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Financial Planning > Charitable Giving

Orion’s Purchase of Advizr Made Sense, but Challenges Remain: Wealth Tech Experts

By Jeff Berman

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The recent decision by Orion Advisor Services to buy New York City financial planning software startup Advizr made a ton of sense because it’s helping Orion expand into new markets and be more competitive with rivals including Envestnet, according to wealth tech experts.

However, Orion still faces major challenges and has a lot of work to do as new rivals look to enter the market.

Advizr “has a premier position among planning software in the employee benefits marketplace [and] 401(k)s, making it a very attractive acquisition for Orion to expand into new markets,” Timothy Welsh, president of consulting firm Nexus Strategy and a former Schwab executive, told ThinkAdvisor on Monday.

Orion’s decision to expand into financial planning with the Advizr acquisition, announced July 10, wasn’t surprising, blogger and advisor Michael Kitces tweeted after the announcement. After all, Orion was “rumored to be an active bidder” for MoneyGuidePro before Envestnet ended up buying those financial planning tools for $500 million, he noted.

“Strategically,” the software acquisition enables Orion to “continue to shift towards a more holistic ‘platform,’ from being ‘just’ portfolio performance reporting software” — just as adding Eclipse moved Orion into trading, he said.

“The ability to more deeply integrate their ‘own’ financial planning software also positions [Orion] better against Fidelity’s expanding portfolio-plus-planning WealthScape platform and Envestnet’s own Tamarac offerings,” he said.

Orion, however, is “still in a different position than the others” because it “doesn’t run a TRUE platform model (making money by participating in transactions on their platform),” he argued, noting that, “ultimately, it’s still in the software sales business.”

Orion was “still not well positioned to compete against” the kind of threat posed by Envestnet in particular, he said, adding Orion’s “whole category faces pricing pressure soon as advisor business models shift [and] merely throwing in financial planning software won’t necessarily validate the challenge.”

Meanwhile, Advizr has “struggled” with advisor market adoption and carries a much lower user rating than peers, he pointed out. That means Orion “still has some real work to do to bring Advizr up to snuff with the high-end RIA users running Orion,” he said.

It was also unclear if Orion’s purchase of Advizr represented a good deal for either of the two companies because the purchase price wasn’t disclosed, he noted. He also pointed to the lack of clarity around whether Orion users will have to pay extra to use Advizr.

Orion paid about $50 million for Advizr, RIABiz reported, citing an unnamed source. Orion on Tuesday declined to confirm or deny if that was accurate as it continued to be mum on terms of the deal.

But Orion Chief Marketing Officer Kelly Waltrich told ThinkAdvisor on Tuesday that “there will be no extra cost for use of the tool.” She added, however, that “if folks want to add aggregation there will be a small per-household fee for that.”

Kitces rated the Orion purchase of Advizr a “B- or so,” explaining that the startup and its client experience technology platform “helps expand Orion’s offering, but not to compete hard right away, as Advizr’s user ratings from RIAs suggests there’s still a lot of work to be done on its FP core even as new entrants loom.”

However, “on the plus side,” he said: “Yet another financial planning software acquisition should support ongoing interest from [fintech] investors who see both market opportunity and a long list of strategic acquirers to exit to.” He predicted it will be an “exciting few years for advisor FP software.”

Welsh of Nexus Strategy said he pretty much agreed with Kitces’ tweets on the acquisition — “except the grade of B- [because] Advizr has a robust cash flow engine, a very intuitive user interface and advanced functionality to open accounts right from the planning analyses.”

Giving the deal a grade of “A+,” he called it a “very significant acquisition for the industry as it once again fires up the debate for owning all of the components of the tech stack (Envestnet, Orion, Fidelity) vs. best-in-breed integrations (Black Diamond, TD Ameritrade).”

— Check out Orion Buys Planning Software Startup Advizr on ThinkAdvisor.

Jeff Berman

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