Orion Advisor Services CEO, Eric Clarke, and I covered a lot of ground in this conversation. As one of the most innovative leaders in both FinTech and financial services, Eric has tremendous insight into how technology drove our industry in 2020 – “A year of Darwinian evolution…” – and how our landscape has been permanently changed as a result.
- The importance of leading by listening
- What Eric sees as the next phase in the evolution of our industry
- How Orion’s merger with Brinker Capital led to a new mission: “Power The Advisor/Client Journey”
- How the American investor benefitted from the evolution of the financial services industry
- How close are we to “Alexa…” for financial services?
Eric Clarke, Derek Bruton
Derek Bruton 00:00
Leading Edge. Let me start over. Leading Edge innovation. That's what we're talking about today. I'm talking pushing the envelope, leaving your competitors in the dust innovation. And my guest today Eric Clark, CEO of Orion Advisor Services. . .
Eric Clarke 01:57
Well, Derek, thank you very much. It's it's certainly an honor to be with you today. And I look forward to engaging on, you know, innovation, fin tech and all things top of mind to advisors right now. So thank you for having me on your podcast.
Derek Bruton 02:15
Well, you're welcome. And you know, Eric, every time your name comes up in a conversation, people always say Eric's had a ton of access. But you know what, he's just a good guy. So what what gives here? I mean, are you given that a lot of free software? I know you're in Omaha, so maybe it's the Omaha Steaks you're sending out to people for Christmas? I mean, are you really that good of a guy?
Eric Clarke 02:37
Well, Derek, you know, what the been in the fiduciary advisor space, I think it's just a great space to be in, you know, helping advisors do the right thing for their clients is really what gets me excited, each and every day to come in and serve the advisors that we do. We, we believe that the future of this business is fiduciary, and being able to help the right side of Wall Street wins, so to speak, is something that that, you know, I i think is especially motivating to us each and every day. And and hopefully that translates through into the work that we do, and our corporate culture, and certainly the way that we behave and interact with the opportunities that we have. Are the advisors that we have an opportunity to serve?
Derek Bruton 03:30
Oh, yeah, it's an exciting business, no doubt. And I know you're very passionate. And I think that's what people mean, when they say you're a good guy. Okay, let's first talk about what's going on in a Ryan, and how you are you all are influencing the lives and businesses of financial advisors, our audience, and then we'll put on our visionary glasses and provide our listeners with some thoughts and ideas to ponder regarding the future of wealth management. So we'll start you know, maybe 10,000 feet, and we'll range up to 30,000 here. So, you know, how has this year been for Ryan? It's certainly been a different one for many, and how have you adapted to what's going on in the world with the pandemic? And what have you learned from all of this?
Eric Clarke 04:14
You know, it's, it's definitely been a year of Darwinian evolution, I think for all of us, you know, we've we've realized that, that we can work remotely, that we can operate our businesses successfully without being you know, in the office, sitting shoulder to shoulder, elbow to elbow, so to speak. And, you know, it's been it's been a, just an unbelievable year for us, you know, we've we've successfully transitioned, you know, our teams to working from home, as has everyone else during this this pandemic. You know, for me personally, I've realized that that Derek that my teenagers can't distinguish what uses Wi Fi And what and what doesn't? You know, it's it's completely ubiquitous to them. You know, I think as we step back and we look at some of the the key learnings for us, you know, we've we have most often been so busy and wrapped up in growing the business and getting out and traveling and meeting partners and colleagues and advisors. And for us, it's presented an incredible opportunity to work on our business. And we have taken advantage of that we've we've revisited the traction enterprise operating system, we have redefined our mission, vision and values. And amidst all of that, we had the opportunity to merge with Brinker capital, which for us was just great. It's been incredible to see our teams come together, and really accelerate our continued success in the marketplace. But we did all that Derek without actually having met the Brinker team face to face we have, you know, since we started going through the due diligence process, we have met for a grand total of four hours in person at the Chicago O'Hare Airport. And, you know, outside of that everything's been done on zoom. So I think that we're all very fortunate to have the technology in place that we do today that allows us to successfully operate our businesses remotely.
Derek Bruton 06:43
I mean, that's, I mean, it's amazing. I've talked to a lot of people about how difficult it is to establish rapport in this environment. And you know, and it's tough to do if you're not face to face for hours at a Chicago air O'Hare Airport. I mean, that's your standard delay, right? At O'Hare, you can get a lot of work there, but still four hours. That is that is amazing. And congratulations on what you know, kind of capturing the moment and taking advantage of everything, given the cards we've been dealt here. I want to move on and talk a little bit about independence and flexibility. And you know, advisors love flexibility. I know, I've heard that over the years, they'd like to have choices. It's synonymous with independence. But I found too much flexibility often paralyzes advisors. I mean, I like going to Cheesecake Factory and seen a menu that's longer than a Tolstoy novel. But at the same time, it can be quite overwhelming. And I ended up getting the same darn Caesar salad I always get the advisors want choices. But importantly, I think they also want direction. And so my question to you is, how important is it for Ryan, to lead advisors down the path of what technologies they choose for their business, versus just making a bunch of options available to?
Eric Clarke 08:01
I think, I think as an industry, it's, it's a couple of things come to mind, you know that? You know, I think I think we have moved past integrations, and we're talking about connections. And we're talking about connecting the prospecting process with the planning process, we're talking about connecting the planning with the investments, connecting the investments, to the specific goals that the investor has, and, you know, ultimately, that that connected fiduciary framework is, is what we're focused on here at Orion. And we have found that it's incredibly important for us to lead by listening. And, you know, when we look at the acquisitions that we've done, over the past three years, we've been focused on adding value and capabilities, where we're hearing the most feedback from the advisors that we serve. And I think that as we have have, you know, look to lead by listening to those top advisors that we have the good fortune of doing business with, it's allowed us to see a real opportunity to tech enable that fiduciary framework.
Derek Bruton 09:19
So it's, it's it's not just the capabilities that you're talking about, but it's how well they work together. And, you know, I know that running an RA, it's, you can talk about the best financial planning the best performance reporting the best fee billing, but how they work together is really I feel is what drives efficiency in our office. Would you agree?
Eric Clarke 09:41
I totally agree. And when we look at what what is the standard, what's the benchmark that we're comparing ourselves to? It cannot be the the bank or the financial institution across the street from us. It needs to be on par with Israel. experiences outside of financial services. So, so we need to, we need to be looking at Netflix and Spotify and Uber, and even Apple to say, what can we do to make our user experience stand out from the crowd be different than the competition, accentuate our value proposition and the things that make us unique? And really put things that that drive, incredible experience and ultimately better investor behavior at the forefront of what we're offering to clients.
Derek Bruton 10:36
So how do you how do you balance the desire and the need to offer your own solutions? Because I know you've got through acquisition through what you've built, you got some great solutions yourself. But you also pride yourself on your integrations with third party technologies and firms that you don't know. But But how do you how do you balance this need for you know, to maintain an off your own solutions, while also maintaining these healthy relationships with the competition, but want to integrate with you?
Eric Clarke 11:08
Well, we've had the good fortune over the years of building out our technology on an open API structure that allows us to dynamically interact with our integration partners, they can, they can simply in a very real time way, tap into the same API layer of our system that that our in house tech stack, in house tech staff uses to you know, build out our our user experience. So, you know, for us, Derek, it's, it kind of goes back to something Rick Adelman said years ago, and he was talking to a group of advisers, and he mentioned the importance of narrow casting into a niche to be successful. And for us, as we look at serving, you know, 2000, plus advisory firms, each of those firms that we serve, has a different and unique value proposition, a specific niche or a group of clients that they're serving. So we have to be very flexible. And having that open API framework has really allowed us to, to not only provide a connected experience with our own technology, but connect other technologies that our advisors use. A good example of that is the Redtail CRM system, right? You see a lot of advisors, using and leveraging red tail to be successful. And for us, you know, we're constantly looking at ways that we can make those workflows more connected with Redtail. How can we help drive a more efficient, you know, prospecting to client process, and ultimately, putting the information that our advisors need? Right at their fingertips inside of Redtail? As an example of of what you're referring to, I think your question Derrick really gets to the core of what's an independent advisor. And an independent advisor, in our mind, is all about not only being a fiduciary, but making sure that they have the very best technology to execute on the niche of clientele that they want to serve. Right.
Derek Bruton 13:23
Yeah, I mean, it's got to be tough. I mean, I know I bet the leadership team at Red Tails, wondering what you know, what, when's Eric gonna get into the CRM business? And, and when are we gonna have to, you know, have that conversation, but like you said, I mean, you're serving the fiduciary in this business. And and you're listening, the you're leading by listening, as you put earlier, and I think that's, that's really important. Let's move on.
Let's talk a little bit about consolidation or industry. I want to maybe started at the RA industry in general, then talk a little bit about what you guys are doing. Seems like, you know, there's a deal announced every day I woke up this morning, there was at least two or three already today. So how does the rate of consolidation impact your strategic plan? Because, you know, you've got firms that are that use a Ryan and maybe use one of your competitors that are coming together. And that's obviously it's a catalyst for conversation, at least with that leadership team. How's it impacting your strategic plan?
Eric Clarke 14:23
Well, we have seen over 100 m&a deals across the firm's that that we support on our tech platform year to date. So, you know, 2020, with all of its headwinds of the pandemic impacting everyone's strategic plans and throwing curveball, curveballs that all of us, look, you know, we we were still seeing deals get done. And I think Derrick private equity is fueling deals in our space right now. Because when you step back and you look at financial services, the fiduciary space is growing the fastest and in fact Because it's growing the fastest, it's attracting an outsized amount of, you know, it's more than its fair share of capital, so to speak, is pouring into this space right now. So, so you're seeing investments being made in platforms like cars, that drive scale to our advisors, you're seeing investments get made, that that drive operational efficiencies, better user experiences. You know, we're making big investments in personalization, you know, here in a Ryan to to, hopefully in a very elegant way, lineup that that tech enabled fiduciary process. But you're also seeing private equity firms invest in consolidators, and provide equity to firms to get out and actually, maybe not create a national brand, but create a regional brand, take best practices with regard to marketing, and ways that you can effectively grow and apply those towards the businesses that that they're purchasing. And we're seeing the organic growth rates, you know, off the charts as a result of those firms that are replicating successful processes, as they as they acquire other firms. This pace of consolidation healthy for industry.
I think it's a reality for the industry, I think that you're going to see continued success by independent advisors that are part of a larger firm, and independent advisors that are affiliated with say tamps, or they're affiliated with, you know, networks like, Michael kitsis, is xy planning network, you'll see almost a split, I think, in the industry where you're part of a larger, independent firm, or you're out on your own. And quite honestly, I see success in both of those models. Because of the technology that's available. It used to be you had to affiliate with the larger firm to get best in class tech. Today, independent advisors, I would argue, have access to better technology. And I think that technology acts as a great equalizer, and it's going to continue to level the playing field so that that independent adviser will do just fine on their own.
Derek Bruton 17:42
I agree. And I and I, and I want to talk a little bit about how that filters down to the, to the why of why we're in this business. And that's the end The end investor, the American investor, and how they benefit from this. But before I leave this topic, what about your strategy? What is a Ryan strategy moving forward? Is it released acquisitions?
Eric Clarke 18:04
Well, you know, our acquisition strategy will center around three things. And those are the things that I mentioned a minute ago, you know, we look for scale, obviously, when we can do an acquisition that adds scale to us and allows us to extend our scale, and scale and pricing out to our advisors, we The second thing that we look for is, you know, integration, if there's something that we can do that will drive operational efficiencies, then we're interested in that. And then the third thing is all around the personalization of the experience, what can we do to drive better client experiences? If somebody out there in the marketplace is doing a better job than us? Then we're going to go after that, you know, I think back of our acquisition in June of 2019, of a little financial planning business called advisor, and Hussein's Eddie and Mustafa, but Siri did an excellent job of creating a client experience that was on par with personal capital. And by acquiring that business, it allowed us to extend that same capability to the advisors that we serve, and we think make a big, big impact on those firms ability to grow.
Derek Bruton 19:24
Yeah, I really enjoyed meeting the leadership team advisor I think it was a couple summers ago right in the middle of August and I I recall, advising you on on the first investment for for that company was air conditioning in their in their conference room, it was just, you see where my strategic counseling goes, or, you know, speaking let's talk about the Brinker acquisition and specifically we noticed an update to a Ryan's mission statement at the time right around then, which is to power the advisor client journey. Tell us about how you and your team identified this as a goal for the company.
Eric Clarke 20:07
Yeah, for us, when we, when we set out, you know, even three years ago to, you know, power that advisor client journey, we were looking at technology stack that would help us to connect the prospect, plan, invest achieve framework, and quite honestly, we were missing several pieces of that. So you know, some of those pieces we close the gaps on with internal resources, we rolled out our marketer prospecting, you know, campaign tool that helps our advisors with digital ads and email campaigns, but we had to acquire the the planning expertise. On the investment side, we saw the Brinker capital merger as an incredible way for us to not only deepen our proprietary expertise in the realm of investments, but also just get an immense amount of scale and reach in broadening out our capabilities when it comes to, you know, providing true investment expertise. And, you know, all that ties back into helping the investor achieve their goals in and make sure that they're aligned appropriately based on what their future intentions are, so to speak. So, you know, we're big, big believers, Derek, that the future is fiduciary, and we want to help enable our fiduciary advisors to win.
Derek Bruton 21:43
Well, let's, let's go, I see go up to 30,000 feet, because I mean, in terms of the future here of our business, and I want to I want to talk about that for a second, in a recent byline. We saw you say that the industry has undergone a transition from investment focus to planning focus, and that you think the next evolution of our business will be behavioral focused. Can you tell us a little more about that? And also the role you see Ryan playing in it?
Eric Clarke 22:12
Yeah, I mean, you know, I think if we step back and we look at it, we'd say that the investment problem has been solved, right there, there have been Nobel Prizes awarded for solving the investment problem, if you're a strategic investor, or a tactical investor, or, you know, somewhere in between, you know, if you stick with your, your investment, you know, long enough, we we tend to see some favorable outcomes, where we see the the next evolution of this business is in regards to helping solving the investor problems. So, so, you know, dalbar, along with others, they always, you know, will release data on top performing funds. But if you look at the investor returns that have bought and sold those funds, you know, there's several 100 basis points discrepancy. And in some cases, you can take the very best performing mutual fund investments and the investor returns are negative. And so, you know, we're just looking at that and say, Okay, the next horizon, kind of where we see the puck going in our industry is all about helping to solve the investor problem. With the Brinker merger, we had an incredible opportunity to tap into the thought leadership of Dr. Daniel Crosby, we are beyond excited to think about the ways that we can revolutionize our tech offering to better match up with those behavioral principles that he has already started to drive and, and make an impact on in our business in every aspect, to make sure that we're solving helping the advisor to solve the investor problem of those darn emotions that we all have greed and fear they get in the way of our successful investing efforts.
Derek Bruton 24:18
Yeah, I mean, I was commenting on a previous show how I believe the American investor has benefited tremendously from from the evolution in our industry, it's become much more affordable, if not completely free, to, to invest. The options from a technology standpoint and an investment standpoint, are just are just, you know, out of this world. However, it still takes that fiduciary it still takes that advisor to help clients, you know, some just, you know, kind of go through the noise of this industry and come out on the other end with solutions for themselves. So What fits them? And I love the work that you're doing there. You know, speaking of that just true, false question, the rise in success of Robin Hood is good for the independent financial advisor.
Eric Clarke 25:17
What Robin Hood represents is an opportunity to get people engaged in the investment process much earlier at a lower price point. And if we step back, and we look at, you know, technologies, that that people are adapting technologies that are helping people have better financial futures, you know, Robin Hood has definitely, you know, been squarely in that category. Now, I would say that it has some challenges, but it's a great introduction for so many people to get them exposure to the markets that you know, fractional share prices, so to speak that, quite simply, they wouldn't have the opportunity to participate in Otherwise, the the investors that Robin Hood is working with are not the typical target market for fiduciary investment advisor, but it gives investors an opportunity to engage earlier on in the process.
Derek Bruton 26:25
Like, yeah, absolutely. I mean, my daughter's a gleaming example of that she opened up a robin hood account, she would be probably a financials advisors nightmare at this point. But in the future, she's going to have the needs, and there's going to be a defining line or life where she's going to realize that she needs ongoing advice versus transactional help or guidance. So I think I think you're spot on there. You know, earlier, we're talking about, you know, what companies you look to, as you look to grow your business and, and innovate. And those companies are often outside of financial services, which is great, which is cool. So How close do you think, Eric, we are to an Alexa, for example, for financial services?
Eric Clarke 27:12
Well, I think we're right on the cusp of some very, very big and exciting developments in our space, you know, technology, the barriers to entry for access to leading edge, or even bleeding edge technology is coming down, you know, there's, you know, the, the amount of work that it takes us to tap into things today and exponentially improve our future outcomes are just much less than than what they used to be. So, for instance, when we started this business, Derek in the late 90s, you know, it was a decision of, Okay, we're going to use either Oracle or Microsoft SQL Server to support the back end database structure. Today, there are several open source database platforms that are doing new, amazing and incredible things that drive scale. And I think that that same open source revolution, if you will, that's applied and played out in the tech space is exactly what we're seeing play out in the advice space. And that's driving and fueling success for the independent advisor.
Derek Bruton 28:30
Look, Derek. Well, Eric, I really appreciate your time today. You've certainly kept my attention. And the fact is, we could go on talking about these topics forever. I know, I know you could. But you got to get on with your day. Stay safe. Stay healthy, please. And thank you again for your insight this morning. We really appreciate it.
Eric Clarke 28:49
Thank you, Derek. It's been a pleasure. And I look forward to to hearing from any of the listeners with any additional feedback or questions they might have.
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