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Eric Clarke, CEO of Orion Advisor Tech

Industry Spotlight > Mergers and Acquisitions

‘The Stars Aligned’: Orion-Redtail Deal Was Years in the Making

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What You Need to Know

  • Orion had been seeking to acquire Redtail for several years, but the time was right for both firms this year, their CEOs say.
  • CRM was the one big offering for advisors that Orion had been lacking.
  • Timothy Welsh of Nexus Strategy sees the deal as a major blow for Orion rival Envestnet.

The deal that Orion Advisor Solutions reached to acquire Redtail Technology, announced Tuesday, was several years in the making, and everything finally came together early this year when the timing also became right for Redtail, the CEOs of each company told ThinkAdvisor in an interview on Wednesday.

Redtail, led by Brian McLaughlin, its CEO and co-founder, is a client relationship management software firm focused on the wealth management industry, and CRM is a major component of the financial services sector that Orion has been missing.

“We’ve been asking Brian if there was an opportunity to do this deal for a number of years and this year the opportunity kind of came together, so to speak, and the timing was great for both of us,” according to Eric Clarke, CEO and founder of Orion Advisor Solutions.

“It’s no secret that Redtail has a series of raving fans in the marketplace,” Clarke said. “They have incredible market share. They have high user satisfaction.”

In addition, “when we stepped back and looked at the integrations that we support with the open-architecture platform here at Orion, Redtail has more integrations with our user base than any other integration that we have in place today,” Clarke pointed out.

“Over 30% of our Orion customer base is already using Redtail, which made this just an unbelievable opportunity from our perspective,” he added.

With all that in mind, “I’ve been reaching out to Brian for years, like on a regular basis,” Clarke said, noting that it was “on my calendar [but] I can take the reminder off now.”

Clarke added: “I used to lose sleep over the thought of this transaction going in a different direction. So this was really, really strategically important to us.”

‘The Stars Aligned’

McLaughlin declined to say if other firms, such as Envestnet, had also approached him to acquire Redtail.

But at least part of the reason that McLaughlin agreed to be acquired by Orion was his long relationship with Clarke.

“We worked together on a number of projects,” McLaughlin said. “We’ve been doing the hackathons together [and other] industry events together. There’s been a lot of connections over the years.”

Finally, early this year, “the stars aligned,” McLaughlin told ThinkAdvisor. “It was a crossroads for me strategically,” he explained. “We’re doing really well,” but he wanted to take Redtail “to the next level,” he said. “I really want to innovate for the advisors. I want to innovate for the industry and scale it up.”

When he looked into how to best achieve that, there were a couple of choices, McLaughlin said. “To me, one of the most important options is working with somebody who understands the business, who has the same values and core principles of foundational aspects that we’ve always had and that we believe in so strongly.”

That was certainly the case with Clarke and Orion, and “that’s why this was a match made in heaven,” according to McLaughlin.

When he spoke to Clarke, “early on I told him … [to] be really crystal clear here, I want to work. I want to keep going. I want to drive value and I want to provide value,” McLaughlin recalled.

“It was important to me that they understood I’m still committed to all this and I’m committed to the advisors’ success,” McLaughlin said. “I’m committed to my employees’ success, their employees’ success. … So that was just important to me, no matter which direction Redtail went. That was critical.”

He added: “I’m not walking away into the sunset here. To me, this is the next chapter and next story of my career as well. And I’m extremely excited about this opportunity.”

Financial terms of the deal, expected to close in the second quarter, weren’t disclosed.

But as part of the deal, McLaughlin will become president of CRM for Orion and report to Clarke. In addition, McLaughlin will join Orion’s executive team and its board of directors.

For Clarke, “this is an opportunity for us to both broaden out our capability set as we bring the best of our businesses forward,” he told ThinkAdvisor. “Brian has done a great job of intentionally building a great culture. And so we have a lot to learn from Brian and his team, and we’re looking forward to taking their best practices and adopting them back into our business here.”

Asked how much of a strategy change, if at all, he saw the Redtail purchase representing for Orion, Clarke said: “Zero because we have from the get-go been trying to connect that advisor-client journey across four strategic pillars of prospect, plan, invest and achieve, and all of the advice center interactions take place first and foremost in the CRM.”

Therefore, adding Redtail was “the most valuable piece of our strategic puzzle. … We have been wanting this strategic piece for a long time. Our strategy doesn’t change but our ability to execute on strategy changed drastically,” Clarke said, adding that he saw no other CRM provider on the market he was interested in.

Orion is “always looking at M&A opportunities but, in the tech space specifically, we’re super happy about this opportunity and we’re going to be heads-down focused on executing,” he added.

A ‘Big Deal’

Industry experts in the fintech space continued to praise the transaction on Wednesday.

“This is a big deal because they’re the number one supplier of CRM to independent advisors,” Joel Bruckenstein, head of Technology Tools for Today (T3), told ThinkAdvisor.

“But I think, for Orion, it really sort of fills out their product line,” he said. “They are a reseller, or have been for years, of Salesforce, and that’s great, but not every Orion user is going to want Salesforce.”

Now, “particularly as Orion, I think, is making a move more into the broker-dealer space, Redtail is really entrenched there so, number one, it means that now people who are using Redtail will be able to have even better integration, I would think, going forward with Orion,” he said.

“For Orion, it opens some doors into broker-dealers that they may not be entrenched in in the moment. So it’s a win-win for everybody, I think.”

Asked if he thought Orion would still be missing any puzzle pieces after this deal is completed, Bruckenstein said its financial planning software is “still not at the level yet where it can compete, in my opinion, directly” with market share leaders including Envestnet’s MoneyGuide or Fidelity’s eMoney.

“Their financial planning software is still somewhat of a work in progress as comprehensive financial planning goes,” he explained. “If people are just looking to do some basic retirement projections or things of that nature, what they have is already good enough. So it depends on the use case.”

Orion acquired Advizr in 2019 for its financial planning software, which is now called Orion Financial Planning, he noted.

Bruckenstein’s prediction for Orion: “It’s going to be, once all the pieces get integrated fully, a robust platform. … I would say they have a lot going for them.”

Big Blow to Envestnet?

Agreeing with Bruckenstein on the deal, Timothy Welsh, president, CEO and founder of Nexus Strategy, told ThinkAdvisor: “What an incredible win for Eric Clarke and Orion and a potential death blow for Envestnet.”

Clarke is now “doing laps on the field, particularly as Envestnet is bogged down in changing execs, losing their best people, moving headquarters, and fending off PE buyers, while still not integrating any of their billions of dollars of acquisitions in the last few years, Welsh said. “Seems like Envestnet has been asleep at the wheel since before the pandemic,” he said, adding: “Redtail was theirs for the taking!”

Envestnet declined to comment Wednesday.

Welsh also called the deal a “tremendous victory for Brian McLaughlin and Redtail,” adding: “He was the last software standing and got the dream deal.”

Rich Cancro, CEO of AdvisorEngine, which provides a wealth management platform for advisors, also praised the deal, saying: “Orion and Redtail are strong integration partners of ours, and we’re excited to continue developing our integrations with them.”

(Pictured: Eric Clarke, CEO of Orion Advisor Solutions)


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