Cybersecurity firm Entreda is being bought by information archivist Smarsh. Both fintech firms focus on the compliance needs of financial firms, which have closed many offices and now remotely operate most services due to the pandemic.
Entreda works with about 300 clients, such as Advisor Group, other broker-dealers, RIAs and wealth managers. Smarsh has a client base of roughly 6,500 firms, including KPMG, BBVA, ING and Penn Mutual.
“The proliferation of mobile devices has been exacerbated by COVID-19 and working from home …, and this opens up new cybersecurity records as well as new regulatory/compliance vectors,” said Entreda CEO Sid Yenamandra, in an interview.
As regulators watch this and related trends impact financial firms, “It’s seen as a ‘must do’ that they protect investors’ money, as well as … provide them with security and regulatory compliance,” Yenamandra said.
The merger with Smarsh means “being able to deliver more value” as such trends converge, he added.
While Smarsh has sold its clients archiving and compliance resources since 2001, these firms also “need a cybersecurity compliance partner like Entreda,” said Stephen Marsh, Smarsh’s founder and board chairman, in a statement.
“Entreda’s Unify platform is a … cybersecurity command center, monitoring multiple mission-critical threat vectors behind a single pane of glass,” Marsh explained, adding that it’s similar to Smarsh’s Connected Archive offerings.
“Now customers can get compliance solutions for cybersecurity and electronic communications in one place,” he said.
Entreda client and independent BD Advisor Group, for instance, uses its technology as part of the CyberGuard Program. “This does all the work for [users]. They load it up when using a device, so their sessions are captured. They have an end-to-end package installed to do business in a secure fashion,” explained Smarsh CEO Brian Cramer.
With many tech stacks and bundles to choose from, “IBDs want to make it easier for their advisors to have secure and compliant digital workflows, no matter where they are working,” Cramer said.
Using one “unified vendor, rather than having to pull together technology from five or six vendors,” is preferred, he explained.
Fintech, Financial Stability
The fintech world is seeing a lot of M&A and related upheaval in early 2020.
A few weeks ago, for instance, Motif Investing closed its trading platform and sold its accounts to Folio Financial, which was then acquired by Goldman Sachs. Charles Schwab soon stepped in to buy Motif’s technology and hire its leadership and staff.
“This is the tip of the ‘tip of the iceberg’; I estimate that we’ll lose 20% of the firms in [Michael] Kitces’ fintech map by this time next year,” said Doug Fritz, founder and president of F2 Strategy. “Many will be purchased or consumed by their equity backers. Others will close.”
Wealth managers, broker-dealers and other don’t want to give compliance and cybersecurity tools to their advisors “if the vendors don’t have the financial scale that they can rely on,” said Yenamandra.
“Smarsh is certainly a key player in the wealth management space, and … this [transaction] gives us an opportunity to leverage their platform,” he added.
Others agree. “Smarsh and Entreda are both category leaders, with a shared vision for accelerated future growth,” said Hasan Askari, a managing partner at K1 Investment Management, in a statement. “With the addition of Entreda, Smarsh is exceptionally well-positioned to help companies in the wealth-management space meet critical regulatory tech and cyber risk management needs.”