Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Master's in Business with Baravorite Holds on Bloomberg Radio.
Speaker 2: This week on the podcast, I have an extra special guest.
Speaker 2: Natalie Wolfson is CEO of Orion. She has an absolutely
Speaker 2: comprehensive resume in the financial services industry, everything from AMEX
Speaker 2: to asset Mark to Charles Schwab. Not only has she
Speaker 2: been named to a number of one hundred most Influential
Speaker 2: Women in Finance, I don't know many people who have
Speaker 2: seen as much of this industry on the front lines
Speaker 2: as she has for as long as she has, and
Speaker 2: is now in a position to very much drive change
Speaker 2: within the industry as CEO at Orion. We know Orion,
Speaker 2: I know Orian as a performance reporting company. We've been
Speaker 2: using their their software for I don't know, almost a decade,
Speaker 2: and they're just a powerhouse in the space. There are
Speaker 2: few people who have her unique insights into the inside
Speaker 2: baseball of what drives change in actual wealth management. Not
Speaker 2: only working with finrun the SEC on the regulatory side
Speaker 2: and working on the technology side, but having some insight
Speaker 2: into behavioral finance and understanding what advisors need to help
Speaker 2: their clients obtain their goals. I thought this conversation was
Speaker 2: fascinating and I think you will also. With no further ado,
Speaker 2: my interview of Orian CEO Natalie Wolfson.
Speaker 1: Thank you so much for having me. It's great to
Speaker 1: be here.
Speaker 2: Well, it's great to have you. Full disclosure, my firm
Speaker 2: uses Orion as part of our tech stack in managing
Speaker 2: the four and a half or so billion dollars we have.
Speaker 2: But let's talk a little bit about you and your
Speaker 2: background from UC Berkeley undergrad and then an MBA from UCLA.
Speaker 2: What were the career plans?
Speaker 1: So I have to say I graduated Berkeley with a
Speaker 1: political science degree focusing on international relations and power politics,
Speaker 1: and so coming out of cal I had absolutely no
Speaker 1: idea what I wanted to do with my life other
Speaker 1: than move to New York and start my career.
Speaker 2: I'm always done when people in California say that, because
Speaker 2: every time I visit California, it's just so delightful. The
Speaker 2: weather is fantastic, even just the geography is fabulous. What
Speaker 2: was it like coming to New York?
Speaker 1: Oh, New York is fabulous. I mean, anyone who lives
Speaker 1: here knows this, but especially coming from the West Coast.
Speaker 1: I love San Francisco. I live in the San Francisco
Speaker 1: Bay area right now. But there's something just so twenty
Speaker 1: four to seven about New York City, and you know,
Speaker 1: I was interested in being part of that. And I thought,
Speaker 1: if you don't do it in your early twenties, why
Speaker 1: when would you do it? So I came to New
Speaker 1: York no job plans, no ideas.
Speaker 2: No kidding. Wow. So what was the first gig in
Speaker 2: New York? As a NBA graduate?
Speaker 1: So I wasn't an MBA yet. I was just a BA.
Speaker 1: And I was fortunate enough to have a marketing internship
Speaker 1: at Caesar's World, which is what I did to work
Speaker 1: myself through college.
Speaker 2: Caesar's World is what the casinos? Oh really, yes? And
Speaker 2: that was in New York City they were headquartered.
Speaker 1: No, the internship I did in Nevada, uh huh. And
Speaker 1: then because that internship was in marketing, I had some
Speaker 1: opportunities to do consulting work and then eventually found my
Speaker 1: way to American Express working in their marketing department.
Speaker 2: Got it. So you did get your New York experience.
Speaker 2: How long were you at AMEX for?
Speaker 1: I was at Amex for about three and a half years,
Speaker 1: and then I started a company in New York. It
Speaker 1: was the mid nineties or the late nineties. And who
Speaker 1: didn't start an internet company in the nineties, that's right.
Speaker 1: And then when that company quickly failed, I moved back
Speaker 1: to the Bay Area and started working at Charles Schwab.
Speaker 2: Ah. So you were Schwab for a while, right about
Speaker 2: ten years? And what was that experience like? You were
Speaker 2: in product development, strategy, segment management. Tell us about your
Speaker 2: various roles at Schwap.
Speaker 1: Schwab was a great place to spend ten years of
Speaker 1: my career. And one of the things that was so
Speaker 1: fantastic about it is most of the time I was there,
Speaker 1: it was growing really quickly, which created a lot of
Speaker 1: opportunities for me and other folks at Schwab to try
Speaker 1: different things. And so I started in marketing, active trader marketing,
Speaker 1: and then I fell in love with the active trader
Speaker 1: segment of the market. I had an idea that a
Speaker 1: group of us wanted to try out at Schwab, which
Speaker 1: was to build a mobile trading application for active traders.
Speaker 2: What year was that.
Speaker 1: That was nineteen ninety nine.
Speaker 2: So long before there was really any sort of smartphones.
Speaker 2: The BlackBerry was the closest thing, and even that there
Speaker 2: were no real apps or anything.
Speaker 1: That's right. I mean, I don't know if you remember this,
Speaker 1: but the mobile trading applications we built at at Schwab
Speaker 1: were on phones that had numbers, so if you wanted
Speaker 1: to enter in a you had to at one once
Speaker 1: be won twice. And then also pomp pilots. So we
Speaker 1: used both of those devices to build one of the
Speaker 1: first mobile trading applications ever and it was It was
Speaker 1: a great experience. And then I fell in love with
Speaker 1: technology and product development, moved from there to strategy, then
Speaker 1: moved from there to investment product development, worked on Schwab's
Speaker 1: first ETF offerings, their equity mutual funds, fixed income mutual funds,
Speaker 1: and then when I decided to leave Schwab, I went
Speaker 1: to Pershing and worked on investment platforms.
Speaker 2: Another very substantial custodian. Yes, what was your experience like
Speaker 2: at Pershing after Schwab, which is just such a unique
Speaker 2: animal in the investment world.
Speaker 1: You know, Pershing's is a different custodian. They have different emphasis,
Speaker 1: they serve a different clients.
Speaker 2: Site, little bit higher end.
Speaker 1: No, they tend to be or at least at the time,
Speaker 1: we're very much focused on clearing for the broker dealers
Speaker 1: versus Schwab that was more focused on the rias Pershing
Speaker 1: does both than When I was brought into, Pershing was
Speaker 1: hired to help the ra part of the business and
Speaker 1: the broker dealer part of the business. And they wanted
Speaker 1: to ensure that they had the investment platforms they needed
Speaker 1: to compete globally. So built in a retirement offering, an
Speaker 1: insurance offering, expanded their mutual fund offering, expanded their etf offering.
Speaker 1: It was great, great job.
Speaker 2: To choice is good. So Schwab to Pershing and then
Speaker 2: you end up at asset Mark for just about a
Speaker 2: decade and you had a lot of roles there, chief
Speaker 2: commercialization officer, chief solution officer. Tell us about your professional
Speaker 2: experience at asset Mark.
Speaker 1: Yeah. So at asset Mark when I was brought in,
Speaker 1: I was brought in to help transform the platform and
Speaker 1: grow it. And the reason the first role was chief
Speaker 1: Commercialization Officer was because my emphasis was bringing together all
Speaker 1: of the ps of marketing, promotion, place, price, and people
Speaker 1: segments into a unified offering. And then once that work
Speaker 1: was done and we had done that, it was time
Speaker 1: to expand our markets, expander segments, build a growth strategy,
Speaker 1: and so I did that as chief solutions officer, and
Speaker 1: then when my predecessor left Asset Mark, I was asked
Speaker 1: to join a CEO and was CEO there for about
Speaker 1: two and a half years.
Speaker 2: How was that experience and how different was being the
Speaker 2: top of the org chart from being a worker bee
Speaker 2: a little further down?
Speaker 1: You know, I love being a CEO. I don't know
Speaker 1: about you, but I love it. I love being able
Speaker 1: to lead the team. At Asset Mark I was a
Speaker 1: public company CEO. I enjoyed working with investors. I enjoyed
Speaker 1: that aspect of the role. And one thing about being
Speaker 1: a CEO versus you know, being a chief solutions officer,
Speaker 1: chief commercialization officer, you spend a lot of your time
Speaker 1: outside the company as well as inside the company. So
Speaker 1: we still spend a lot of time with your clients,
Speaker 1: which you do at every level of the organization. I
Speaker 1: believe you also spend time with investors, with other aspects
Speaker 1: of the industry, a little bit more time on strategy
Speaker 1: and innovation, and that's an exciting part of the role,
Speaker 1: representing your firm and its success to investors, to potential partners.
Speaker 2: And then from Asset Mark in October twenty twenty three,
Speaker 2: you're recruited to become CEO at O'rian tell us a
Speaker 2: little bit about what that process was, and let's delve
Speaker 2: a little bit into what Orian actually does.
Speaker 1: Yeah, so, I have been a long time admirer of Orian,
Speaker 1: just as a trendsetter and an innovator in the industry,
Speaker 1: both in technology and wealth services. When Eric announced that
Speaker 1: he was going to be departing, Eric being the previous
Speaker 1: CEO and founder, Eric Clark. When he announced in I
Speaker 1: guess it would have been last spring that he was
Speaker 1: leaving the firm, the executive chairman of the board, Charles Goldman,
Speaker 1: reached out to me asked if I would be interested.
Speaker 1: He and I had a few conversations before I decided
Speaker 1: that it was something I wanted to do, and I
Speaker 1: really believe that Orian has the potential to make a
Speaker 1: huge impact on the industry. You know, met the board
Speaker 1: really liked to what they had to say about plans
Speaker 1: for Orian, spent some time with Eric. Was very important
Speaker 1: to me that Eric was a big part of picking
Speaker 1: the future CEO, and it's been fantastic since then.
Speaker 2: So I know Orian for many years because from the
Speaker 2: RIA perspective, from a registered investment advisor perspective, clients want
Speaker 2: to know how their portfolios are doing, what their performances,
Speaker 2: both in absolute terms and relative to benchmarks, and you
Speaker 2: want an outside third party doing it as opposed to
Speaker 2: someone just telling the client yeah, yeah, you're doing great.
Speaker 2: You really want to see the numbers, and you want
Speaker 2: to know that a trusted objective third party is running that,
Speaker 2: not the person who you're trusting to manage the money.
Speaker 2: That's the core role I think of when I think
Speaker 2: of Orian, But there are a lot of other things
Speaker 2: the firm does tell us about the various roles and
Speaker 2: responsibilities Orian has within the RIA industry.
Speaker 1: You're right that the heritage of Orian is por ffolio counting,
Speaker 1: trading and reporting. That's kind of at the heart of
Speaker 1: what O, where Ryan came from, how it was built.
Speaker 1: Over the course of the last five years, though, Orian
Speaker 1: has added to that core capability a depth of services
Speaker 1: and wealth management, everything from portfolio customization through and indexing
Speaker 1: all the way through fully outsourced portfolios, and so Orian
Speaker 1: now has a wealth business and a tech business that
Speaker 1: work together to help financial advisors save time and effort
Speaker 1: and spend more time with their clients and then on
Speaker 1: the technology part of the business. Around what we've built
Speaker 1: around portfolio counting, trading and reporting is the entire advisor
Speaker 1: interaction with their investor.
Speaker 2: Meaning how they interface with both Orian and the client themselves.
Speaker 1: That's right.
Speaker 2: Tell us a little bit about that.
Speaker 1: So in the additive services that Orian offers now our
Speaker 1: financial planning, compliance, CRM services, risk and analysis, portfolio construction,
Speaker 1: and advisor portal, an investor portal, and clients can choose
Speaker 1: our clients can choose to use all of it in
Speaker 1: an integrated way, or they can choose to use a
Speaker 1: piece of what Orion offers and integrate that into their
Speaker 1: client experience.
Speaker 2: So CRM is customer relationship management for people we may
Speaker 2: not know the acronym. Tell us about the portal, that
Speaker 2: is the client's interface with their own assets and portfolios,
Speaker 2: regardless of what platform they're on. Tell us what comes
Speaker 2: through the portal to the client.
Speaker 1: Yeah, So for the investor client, what comes through the
Speaker 1: portal is their holdings, their connection between the portfolio and
Speaker 1: the financial plan, a variety of comparisons that advisors can
Speaker 1: walk through with the investor about how their portfolio, if
Speaker 1: the advisor's proposing a new portfolio, how the proposed portfolio
Speaker 1: compares to the portfolio the investors in. Now we have
Speaker 1: behavioral finance tools so that the investor can understand their
Speaker 1: relationship with wealth and their risk tolerance, their needs at
Speaker 1: a greater level of detail, and they can compare that
Speaker 1: to that of their spouse, and then also compare that
Speaker 1: to the portfolio that the advisor is recommending. The advisor's portal,
Speaker 1: in contrast, has portfolio construction tools, sophisticated reporting tools, workflow management,
Speaker 1: the dashboards that help the advisor understand the strength of
Speaker 1: their business and the strength of their relationships with their clients.
Speaker 1: And again, you can choose to just use Ryan for
Speaker 1: reporting that's great, or you can choose to use Oryan
Speaker 1: for more depending on the size of the advisor and
Speaker 1: the degree with which they want to control their clients experience.
Speaker 2: Huh, that's really intriguing. So you've been at the firm
Speaker 2: now for barely eight months. What changes have you begun
Speaker 2: implementing or have you just kind of started out with
Speaker 2: a little bit of a listening tour and picking up
Speaker 2: some surveillance about what's actually been going on before you
Speaker 2: join the company.
Speaker 1: In the first ninety days, I absolutely did a listening tour.
Speaker 1: I talked to as many financial advisor clients as I
Speaker 1: possibly could. In fact, in my very first day, I
Speaker 1: talked to our top twenty clients, reached out to them,
Speaker 1: wanted to let them know that I was interested in
Speaker 1: hearing from them. And then for that first ninety days,
Speaker 1: I made sure that I talked to as many clients
Speaker 1: as I could. I also want an internal listening tour.
Speaker 1: Wanted to get to know the team. You know, I'd
Speaker 1: been at my previous firm for ten years and so
Speaker 1: everyone knew me. I knew everyone in the firm. I
Speaker 1: knewho top performers were, how we were organized. I had
Speaker 1: to learned that about Orian. Get to know the team,
Speaker 1: Understand how we were organized, understand what they enjoyed about
Speaker 1: working with Oryan, if there are any opportunities. And so
Speaker 1: after that first ninety days, I started looking at things
Speaker 1: that we could prioritize a little differently. Eric Clark, the
Speaker 1: founder of Oriyan, you know, he's an incredible CEO. At
Speaker 1: the same time, you know, I personally felt that we
Speaker 1: need to emphasize put a little bit more emphasis on
Speaker 1: building a client service model, making sure that we were
Speaker 1: developing for scale, putting in place services that are highly
Speaker 1: flexible and integratable, and so pivoted just slightly to make
Speaker 1: sure that we were focusing on the information and the
Speaker 1: data and the accessibility to it, so that we could
Speaker 1: get to a place where whether clients wanted to use
Speaker 1: us for micro services or want to use us for
Speaker 1: holistic technology, we can integrate that into their client experience
Speaker 1: in a way that saves advisor's time.
Speaker 2: Let's talk a little bit about the transition that you undertook.
Speaker 2: You followed Eric Clark, who was not only a long
Speaker 2: standing CEO, he was the company founder. How challenging is
Speaker 2: it to take over from a founder?
Speaker 1: You know, the first thing I'll say about that is
Speaker 1: it's a big change for the team and the clients.
Speaker 1: You know, anytime a founder decides to move on to
Speaker 1: their next chapter, it just creates uncertainty, and both the
Speaker 1: team as well as clients just want to make sure
Speaker 1: that you're committed to the same purpose, that you're committed
Speaker 1: to the same level of service that they've come to
Speaker 1: expect from the predecessor. And the great news about Eric
Speaker 1: and me is because Eric was a part of the
Speaker 1: selection process for me. We knew going in that we
Speaker 1: were highly aligned on what we think about the market,
Speaker 1: how we want to serve our clients, where we think
Speaker 1: the future opportunities are in technology. And so while I've
Speaker 1: absolutely adjusted the strategy slightly to focus more on integrations,
Speaker 1: the heart of Orion remains the same.
Speaker 2: So Eric, Eric Clark has been called the legend in
Speaker 2: the RIA community. Tell us a little bit about what
Speaker 2: makes him so legendary and a little bit about your
Speaker 2: relationship with him.
Speaker 1: Yeah, so there's no question that Eric is a legend
Speaker 1: in the RAA community. The reason that he is a
Speaker 1: legend is because his technology helped power the growth of
Speaker 1: the industry. He was a visionary and that he saw
Speaker 1: how much time advisors were on portfolio construction, performance reporting, reconciliation,
Speaker 1: and how much the ria's interaction with their client could
Speaker 1: be improved if that work was taken off the advisor's
Speaker 1: plate and if the advisor had the benefit of those
Speaker 1: insights to deliver back to their clients. And he built
Speaker 1: it in a highly innovative way. You know, Eric was
Speaker 1: very focused on ensuring that right after he built a solution,
Speaker 1: he started improving it as a result. Right now, Oryan
Speaker 1: serves about eighty percent of the top rias in the US,
Speaker 1: and we have four point three trillion in assets that
Speaker 1: we service. He also is a huge voice of the
Speaker 1: importance of independent advice, and I am too. So we
Speaker 1: both believe in independent advice. We both believe in powering
Speaker 1: rias and the enterprises that serve them, and we both
Speaker 1: believe that the more time we can give the advisor back,
Speaker 1: the better off the advisor the investor are. I talked
Speaker 1: to Eric a couple times week. He's a great thought partner.
Speaker 1: He's a great person to bounce ideas off of. He
Speaker 1: reaches out to me sometimes when he has questions. He's
Speaker 1: still on our board and he's a really great board member,
Speaker 1: so the relationship is strong and getting stronger every day
Speaker 1: as we continue to work together. He's a great advisor
Speaker 1: and partner.
Speaker 2: So I just have to share a quick Orion story
Speaker 2: with you, and again, Riddhelts Wealth Management has been using
Speaker 2: Orion pretty much from day one, but fifteen years or
Speaker 2: so ago. I just have this vivid recollection of what
Speaker 2: we had to do every quarter when we weren't on
Speaker 2: a platform like yours. First we had to get approval
Speaker 2: for what the performance numbers were for the quarter. Then
Speaker 2: we would print out documents, which were different for every client,
Speaker 2: because not every portfolio is identical. Not everybody was in
Speaker 2: the same set of funds or same set of investments,
Speaker 2: And so you would print out the cover letter, you
Speaker 2: would print out the performance letter, and this was quarterly,
Speaker 2: and everything would get stuck in a Manila envelope and
Speaker 2: get sent out. And you mentioned behavioral finance earlier. The
Speaker 2: fascinating takeaway was it turned that quarterly number into a
Speaker 2: big deal, both emotionally and intellectually. And you know, sometimes
Speaker 2: the quarter ends strong, sometimes it ends weak, and in
Speaker 2: the scheme of things, three months is not all that important.
Speaker 2: And the surprising advantage of moving to a computerized always
Speaker 2: on system like Orian was that we gave clients, you know,
Speaker 2: the joke is, you could check your performance twenty four
Speaker 2: to seven, but please don't check it occasionally, but don't
Speaker 2: obsess about it. And once you move from that quarterly,
Speaker 2: you know it was the culmination of three months, and
Speaker 2: everybody was focused on that number. Suddenly the little squiggles
Speaker 2: on the chart didn't make that all that big. Difference.
Speaker 2: People went from freaking out over a quarterly number two, Hey,
Speaker 2: I have access to this whenever I want. Surprisingly, it
Speaker 2: becomes less meaningful on a day to day basis when
Speaker 2: it isn't this big quarterly event.
Speaker 1: It's true, It's very, very true. And the other interesting
Speaker 1: thing that's happened more recently is the transition to more
Speaker 1: personalization in financial services. I mean, we have personalization in
Speaker 1: every aspect of our lives right now. You can create
Speaker 1: your own clothing, you can create your own streaming, you
Speaker 1: can create your own music. Like there's personalization in all
Speaker 1: aspects of our life, and financial services is catching up,
Speaker 1: and platforms like Oryan can bring that to the advisor.
Speaker 1: We can innovate on their behalf. Whether it's through custom
Speaker 1: portfolios and custom indexing, or it's through expressing values in
Speaker 1: your portfolios, or it's in how you customize the investor
Speaker 1: experience you want to create on your white labeled investor portal.
Speaker 1: Drawing attention to behavioral finance and how you emotionally attached
Speaker 1: to your wealth and your financial plan versus benchmark based
Speaker 1: performance is a huge change in the industry and something
Speaker 1: that orian's a big part of We're pushing the limits
Speaker 1: of behavioral finance. We're pushing the industry in a direction
Speaker 1: where it's not just about fulfilling your goals as it
Speaker 1: relates to wealth, but finding true happiness and giving advisors
Speaker 1: the tools that they need to have those conversations with
Speaker 1: their client.
Speaker 2: So, once you run people through this three or four
Speaker 2: minute questionnaire the BFI twenty, what spits out the other end.
Speaker 1: What spits out the other end is your behavioral finance profile.
Speaker 1: You could be an optimist, maybe your conservative, maybe you're
Speaker 1: curious about investing, And then you can contrast what makes
Speaker 1: you that profile relative to your spouse or relative to
Speaker 1: your children, so that if it's you and your spouse
Speaker 1: who are making decisions about money, you understand why you
Speaker 1: might be in conflict. And then we also give tools
Speaker 1: to reconcile that conflict, to understand it and to reconcile
Speaker 1: the conflict. And then we also use AI so that
Speaker 1: the advisor can send communications first draft communications to clients
Speaker 1: in different market environments and important parts of their financial
Speaker 1: planning conversation with their client that understand their profile and
Speaker 1: include optimal language related to their profile and their portfolio.
Speaker 1: In those first draft communications.
Speaker 2: That optimal language is in order to not cause people
Speaker 2: to misinterpret things. Or we found calling portfolios conservative or
Speaker 2: aggressive generated a negative response, and so we came up
Speaker 2: with a different nomenclature for all of our different portfolios.
Speaker 2: And I'm kind of a space geek, so I love
Speaker 2: the concept when I first heard it is based on
Speaker 2: different NASA missions depending on how far out they go,
Speaker 2: and the Solo system, so left the Solar system that's
Speaker 2: the most aggressive portfolio. Pioneer a little closer, a little less,
Speaker 2: a little less aggressive manner the same. But you would
Speaker 2: be surprised that merely saying to somebody, oh, we have
Speaker 2: you in a conservative portfolio based on your risk tolerance
Speaker 2: and goals. I'm not a conservative person. I understand that
Speaker 2: it's just a loaded and the same thing with aggressive.
Speaker 2: Hey I'm not an aggressive person. I'm not a big
Speaker 2: risk taker. No, but you have forty years and you
Speaker 2: have no other obligation like that conversation. It's so funny
Speaker 2: how language can be misinterpreted, and behavioral finance really addresses that.
Speaker 1: It's so true. I mean, words matter, and that's one
Speaker 1: of the reasons that we don't use aggressive. We use
Speaker 1: financial optimist because It's about the optimism and the point
Speaker 1: of view and your willingness to endure draw downs and
Speaker 1: market change. It's one of the reasons that bucketing is
Speaker 1: so powerful in financial services. Investors can understand, oh, this
Speaker 1: is the goals I have for my money for the
Speaker 1: next one to two years, the goals I have for
Speaker 1: three to seven, the goals I have for seven plus.
Speaker 1: And you can have conversations with them about how common
Speaker 1: drawdowns are and what they're willing to endure and how
Speaker 1: likely it is that seven years from now based on
Speaker 1: historical performance. You know they're aggressive. And I hate to
Speaker 1: use the word aggressive, but there I should say. Equity
Speaker 1: waiting pays off and it's really exciting work we're doing
Speaker 1: at Orian, and I think it benefits advisors and helps
Speaker 1: them bring these tools to their clients at scale.
Speaker 2: So I'm glad you brought up the word scale. You
Speaker 2: guys are well over four trillion dollars, well over six
Speaker 2: million accounts. There has to be massive challenges with scaling
Speaker 2: that up even larger as you continue to grow. What
Speaker 2: are the challenges with this, especially as you get deeper
Speaker 2: into customization where no two arias, no two clients really
Speaker 2: look exactly alike.
Speaker 1: You know, it's definitely a challenge, but one that Orion's
Speaker 1: spends a lot of time and effort on so that
Speaker 1: our clients, enterprises and oraas don't have to do that
Speaker 1: on their own. The first is you need to make
Speaker 1: sure that all the data that the advisors and the
Speaker 1: enterprises need are accessible twenty four to seven. And to
Speaker 1: do that we have to invest in data streaming capabilities.
Speaker 1: And then also we partner with Redshift and Snowflake to
Speaker 1: provide data access data access capabilities. We invest a lot
Speaker 1: to make sure that as our clients grow and their
Speaker 1: needs for information grows, that are tools, whether they be
Speaker 1: reporting or trading or performance and orientation, meet their needs
Speaker 1: at different sizes. You know this the industry's consolidating, the
Speaker 1: industry scaling up everywhere, and Ryan, we need to be
Speaker 1: part of that.
Speaker 2: I have some consolidation questions for you a little later.
Speaker 2: I want to stay with the concept of scale. How
Speaker 2: do you accommodate everybody who wants this personalizations? Do you
Speaker 2: get requests that are like, hey, that's just a little
Speaker 2: bit of bridge too far. If we offer that degree
Speaker 2: of customization, well then it's going to put other things
Speaker 2: at risk. Where's the balance between some uniformity and the
Speaker 2: ability to adapt to every customer desire.
Speaker 1: You know, it's interesting in my view, you have to
Speaker 1: build your technology or investment solutions with the goal to
Speaker 1: be highly customized and highly personalized. If you don't do that,
Speaker 1: then the foundation is shaky. And so we want to
Speaker 1: make sure that our technology looks and feels like advisors
Speaker 1: need it to to be consistent with what they offer,
Speaker 1: either their advisors or their clients. We want to be
Speaker 1: sure that our communications tools leverage large language models so
Speaker 1: that can be highly personalized. Again, as a first draft
Speaker 1: within advisor teams or between the advisor and the investor,
Speaker 1: we need to make sure that the channels we're using
Speaker 1: are highly custom You know, I was reading materials when
Speaker 1: I joined to Ryan that ninety eight percent of text
Speaker 1: messages are open and responded to in ninety seconds, versus
Speaker 1: you know, less than thirty percent of emails that are
Speaker 1: responded to within a week, if they're responded to at all.
Speaker 1: And so you also have to customize your channels to
Speaker 1: make sure that you're benefiting your advisor. You need to
Speaker 1: customize look and feel, and if your systems are built
Speaker 1: with that in mind, then you can be highly highly flexible.
Speaker 2: You mentioned custom indexing before. We found custom indexing to
Speaker 2: be one of the fastest growing parts of our business,
Speaker 2: especially for people who and this was a little bit
Speaker 2: of a surprise versus how we anticipated this going. People
Speaker 2: who are deeply concerned about task loss harvesting. Either they're
Speaker 2: selling a business, they have low cost stock or founder stock,
Speaker 2: or some other capital gain. They're trying to manage through
Speaker 2: highly concentrated position that they want to de risk but
Speaker 2: not create a giant tax obligation. How are you finding
Speaker 2: the growth of customer and indexing going.
Speaker 1: Custom index is growing really fast. It's one of the
Speaker 1: fastest growing part of our platform. We have over four
Speaker 1: billion in portfolio customization today and when you look at
Speaker 1: the growth rate of the adoption of it, it grows
Speaker 1: each quarter that flows into those products grow in the
Speaker 1: high double digits, and so we're very, very excited about
Speaker 1: the growth of the platform. You mentioned the most important
Speaker 1: use case, which is tax management, also tax transition if
Speaker 1: you're moving from one provider to another and you want
Speaker 1: to manage your tax in the transition. And then the
Speaker 1: last is you know, different investors do have different values
Speaker 1: and they want to make sure that their portfolios reflect that.
Speaker 1: Some it's religious, you know, they want it to reflect
Speaker 1: Catholic values or Islamic values. Other times they're very very
Speaker 1: focused on governance, and that degree of customization for some
Speaker 1: is incredibly important. Now, obviously the regulators are concerned about
Speaker 1: that too, and so we need to make sure that
Speaker 1: our rules are compliant, help our advisors comply, and so we.
Speaker 2: Do that two questions. So first custom in next we
Speaker 2: use as canvas. Speaking with them, they tell a couple
Speaker 2: of really interesting stories. First, on the value side, the
Speaker 2: single biggest requests they get no tobacco, no guns, which
Speaker 2: kind of surprised me, but I guess it kind of
Speaker 2: makes sense. It's a simple adjustment, and if you don't
Speaker 2: think you want your capital going to those companies, it's
Speaker 2: just a simple boxer check and that's it. It comes
Speaker 2: out of the portfolio. They also tell a story about
Speaker 2: the New York Catholic Bishop's investment and the ability to
Speaker 2: say noah drugs related to abortion or anything that violates
Speaker 2: their sense of their rules, their religious beliefs, and it's
Speaker 2: easy to make those adjustments. What are you seeing in
Speaker 2: terms of other use cases? So clearly, tax us harvecing
Speaker 2: is a big one. The personalization on the value side
Speaker 2: is the other issue. When you talk about governance, how
Speaker 2: are people adjusting in that space?
Speaker 1: You know, it's interesting there's all sorts of research that
Speaker 1: boards that are diverse or boards that have certain controls
Speaker 1: and processes in place are highly aligned to future success
Speaker 1: of the companies. And so when people implement the g
Speaker 1: of ESG, what they're really implementing.
Speaker 2: Is that how good government How.
Speaker 1: Effective is that board in delivering returns to the shareholder.
Speaker 1: So that's a common use case. You know. The other
Speaker 1: thing I would just mention is that transition where you're
Speaker 1: moving from one advisor to another, or are you moving
Speaker 1: from one portfolio to another, or in your examples, trying
Speaker 1: to transition out of a concentrated position is extremely important
Speaker 1: and when managed correctly, can deliver outsized alpha to the investor.
Speaker 1: And it it's taxed alpha, tax alpha, and it puts
Speaker 1: the advisor, the advisor in a different position with our
Speaker 1: client because tax is confusing and complex at something that
Speaker 1: most investors avoided all costs, and the advisors able to
Speaker 1: talk to the investor about tracking error how close, how
Speaker 1: closely you want to track a certain index or how
Speaker 1: closely you want to manage that concentrated position relative to
Speaker 1: the destination portfolio, and it raises the bar on the
Speaker 1: conversation between the advisor and the investor.
Speaker 2: You know, our experience has been it's not only complicated,
Speaker 2: but tax preparation relative to somebody with a sophisticated set
Speaker 2: of portfolio and investment needs is a very specialized niche.
Speaker 2: When we launched a decade ago, I never thought we
Speaker 2: would open a tax practice, but there were so many
Speaker 2: requests for it, and anytime we would review a previous
Speaker 2: tax file and we always found almost always found mistakes,
Speaker 2: overlooked opportunities. Hey why did you pay thirty percent capital
Speaker 2: gains here? You held this for five years? Why didn't
Speaker 2: you check this? But hey, this was a qualified investment.
Speaker 2: This should have been in a different category. And so
Speaker 2: we had to build that out because the demand is there,
Speaker 2: and very often the average accountant just doesn't have the
Speaker 2: experience with capital markets. They're leaving a lot of tax
Speaker 2: alfa on the table.
Speaker 1: It's true, it's true. And the advisor that can deliver
Speaker 1: those types of opportunities to the investor has a very
Speaker 1: loyal client forever and custom indexing and portfolio customization, whether
Speaker 1: it's related to values or hedging or other aspects, is
Speaker 1: another way for the advisor to deliver services to the investor.
Speaker 1: They have no hope of doing themselves, or no hope
Speaker 1: of doing in a self directed way.
Speaker 2: You know, it's amazing. You generate a good return for people,
Speaker 2: and it's abstract and theoretical, well, eleven point two versus
Speaker 2: ten point eight. You know, you can extrapolate it. You can,
Speaker 2: but hey, here's one hundred thousand dollars in tax savings.
Speaker 2: Suddenly it's real money. And even though it's less than
Speaker 2: the performance of the portfolio, it doesn't matter. It's so
Speaker 2: visceral and real people have such a funny response to taxes.
Speaker 2: I guess we've all drank the kool aid that no
Speaker 2: one wants to pay more taxes than they have to
Speaker 2: save someone some money on taxes their client for life.
Speaker 1: That's right, And they see it on the tax forms.
Speaker 1: They can actually see it in real time that year
Speaker 1: on those.
Speaker 2: Tax forms, that quarter so makes a big difference.
Speaker 1: It does, it does.
Speaker 2: So let's talk a little bit about what's going on
Speaker 2: in the industry. Now, there's a lot of flux. There's
Speaker 2: a lot of challenges. What are the biggest events you
Speaker 2: see coming up? What are the biggest adjustments people in
Speaker 2: our industry should be thinking about.
Speaker 1: I mean the first is definitely regulation. This is an
Speaker 1: incredibly active and innovative as it relates to regulation. See
Speaker 1: right now, the number of rules that are underway exceeds
Speaker 1: recent memory and the reach. The reach of those rules
Speaker 1: are extending the reach of the SEC. So you have
Speaker 1: the cybersecurity rule, which is incredibly important. There's no one
Speaker 1: in the industry that questions the need for this industry
Speaker 1: to be very secure.
Speaker 2: That's the nightmare scenario.
Speaker 1: That's right, and we all need to be focused on
Speaker 1: protecting client data and privacy. At Orian, we spend a
Speaker 1: lot of time wornest compliant. We also are SOK two
Speaker 1: Type two compliant. We have a large team that focuses
Speaker 1: on cybersecurity and privacy to make sure that we're not
Speaker 1: just understanding the rules that the SEC has in place,
Speaker 1: but also what they're interested in and where they're going
Speaker 1: with the rules.
Speaker 2: Let me let me interrupt you sex. So the biggest
Speaker 2: set of changes we've seen recently, have over the past
Speaker 2: six months, have been the marketing rules what you can
Speaker 2: and can say, even to existing clients, which every now
Speaker 2: and then I'm kind of perplexed about, Hey, here's how
Speaker 2: these indexes have done over the past couple of years,
Speaker 2: and if we just take the past one hundred years average,
Speaker 2: here's what we can Monte Carlo simulation, here's what we
Speaker 2: can expect. Like that has kind of changed. You have
Speaker 2: to be very wary of not showing hypothetical past performance.
Speaker 2: I find some of it to be a little confusing,
Speaker 2: Like I understand the rules, Hey, you can't make stuff up.
Speaker 2: You can't say had you put money with us over
Speaker 2: this period, you would have done this perfectly credible. It
Speaker 2: seems like around the edges it just goes further than
Speaker 2: you think is warranted. So that's been a set of rules.
Speaker 2: What are the rule changes are you looking at?
Speaker 1: Well, I mean you mentioned the marketing rule, and I
Speaker 1: think that that's changed the way performance reporting is calculated
Speaker 1: and distributed across the industry, and that clearly impacts around
Speaker 1: doubt because performance reporting is a big part of what
Speaker 1: we do. In addition to cybersecurity, there's also the third
Speaker 1: party rule, which is rias and investment advisors that leverage
Speaker 1: third party providers to provide services to their clients. The
Speaker 1: proposal is they'll be held accountable to do deep diligence
Speaker 1: on those third parties to make sure that their security,
Speaker 1: their effectiveness is what the investor expects. And for Oryan,
Speaker 1: we want to make sure that we're there to help
Speaker 1: our advisors comply. We provide the advisors with the research
Speaker 1: they need on us as a third party, and for
Speaker 1: the third parties we use at Oriyan. We deliver that
Speaker 1: to the advisors so that they can comply. And this
Speaker 1: third party rule and the cybersecurity rule, both of those
Speaker 1: are aimed at making sure our industry is secure, which
Speaker 1: is a great thing, but they introduce a lot of
Speaker 1: complexity for financial advisors, and we need to make sure
Speaker 1: that we help financial advisors clear that complexity and comply.
Speaker 2: We mentioned custom indexing earlier. You suggested there was some
Speaker 2: more rule changes about that. When it comes to what
Speaker 2: the SEC expects in terms of either value based investing
Speaker 2: or governance, what are the changes there. I'm curious about that.
Speaker 1: The SEC is incredibly concerned that financial performance is the
Speaker 1: primary measure by which the advisor communicates to the investor
Speaker 1: their success. They worry that with the introduction of different values,
Speaker 1: it's getting in the way of the investor maximizing their
Speaker 1: investor performance, their investment performance. And so when I say
Speaker 1: that there's regulatory interest in this, it comes down to clarity.
Speaker 1: Regulators want to be sure that the investor understands if
Speaker 1: they're choosing to implement a particular value that can have
Speaker 1: consequences for investment return. And I think that technology providers
Speaker 1: like Orion can easily provide those trade offs if you
Speaker 1: relax the tracking error constraint, because you don't want to
Speaker 1: invest in tobacco, which is a common usage that you mentioned,
Speaker 1: and tobacco is a successful part of mark which isn't
Speaker 1: exactly true.
Speaker 2: Well it was twenty years ago.
Speaker 1: But isn't exactly true right now.
Speaker 2: So it turns out killing your clients for decades is
Speaker 2: a bad strategy.
Speaker 1: It does turn out, right, that is true.
Speaker 2: It worked for a while, but eventually they all die off.
Speaker 1: Yeah, and eventually, you know, the new generation wants to
Speaker 1: focus on other things. That said, you know, if you're,
Speaker 1: as an example, concerned about oil and gas, well that's
Speaker 1: been a great part of the market, and by avoiding
Speaker 1: that part of the market has consequences for a return.
Speaker 1: If you have issues with Tesla for one reason or another, right,
Speaker 1: you know, if you eliminate that part of the portfolio,
Speaker 1: well then there's consequences for returns. And we just need
Speaker 1: to do a good job as an industry of explaining
Speaker 1: to our clients that investing consistent with your values is
Speaker 1: your choice. But it does relax tracking error. It does
Speaker 1: have the potential to create a deviation from your portfolio.
Speaker 1: In the benchmarkt right.
Speaker 2: There's a couple of really interesting things related to that.
Speaker 2: One is, check the box for no tobacco, no guns.
Speaker 2: It's like a fraction of a percent. It really doesn't
Speaker 2: move the needle. It doesn't make any difference. The other
Speaker 2: thing is I never really understood if you're concerned about
Speaker 2: the environment, if you're concerned about global warming, going low
Speaker 2: carbon seems to be reminds me of the War on drugs,
Speaker 2: where we were trying to interdict the supply, but we
Speaker 2: just ignored the demand. And I love when you know,
Speaker 2: Google and Apple and Microsoft are labeled green companies, they're
Speaker 2: some of the biggest consumers of you know, carbon based
Speaker 2: energy of anyone out there. Low carbon seems to miss
Speaker 2: the concept if you want to reduce carbon consumption, you
Speaker 2: have to not merely address the suppliers, but you have
Speaker 2: to address the consumers also. The underlying philosophy of that
Speaker 2: just seems fundamentally wrong from an economic standpoint. If you
Speaker 2: don't reduce demand, you could do whatever you want with
Speaker 2: you know, supplies, They'll find a way to get drugs
Speaker 2: into the country as long as the demand is there.
Speaker 1: Yeah, it is definitely true. And the other thing I'll
Speaker 1: just say related to that, and this comes back to
Speaker 1: the marketing rule and ESG. You also have to make
Speaker 1: sure that the claims you're making are accurate. If you're
Speaker 1: saying that your ETF or your investment vehicle is green,
Speaker 1: it better be green. And I think that in some
Speaker 1: instances the measurement was wrong.
Speaker 2: The greenwashing was a big really has been a big issue.
Speaker 2: That's right. And you'll we have seen this every time
Speaker 2: a new trend comes out, whether it's AI or low
Speaker 2: carbon or whatever it is. Do you remember for a
Speaker 2: while everybody was trying to turn their companies into a
Speaker 2: meta company or whatever the hot trend of the week was.
Speaker 2: It finds its way into the quarterly reports regardless of
Speaker 2: whether there's any truth to it or not.
Speaker 1: Yes, it's true. And what it all comes back to
Speaker 1: for me as it relates to values and customization is
Speaker 1: the original The originator of these ideas were actually religions,
Speaker 1: and if you're investing consistent with a Catholic faith, you
Speaker 1: better be investing consistent with that religion. We should hold
Speaker 1: all values based portfolios to the same standards.
Speaker 2: Maybe it was Calvert was the first mutual fund that
Speaker 2: had Catholic value based investing as its core, but they
Speaker 2: were they were doing this because there was a demand
Speaker 2: from those investors who said, we don't want a B
Speaker 2: or C because it's not consistent with our belief system.
Speaker 2: I would like to see the SEC make sure that
Speaker 2: the management companies are true to the underlying belief system.
Speaker 2: But I don't know how much further you can go.
Speaker 2: If someone says I don't like Facebook or I don't
Speaker 2: like Tesla as a client, and as long as the
Speaker 2: advisor isn't making any promises about that, Hey, this has
Speaker 2: had a giant run up and it's giant sell off
Speaker 2: and it's at a partial recovery, and we can't tell
Speaker 2: you what this is going to do in the future.
Speaker 2: But if you don't want these. If you tell us
Speaker 2: this is on your do not own list, I don't
Speaker 2: care if the client wants that, they just have to recognize, hey,
Speaker 2: it's a big company and it could impact their performance.
Speaker 1: Yeah, you know. And the tools that the advisors use,
Speaker 1: like oriyan should make it easy for them to communicate
Speaker 1: to clients the percentage of total S and p returns
Speaker 1: that have come from tech. And you never know exactly
Speaker 1: which tech companies are going to deliver those returns. But
Speaker 1: by ignoring Facebook or ignoring Tesla for reasons that are
Speaker 1: personal to you, you may give up that kind of return.
Speaker 2: Right, I mean, just up to the investor. That's exactly right.
Speaker 2: So you mentioned large language models and we danced around AI.
Speaker 2: Let's talk a little bit about that. How can you,
Speaker 2: as a technology provider to the wealth management industry integrate
Speaker 2: artificial intelligence into your offerings?
Speaker 1: So at Orion, we've integrated it in two parts of
Speaker 1: our offering. The first is our client relationship management system REDTAEL.
Speaker 1: We have an offering called redtail Speak, and what redtail
Speaker 1: Speak does is it delivers the advisors' messages both internally
Speaker 1: and externally to investors and to teammates via text and
Speaker 1: one of the things that the AI does as it
Speaker 1: relates to redtail speak, is it creates text messages between
Speaker 1: advisors and investors first drafts. The advisor has to take
Speaker 1: a look at it and make sure that everything's accurate
Speaker 1: based on the text based exchanges that the advisor and
Speaker 1: the investor have had in the past, and we think
Speaker 1: it has a lot of promise because it reduces the
Speaker 1: amount of time it takes advisors to communicate with their
Speaker 1: clients in a personalized way. The second area of orian
Speaker 1: solution that we offer AI, and we've experimented with AI,
Speaker 1: is in our portfolio comparison tool, where you bring in clients'
Speaker 1: behavioral profile, bring in their risk tolerance and metrics around
Speaker 1: their risk tolerance, and you compare the portfolio they have
Speaker 1: today to the portfolio that the advisor is proposing. And
Speaker 1: part of those conversations between the advisor and the investor,
Speaker 1: you know, this is back and forth when the advisor
Speaker 1: wants to ensure the investor understands something, the investor wants
Speaker 1: to ask advisors questions, and so what we deliver is
Speaker 1: first draft communications between the advisor and the investor at
Speaker 1: the time of comparison and then also at specific market
Speaker 1: events that the investor may find troubling if their risk averse,
Speaker 1: or they might be opportunities if they're an optimistic investor.
Speaker 1: We're also testing at Orion knowledge management systems for our
Speaker 1: own service teams and for our own developers to see
Speaker 1: if we can get more rapid speed to answer, more
Speaker 1: accurate speed to answer in our service teams. What we
Speaker 1: learn in those tests will want to share with financial
Speaker 1: advisors because potentially the models that we're developing will have
Speaker 1: application outside of Orion too. But that's work that's underway.
Speaker 2: Mentioned Redtail speak, we briefly alluded to consolidation in the industry.
Speaker 2: I know Redtail as a standalone CRM. Obviously you guys
Speaker 2: acquired them a couple of years ago. What are you
Speaker 2: seeing in terms of consolidation both within the RIA industry
Speaker 2: itself and then with the universe of service providers that
Speaker 2: are part of that ecosystem.
Speaker 1: There has been a tremendous amount of consolidation among advisors.
Speaker 1: Independence has been a winning model in the marketplace for
Speaker 1: the last two decades.
Speaker 2: Like tofine what you mean by independence as opposed to
Speaker 2: being part of a big bulge bracket.
Speaker 1: Farm financial advisors who are either affiliated in a ten
Speaker 1: ninety nine relationship with a broker dealer or are purely
Speaker 1: independent meeting their entrepreneurs. They have their own ria, and
Speaker 1: they're regulated differently. Those two segments of the market are
Speaker 1: the fastest growing advice models because investors value local, un
Speaker 1: biased advice in their community.
Speaker 2: Are we discussing fiduciary Are we just discussing fiduciary? Okay,
Speaker 2: so that's a key challenge. I'm a fiduciary, A big
Speaker 2: chunk of the industry is not, and I have been
Speaker 2: utterly wrong thinking it would eventually dominate everything. Although there
Speaker 2: are some trends that suggest we're moving in that direction.
Speaker 1: I think we're moving in the direction a lot slower
Speaker 1: than many of us thought.
Speaker 2: Yes, it's like twenty years ago it should have been done,
Speaker 2: and here we are in twenty twenty four and it's
Speaker 2: still a subject of debate.
Speaker 1: I do think though, that regulators are stepping their way
Speaker 1: there with REGBI, with the form CRS. Tiptoeing into a
Speaker 1: fiduciary model where investors understand any conflicts is where we
Speaker 1: are now, where the SEC is now. It is my
Speaker 1: hope and expectation that the industry will eventually get to
Speaker 1: a fiduciary standard.
Speaker 2: Right an on a related issue, you're on the board
Speaker 2: of advisors for the CFP parent company, tell us a
Speaker 2: little bit about what you do with them.
Speaker 1: So I was until very recently on the board of
Speaker 1: directors for the CFP board and what and.
Speaker 2: This is a certified financial planner, that's right.
Speaker 1: And I believe that the CFP, the certification for financial planners,
Speaker 1: is a great indication of the quality and education advisors
Speaker 1: have and can deliver to their clients. I'm also a
Speaker 1: believer that we need to bring diversity into our industry.
Speaker 1: We need to educate and attract talent to the industry
Speaker 1: because it's inside colleges and universities. Financial planning isn't a
Speaker 1: profession that's well known or well understood.
Speaker 2: It is offered in a few schools, right it is?
Speaker 1: It definitely is. And so while I was on the
Speaker 1: CFP board board of Directors, the board was very focused
Speaker 1: on raising the awareness of the CFP certification, raising the
Speaker 1: entry rates of the industry for young professionals, and increasing
Speaker 1: diversity either through mid career transfers or degree programs at universities.
Speaker 1: And that was to feel really proud of what we
Speaker 1: did at the CFP Board the four years I was there.
Speaker 1: It's a great organization.
Speaker 2: It's interesting because when you look at the average age
Speaker 2: of the typical advisor and amongst the CFP community, it's
Speaker 2: kind of a hole in the donut. You have lots
Speaker 2: of folks sixty plus. I think the average age is
Speaker 2: like sixty two, some crazy numbers. It is too and
Speaker 2: while there's a new crop of cfps coming in in
Speaker 2: their twenties and thirties, there's definitely that gap between those
Speaker 2: two generations.
Speaker 1: You know, it's really interesting. So my hypothesis about why
Speaker 1: that donut exists is the big recruiting classes of the
Speaker 1: wirehouses diminished over that time period. And so you know,
Speaker 1: whether it's wirehouses or insurance companies, they used to be
Speaker 1: the trainers of our industry, and they had segment strategies
Speaker 1: that led them to the upper end of the market,
Speaker 1: and it just wasn't as much new entry into the industry.
Speaker 1: As it relates to the age of advisors, something that
Speaker 1: I talk about at Orion all the time and publicly too,
Speaker 1: is right now there's one hundred and six thousand or
Speaker 1: so financial advisors that over the next ten years, in
Speaker 1: one way or another, are likely to transition out of
Speaker 1: the industry. One hundred and six.
Speaker 2: Thousand, that's out of four hundred thousand or.
Speaker 1: Something of three hundred thousand, really.
Speaker 2: A third over the next decade. That's amazing, it is.
Speaker 1: And the retirement of financial advisors something's been talked about
Speaker 1: for many years. At the same time, there's great exit
Speaker 1: ramps for advisors right now, either through consolidation and purchase
Speaker 1: of their business or reducing their ownership of their revenue,
Speaker 1: becoming part of bigger advisory firms, and then sunsetting their careers.
Speaker 1: And so if you look at the assets controlled by
Speaker 1: those one hundred and six thousand or so advisors, there's
Speaker 1: about eleven point nine trillion, wow, which is more than
Speaker 1: our whole industry serves today, meaning the independent advisors. And
Speaker 1: so the opportunity to help advisors be consolidate orders to
Speaker 1: benefit from these these trends in the industries right now,
Speaker 1: and I think Orian's in a great place to do that.
Speaker 2: Huh. Really quite fascinating. We talked about cybersecurity as a
Speaker 2: large concern as the nightmare scenario, and we were just
Speaker 2: talking about AI. The first question is how do you
Speaker 2: keep your financial technology platform safe? And second, seems like
Speaker 2: there's an arms race between the good guys and the
Speaker 2: bad guys using AI to penetrate through cybersecurity defenses.
Speaker 1: Absolutely, you know, and companies, all companies need to be
Speaker 1: vigilant every single minute of every single day. We all
Speaker 1: need to invest a lot in cybersecurity. We need to
Speaker 1: learn from the innovation and the evolution of attacks and protocols,
Speaker 1: and at Orian we have a large team doing that
Speaker 1: every day. I mentioned earlier that we were NISSED compliant
Speaker 1: and sock to type two. We use third party penetration
Speaker 1: tests because the most vulnerable part of any system, the
Speaker 1: most vulnerable part of any system is your team, and
Speaker 1: so you need to make sure that you're educating them
Speaker 1: along the way, which we are at Orion.
Speaker 2: It's the human failure that's almost always the softest part
Speaker 2: of the armor. And if you can engineer around a person,
Speaker 2: you can penetrate almost anything. People surprisingly reveal, Like I
Speaker 2: keep reading about these stories about someone will get a
Speaker 2: phone call or an email, Hey I can't get in,
Speaker 2: can you log me in? And it's not a person,
Speaker 2: it's an AI generated voice, And you'd be surprised how
Speaker 2: people kind of fall for that.
Speaker 1: And you think about in our industry not so much,
Speaker 1: but in other industries, how much of it is biometric?
Speaker 1: Your face, your fingerprint, your voice, and all of that
Speaker 1: is replicable by AI. So you need you need to
Speaker 1: ensure that your protocols are ahead of that.
Speaker 2: So the other thing we haven't talked about are alt's
Speaker 2: venture capital, private equity, crypto. How does that fit into
Speaker 2: your platform? How do these and other tradable or investable
Speaker 2: assets work with the services you provide to the advisor community.
Speaker 1: You know, as it relates to new investment types. Just
Speaker 1: like we're investing in understanding new technologies, whether it's AI
Speaker 1: or large language models or biometrics, we need to do
Speaker 1: the same with investing. So right now, I think everyone
Speaker 1: should be thinking a lot about tokenization. You can securitize anything.
Speaker 1: We should be thinking a lot about accessibility and liquidity
Speaker 1: of assets that are non standard, whether that's crypto or
Speaker 1: alternative investments. We should be making these asset types more
Speaker 1: easily accessible, more easy to evaluate, and easy to hold
Speaker 1: in a portfolio. And that's all of those things are
Speaker 1: things we're exploring a oryan right now.
Speaker 2: So last big question before I get to my favorite
Speaker 2: questions I ask all of my guests, is you obviously
Speaker 2: have a big job ahead. You're kind of now got
Speaker 2: your feet wet, You're sliding into the job, You're in
Speaker 2: a comfortable place. What are the challenges you're looking at?
Speaker 2: What do you want to do to take Oryan to
Speaker 2: the next level.
Speaker 1: There's so many things I want to do with Orian.
Speaker 1: I think the most important one though, job number one
Speaker 1: for me. To me, one of the biggest challenges we
Speaker 1: faced in financial services is a fragmented offering that we
Speaker 1: deliver to financial advisors and to investors. And the reasons
Speaker 1: for that fragmentation is we're such a creative industry. People
Speaker 1: have an idea, they build a technology, they have an idea,
Speaker 1: they build an investment solution, and that fragmentation creates real
Speaker 1: challenges for financial advisors, either challenges and ensuring that they're
Speaker 1: diligencing and building optimal portfolios on the investment side of
Speaker 1: the equation, or that they have technology they can actually
Speaker 1: leverage on the technology side of the equation. My favorite statistic,
Speaker 1: and I think the true opportunity for Oryan is that
Speaker 1: if you look at Jdpower results ninety percent of advisors
Speaker 1: know they need to use technology, only little less than
Speaker 1: fifty percent actually find the technology they use useful, and
Speaker 1: only ten percent of advisors is from our wealth Tech survey.
Speaker 1: Less than ten percent feel the technology that they have
Speaker 1: today is sufficient, and the reason for that is it's
Speaker 1: very functionalized. You have your reporting system, and that reporting
Speaker 1: system may or may not be integrated into your trading,
Speaker 1: and that trading may or may not be integrated into
Speaker 1: your portfolio construction, which may or may not be integrated
Speaker 1: into your performance report or your investor portal. And so
Speaker 1: I believe the biggest opportunity for ORYAN is to break
Speaker 1: those barriers down, to integrate those solutions and save advisors
Speaker 1: a lot of time and a lot of effort.
Speaker 2: So I have to follow up with those stats. Half
Speaker 2: of advisors or is it advisors say half of the
Speaker 2: technology they use doesn't deliver.
Speaker 1: Less than fifty percent of financial advisors say the technology
Speaker 1: they use isn't as useful as it could be.
Speaker 2: I mean, we live and die on technology. And while
Speaker 2: you know, I personally hate typing on glass and I
Speaker 2: could come up with show me a technology, I'll give you.
Speaker 2: Here's what the downside of is. The upside is we're
Speaker 2: so much more productive. We can do so many more things,
Speaker 2: so much more quickly, so much more efficiently than we
Speaker 2: used to it, while none of the tech we use
Speaker 2: is perfect. I'm I guess it's the gray hair. I've
Speaker 2: been doing it long enough that I can remember going
Speaker 2: back to what we talked about earlier, the quarterly printing
Speaker 2: out everybody's performance statement and then jamming them one by
Speaker 2: one into Manila envelopes. I remember like five of us
Speaker 2: sitting around six o'clock at night on whatever. The first
Speaker 2: of the next quarter, first day of the next quarter
Speaker 2: was just with everything laid out because you couldn't even
Speaker 2: do it until the quarter ended, and at a certain
Speaker 2: you had to generate everything and print it out. The
Speaker 2: whole process took like three days, and it was literally
Speaker 2: stuffing statements into envelopes. It was just horrific. So I
Speaker 2: don't know. Is it a function of expectations. I'm surprised
Speaker 2: that that many people find their technology not meaningful to them.
Speaker 1: You know, it's it's interesting. I do think you're right
Speaker 1: about if your benchmark is the paper quarterly reports that
Speaker 1: used to go out six weeks after quarter end.
Speaker 2: We were good. We were like two three weeks after, right,
Speaker 2: not too bad then. And by the way, if we're late,
Speaker 2: the phone is.
Speaker 1: Ringing, that's right, then today's technology looks pretty good. If
Speaker 1: your benchmark is your iPhone then and all the apps
Speaker 1: and how integrated they are on the iPhone, then financial
Speaker 1: services technology has a long way to go. And so
Speaker 1: what I believe is because of advancements and data streaming
Speaker 1: and data access, and because of advancements in how technologies
Speaker 1: can work together. As an industry, we can be more
Speaker 1: integrated where the client conversation between the advisor and the
Speaker 1: investor is at the center of the client experience. We
Speaker 1: offer versus the function you're trying to provoid perform trading, rebalancing, reporting,
Speaker 1: which is where we're organized.
Speaker 2: Right. So I see on a lot of people's phone
Speaker 2: the Bloomberg app. There's a Schwab app. Tell us about
Speaker 2: the Orion app.
Speaker 1: So we offer an app to finances and investors where
Speaker 1: they can see their investment performance, they can see communications
Speaker 1: from the financial advisor, they can see the performance of
Speaker 1: their portfolios, they can engage with their behavioral finance profile.
Speaker 1: It's just incredibly important for investors to have access to
Speaker 1: information about their accounts all day, every day.
Speaker 2: Are you finding clients use those regularly or do they
Speaker 2: wait for the next fifteen percent renown before they start
Speaker 2: tapping the screen.
Speaker 1: You know, you'll have to tell me what your experience
Speaker 1: is on this. I'd be interested. What I find is
Speaker 1: that investors interact with their portfolios more when things are
Speaker 1: going well, and then they set the high water mark
Speaker 1: of performance, and then as portfolios get more and more
Speaker 1: distressed in a draw down environment, they look at it
Speaker 1: less and less well.
Speaker 2: The old joke is no one opened their statements during
Speaker 2: the financial crisis. That's not that far from our experience.
Speaker 2: I will tell you we spend an awful lot of
Speaker 2: time before someone becomes a client. We were fortunate enough
Speaker 2: to launch in twenty thirteen, which was a great you know,
Speaker 2: start of a new bowl market and a great decade
Speaker 2: ahead of it. But we spend a lot of time
Speaker 2: warning clients, hey, thirteen percent of year is whatever the
Speaker 2: average was for the twenty tens, thirteen fourteen percent, not
Speaker 2: not our performance, but the SMP. We spend a lot
Speaker 2: of time warning people this is aberrational. This is way
Speaker 2: above eight nine percent historical average. You should your return
Speaker 2: expectations should be ratcheted down. Take the wins when they
Speaker 2: show up, but don't get too used to fourteen percent
Speaker 2: a year. You're probably not going to see that. You know,
Speaker 2: It's funny people freaked out during twenty twenty two stocks
Speaker 2: and bonds both down. The following year you have the
Speaker 2: SMP up double digits and the Nasdaq up big double digits.
Speaker 2: I think it was twenty five and fifty respectively, some
Speaker 2: crazy number like that. And you know, again, it's the
Speaker 2: same conversation, lower your expectations. Don't think that this is usual.
Speaker 2: So we really try to make sure clients know, hey,
Speaker 2: eight nine percent is great, if you get that fantastic.
Speaker 2: What I find during draw downs is that prospective clients
Speaker 2: tend to reach out because when the tide goes out,
Speaker 2: that's when people realize, hey, I'm not so thrilled with
Speaker 2: my particular person, my guy or girl. I'm ready to
Speaker 2: make a change. So suddenly things get busier. What do
Speaker 2: you see money in motion during corrections or during the bull.
Speaker 1: I think the work that financial advisors do during corrections,
Speaker 1: focusing people on their goals versus short term performance, helping
Speaker 1: them understand how common or uncommon drawdowns are like this,
Speaker 1: and what typically happens or could happen after just aligning
Speaker 1: the portfolio and the performance with what the client's expecting
Speaker 1: of it. The work that you all do in dislocations
Speaker 1: in a tough environments pays dividends for years after right,
Speaker 1: and so like at Oryan, in any environment like that,
Speaker 1: we are going to be investing in communications and support
Speaker 1: and insights on our client's behalf, so they have those
Speaker 1: conversations and they can benefit. As you say, the tide
Speaker 1: goes out, right.
Speaker 2: We say internally during dro down's corrections and crashes are
Speaker 2: when advisors earn their keep greed, right, that's for sure,
Speaker 2: all right? So I only have you for a couple
Speaker 2: more minutes. Let's jump to our speed round, our favorite
Speaker 2: five questions we ask all of our guests, starting with
Speaker 2: what's been keeping you entertain these days? What are you streaming, watching,
Speaker 2: listening to? Tell us? What's keeping you amused?
Speaker 1: So I love podcasts and I love random podcasts. So
Speaker 1: I listen to Broken Record, It's all about music. I
Speaker 1: listen to Revisionist History with Malcolm Gladwell. I listen to History.
Speaker 1: I love bag Man Rachel Maddow I thought so interesting
Speaker 1: to listen.
Speaker 2: To my wife's reading her most recent book.
Speaker 1: Is she enjoying it?
Speaker 2: She's loving it, she says. It's a little it's like
Speaker 2: you have to read it, put it down for a
Speaker 2: day or so, and then pick up the next show.
Speaker 2: It's dense. Yes, And we'll talk about books in a minute. Okay,
Speaker 2: if you like broken records, I have two things to recommend.
Speaker 2: One is polyphonic. I don't know if you've ever seen that.
Speaker 2: It's a YouTube podcast, if that's the right word. And
Speaker 2: the other one is you can't unhear this. Okay, you
Speaker 2: cannot hear this is also YouTube. They go into a
Speaker 2: depth of recording of Beatles albums and songs, and it's
Speaker 2: just the oddest, strangest little things about a change in
Speaker 2: tempo halfway through the song, or someone cursing in the
Speaker 2: background that slipped through and was broke gust on radio
Speaker 2: and nobody knew about it on Just like the funniest, oddest,
Speaker 2: quirkiest little things, but really significant elements in a song
Speaker 2: that you just don't notice because it's all part of
Speaker 2: the music, and once you hear it, it's sort of
Speaker 2: you can't unhear it. It's really interesting.
Speaker 1: I love that. I'm actually gonna look at that on
Speaker 1: my way home. I spend a lot of time on planes.
Speaker 2: And podcasts are great for that. Let's talk about your
Speaker 2: mentors who helped shape your career so well.
Speaker 1: Charles Goldman, who's the current executive chairman and my predecessor
Speaker 1: CEO at ACIM Mark absolutely has been a mentor for
Speaker 1: me since I started working with him at Asset Mark.
Speaker 1: I mean started working with him at Schwab before I
Speaker 1: joined him at Asset Mark. Debbie mcguinney, who's the former
Speaker 1: president of Schwab Institutional, she was an incredible mentor to
Speaker 1: me at a really important part of my career. Gave
Speaker 1: me some great advice about leadership and changing the way
Speaker 1: you think as you get more senior in an organization.
Speaker 1: Those are probably the biggest two.
Speaker 2: Let's talk about books. What are you reading now? What
Speaker 2: are some of your favorites?
Speaker 1: Oh my gosh, I love history, so anything. Doris Kern's
Speaker 1: good one. Absolutely love Team of Rivals was fantastic. I
Speaker 1: love financial services history, so smartest men in the room.
Speaker 1: I love all the history about Enron and the financial crisis.
Speaker 1: Devil take the hindmost which is all about the history
Speaker 1: of speculation and the resulting consequences of speculation. Those are
Speaker 1: all great books.
Speaker 2: Along those same lines. Did you ever read When Genius Fail?
Speaker 1: Yes, so loved it.
Speaker 2: Right, so amazing about long term capital management. Yeah, the
Speaker 2: smartest guys in the room, that's Bethany Frankel, amazing, right,
Speaker 2: Like it's amazing what they got away with and for
Speaker 2: so long. Yes, just steamrolling everybody.
Speaker 1: It's so true. And you know the consequences of that.
Speaker 1: A firm that had over one hundred years of history
Speaker 1: just disappeared. And so I just think we all should
Speaker 1: be students of the industry that we're in.
Speaker 2: Just to say the very least. Yeah, our final two questions,
Speaker 2: what sort of advice would you give a recent college
Speaker 2: grad interested in a career in either financial technology or investing.
Speaker 1: To go for it. It's a fantastic industry to be
Speaker 1: part of. Lots of creativity, lots of growth, lots of innovation,
Speaker 1: incredible amount of opportunity. You know, don't be overwhelmed by
Speaker 1: the vocabulary or the math or things that frighten people
Speaker 1: away from the industry. You'll have a great career.
Speaker 2: You know. I meant to ask you the left brain
Speaker 2: right brain question, what's more important creativity or the technical skills?
Speaker 2: I might as well throw that out to you here.
Speaker 1: Yeah, so myself, personally, I tend to lean more left
Speaker 1: brain with the analytical, methodical, numbers focused approach. But I
Speaker 1: don't believe you can be successful if you lean one
Speaker 1: way or the other. When you're doing something that's truly
Speaker 1: first time ever or new, you want to delight your
Speaker 1: clients in an unexpected way, you have to be creative,
Speaker 1: and so I try to exercise both muscles. When we
Speaker 1: were building mobile trading, the creativity right side of the
Speaker 1: brain needed to take over. When you're building a service model,
Speaker 1: the creativity, I think right side of the brain needs
Speaker 1: to take over. When you're building a new asset management vehicle,
Speaker 1: or a new set of investments tools, or a new
Speaker 1: business line, you better be analytical.
Speaker 2: Really interesting. Our final question, what do you know about
Speaker 2: the world of finance and investing today? You wish you
Speaker 2: knew thirty or so years ago when you were first
Speaker 2: starting out.
Speaker 1: I wish I knew how fun it was. Really, I
Speaker 1: really do, and by fun, I just mean you are
Speaker 1: making a huge impact on people's dreams and goals and lives.
Speaker 1: You know, if you're working with institutions, the investors in
Speaker 1: those institutions are teachers and firemen through their pension plans
Speaker 1: and their retirement plans. And when you build something that's
Speaker 1: new and creative, seeing the impact it has on lives
Speaker 1: is just incredibly fun and interesting. So I wish, I
Speaker 1: wish I would have known that I would have sought
Speaker 1: the industry out versus randomly finding it.
Speaker 2: I don't know if I've ever heard that answer before,
Speaker 2: that that's a great answer. Well, well, thank you Natalie
Speaker 2: for being so generous with your time. We have been
Speaker 2: speaking with Natalie Wolfson, CEO of Orion. They have over
Speaker 2: four point three trillion dollars in advisor assets on their platform.
Speaker 2: If you enjoy this conversation, well, be sure and check
Speaker 2: out the five hundred previous discussions we've held over the
Speaker 2: past ten years. You can find those at iTunes, Spotify, YouTube,
Speaker 2: wherever you find your favorite podcasts, And be sure and
Speaker 2: check out my newest podcast, at the Money, Conversations with
Speaker 2: experts about your money, earning it, spending it, and most importantly,
Speaker 2: investing it. You can find that in the Masters and
Speaker 2: Business feed or wherever you find your favorite podcasts. I
Speaker 2: would be remiss if I did not thank the crack
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Speaker 2: John Wasserman is my audio engineer at Tika. Valbrun is
Speaker 2: my project manager. Sean Russo is my head of research.
Speaker 2: Anna Luke is my producer. I'm very results you've been
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