to change if the company wants to continue growing, Fritz said. “They’re still stuck in the design and ideas stage as opposed to execution and scalability.”

InvestCloud is aware of this criticism and working on fixing it, Nash said. The company is currently on a “listening tour” of its customers to learn how it can improve.

“We are focused on how we get things done faster and in a more nimble way,” she said.

Looking forward, the company sees even more opportunities to bring other pieces of Motive’s portfolio into InvestCloud. Companies like FNZ, CAIS and Forge could all fit into the “financial supermarket” that InvestCloud is building, Lumb said.

An initial public offering, however, remains off the table as markets are still unsuitable for such a move. However, investors are in no rush to exit their positions in InvestCloud any time soon.

“We’re two years into what is typically a seven- to 10-year period,” Lumb said. “We have plenty of time to continue to invest in this business.”

The search for a new executive has already begun, and both internal and external candidates are being considered. Lumb expects the process to take through the summer, and he plans to remain on InvestCloud’s board after the CEO is announced.

InvestCloud is looking for someone who knows the wealth management industry extremely well but also has a strong background in technology, Lumb said. “Expect a big name in terms of who we bring forward.”

[Editors note: This article has been updated to include InvestCloud’s statement about the number of executives who have departed the company.]

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