Feb. 19, 2019
Written By Janet Levaux , Thinkadvisor.com
Broker-dealer and RIA Commonwealth Financial Network has a new client — but it’s not a financial advisor or team.
The firm’s tech entity, Advisor360°, just inked a licensing deal with Massachusetts Mutual Life Insurance Co., giving the insurance firm’s advisors and field partners access to Commonwealth’s platform of portfolio, workflow, customer relationship management and other tools.
Commonwealth executives say its tech venture and tie-up are a win-win, and fintech insiders agree. In fact, it’s likely that broker-dealer/RIA and fintech arrangements like this one will become more common.
“I can absolutely see more financial institutions marketing their proprietary front- and middle- office technology platforms to other institutions,” said Gavin Spitzner, president of Wealth Consulting Partners, in an interview. “By offering a field-tested, proven solution, firms can bypass the painful work to develop and implement integrated solutions on their own.”
Spitzner points out that United Capital is leasing its FinLife CX, or client experience, platform to unaffiliated RIAs. While clients will “pay a premium” for this technology, the tie-up can help them “improve speed to market and leverage a known quantity,” he says.
Popular industry blogger Michael Kitces said on Twitter: “Woa. This is a really big deal from an industry perspective. Another example of how advisor platforms are turning into (licenseable) fintech platforms. Akin to [Joe] Duran [and United Capital's] Finlife shift?”
According to Commonwealth Financial CEO Wayne Bloom: “We could not be more thrilled with this agreement, as it represents a win for all involved. We’ve been investing in and evolving our technology … for more than 15 years, and it is so gratifying to know that a firm of the caliber of MassMutual wants to use it to help its own advisors.”
What will it do with funds brought in from the deal? Bloom says the BD/RIA plans to “accelerate the pace of our software development and ensure that our advisors’ tools remain on the cutting edge.” The firm works with about 2,000 financial advisors.
Of course, the idea of having a tech entity that serves other industry players didn’t happen overnight, says Darren Tedesco, managing principal of innovation and strategy for Commonwealth Financial.
“About five years ago, we started talking about the fact that we have such a great platform that’s used by a small percentage of those in our industry,” Tedesco explained, referring to the roughly 350,000 total advisors in the business. “We wondered, ‘What if we put our technology into the hands of others?’”
The Advisor360° technology that MassMutual is tapping into includes advisor, home office and client-facing resources. “They are getting access to our entire back-end system, and the front-end system, too,” Tedesco said.
Other firms, though, can pick and choose which parts of the technology offering they want, he adds.
As for what the MassMutual deal says about the convergence of broker-dealers, RIAs and fintech, “All companies have to think of themselves as technology companies now,” Tedesco said, given the growing importance of data, artificial intelligence and other innovations.
And this tech work doesn’t come cheap. “You have to spend lots of money to get to table stakes today,” he said. “There’s lots of great vision out there. The difference is in the execution.”