Kicking off the 2018 New Year was some big advisor technology news: that robo-advisor-for-advisors AdvisorEngine is acquiring Junxure CRM, the popular CRM system for financial-planning-centric RIAs (that ranked second in adoption in last year’s T3 Tech Survey, coming in behind Redtail and ahead of Salesforce). Yet while Junxure has been around for more than 15 years, AdvisorEngine is still a relative newcomer, having only pivoted away from being a consumer-oriented robo-advisor just a few years ago as it received a substantial venture capital investment from WisdomTree as a potential distribution channel for their ETFs. Which raises the question: Why did AdvisorEngine buy Junxure CRM? And what does it mean for all of Junxure’s existing Cloud and Desktop users?
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss AdvisorEngine’s acquisition of Junxure CRM, including why this is likely a good development for existing users in terms of enhancing Junxure Cloud and migrating away from Desktop, but also what I think was the real motivation behind this acquisition: AdvisorEngine’s desire to grow by converting as many of Junxure’s 1,400 advisory firms over to AdvisorEngine’s technology platform with AUM pricing.
From the perspective of existing Junxure users, the AdvisorEngine acquisition should be good news. AdvisorEngine wants to grow, they’ve got capital to invest for growth, and that means they can hire more developer talent to accelerate the feature roadmap for Junxure Cloud – an area that Junxure itself has struggled as a capital-constrained advisor tech firm (and thus why still fewer than 50% of Junxure users have moved from Desktop to Junxure Cloud). With AdvisorEngine itself being a well-funded and entirely web-based platform, it has both resources and incentives to bring Junxure Cloud up to modern standards… which only benefits existing Junxure users.
That being said, it’s important to recognize that AdvisorEngine didn’t just buy Junxure to make Junxure better to get more Junxure users. They bought it to make AdvisorEngine better, and to get more AdvisorEngine users by leveraging the value of Junxure CRM. Which means AdvisorEngine is clearly also going to be spending resources to integrate Junxure Cloud with AdvisorEngine, and these improvements don’t necessarily help Junxure users. They help AdvisorEngine users (or Junxure users who decide to adopt AdvisorEngine). And as AdvisorEngine continues to flesh out its own offerings, this creates some awkward tension with AdvisorEngine’s other partners, since the company has lauded itself as being “open architecture”, yet appears in practice to be less so as it’s acquired and now is deeply integrating with its own proprietary financial planning software and now its own CRM system.
Yet at the same time, this also raises what I think is the most concerning part of this deal of AdvisorEngine acquiring Junxure CRM: AdvisorEngine needs Junxure users to adopt AdvisorEngine for this to work out. Because the reality is that AdvisorEngine still has the clock ticking on a $20 million dollar equity investment that WisdomTree made back in late 2016. For which, after a full year, AdvisorEngine is only reporting about $3 billion of assets on their platform from 60 advisory firms. Which, even if we’re generous and assume they are receiving their full top rate of 10 bps on all assets, only amounts to about $3 million of revenue so far, which is not a good sign, relative to the amount of capital AdvisorEngine raised. The pressure on AdvisorEngine to bring more assets must be tremendous. Which I think means AdvisorEngine isn’t just acquiring Junxure to make it a more holistic platform, but to specifically convert as many of Junxure’s 1,400 advisory firms over to AdvisorEngine as they can. And if AdvisorEngine can convert just 10% of Junxure users, that’s $60 million dollar revenue opportunity, in a world where Junxure’s 12,000 users may have only been bringing $7 million of revenue or so. Cross-selling Junxure users on AdvisorEngine’s services (and pricing) is the real key to the acquisition deal.
Except, unfortunately, I’m not certain how well that’s realistically going to work for AdvisorEnginge, because Junxure users tend to be deep financial planning firms. However, AdvisorEngine is an investment-centric platform, with a client portal focused on investments, an onboarding process focused on investment accounts (because that AdvisorEngine onboarding data can’t even go to actual financial planning software!), and an internal “financial planning light” solution through Wealthminder that you can’t even turn off in the AdvisorEngine portal if you’re using other third-party planning software like eMoney Advisor or MoneyGuidePro (and I suspect almost all current Junxure users are using third-party planning software!). And beyond this, it’s not even clear if advisors will be interested in AdvisorEngine given its AUM pricing starting at 10 bps. Because charging 10 bps for technology when the typical RIA generates 70 to 80 basis points of revenue yield on AUM means AdvisorEngine would cost the typical advisory firm more than 15% of revenue, when the typical firm only pays 2% to 4% of revenue on all of its technology (which is more than just what AdvisorEngine provides)!
But the bottom line is just to recognize that while in the very near term Junxure users should see a big investment from AdvisorEngine into new Junxure features – particularly to finish getting all the Junxure Desktop functionality into Junxure Cloud – the real value of Junxure for AdvisorEngine is getting Junxure users to start paying basis points for AdvisorEngine’s technology. Which means Junxure users should probably expect a lot of phone calls from the AdvisorEngine sales team in 2018, making their case for consolidating more of their technology with Junxure-integrated AdvisorEngine. Ultimately, we’ll see what happens, and whether the AdvisorEngine value proposition is really compelling enough to make Junxure users break their existing technology relationships?
source https://www.kitces.com/blog/wisdomtree-advisorengine-acquires-junxure-crm-users-24-million-price-fintech/?utm_source=rss&utm_medium=rss&utm_campaign=wisdomtree-advisorengine-acquires-junxure-crm-users-24-million-price-fintech
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