News that fintech platform Oranj is “winding down operations” by year-end had industry tech experts voicing a mix of views on the consequences of the development.
They agree that the departure of Oranj from the fintech landscape should be a headache for at least some of the 500-plus advisors who use the firm’s platform. But how much of one?
Calling the news a “nasty surprise in a year of nasty surprises for advisors,” Ezra Group CEO Craig Iskowitz says his “initial reaction” is that the move is “incredulous, considering how much time I’ve spent talking to” CEO David Lyon, who founded the firm in 2014.
The news comes about seven months after Motif Investing abruptly closed down its trading platform.
“It seems to be a horrible dereliction of your responsibility to both clients and employees not to have seen this coming and drop the news the week before Thanksgiving,” according to Iskowitz.
Noting that a large part of his consulting business is about “helping enterprise wealth management firms evaluate and implement new tech platforms,” Iskowitz explained: “Even the smallest companies need at least two quarters running in parallel to validate billing cycles.
“Instead Oranj is forcing hundreds of small advisory firms to drop everything and cram six months (or more) of work into six weeks, and with the holidays smack in the middle, is just cruel, IMHO,” the tech consultant said via email.
What the Oranj exit “means is coal in the stockings of hundreds of mostly small RIAs,” he added. “They have to throw out all the work they planned to do between now and Dec. 31 and instead focus on finding a new vendor, signing a contract, notifying clients of the change, converting all their data and connectivity, and implementing a new wealth platform. Unbelievable!”
‘Not the End of the World’
But to Technology Tools for Today’s Joel Bruckenstein, the development “is not the end of the world,” since there are “plenty of other options out there” for advisors. This is especially true for those advisors who have been using the platform for free, he adds.
Still, it is “a hassle to have to transition your clients from one platform to another,” Bruckenstein conceded. Some advisors may opt to use Schwab’s platform for certain features, albeit at a cost of 10 basis points, he notes.
“It appears that” Oranj has “jettisoned a lot of clients — probably people who were paying them little or no fees for the platform, and it’s fair to say one scenario might be that [Oranj] would be looking to sell the technology” and not its client list, he added.
The ‘Free’ Model
Although “Oranj was a true pioneer innovator, and [CEO] David Lyon a visionary, ultimately the ‘free’ model of technology offerings for advisors in order to get distribution has never worked, and most likely never will,” explained Tim Welsh, head of the consultancy Nexus Strategy, via email.
“When tech is free, then the advisor or the client becomes the product and this conflicts with a professional, fiduciary advisor’s standard of care,” said Welsh. “Also, model marketplaces have become rapidly commoditized and are available widely, so that aspect of Oranj’s competitive differentiation was competed away quickly,” he said.
At the end of the day, there will be “no real impact to the industry, as there are multiple places advisors can go to get similar capabilities,” Welsh added.
“Most of the big tech players are swamped and won’t have the bandwidth to onboard hundreds of firms, especially ones that are very small,” Iskowitz said, referring to Envestnet | Tamarac, Orion Advisor and Black Diamond.
“However, I think a firm like Morningstar that may already work with a lot of these firms on the research and data side could benefit by signing up advisors for their Morningstar Office Cloud suite,” he explained.
The potential “biggest winners are smaller portfolio management players like FinFolio, Portfolio Pathway, Riskalyze, TradingFront, and all of the custodians (for firms that aren’t multi-custody), such as Altruist, Fidelity, TradePMR and Folio Institutional could get some calls,” Iskowitz noted.
Meanwhile, turnkey asset management platforms “could also benefit [because] it may be quicker for an advisor to just outsource all of their accounts to a TAMP rather than try and implement an entirely new wealth platform in house in just six weeks,” he pointed out. “The advisors would then have more time to look for a new system next year and then transition the assets back over time.”
Iskowitz predicted: “It’s going to be a bit like the feeding frenzy when Schwab sold PortfolioCenter to Envestnet, but on a smaller scale. I believe that they had 300-400 [paying] clients between old digital onboarding Oranj and TradeWarrior, assuming they’re shutting both down, which is around a tenth of the number of clients who were on PC at the time.”
More than 500 advisors are using the Oranj platform now, a company spokesperson said. But the company declined to say how many of them were paying clients and also didn’t specify why the firm decided to close its doors, news that was first reported by Financial Planning.
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