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.