This content is from: Wealth Management

Advisors ‘Don’t Need a Rolls-Royce.’ They Need Interactive Brokers and This New Software.

TradingFront can replace an RIA’s client onboarding, portfolio management, CRM, reporting, and other systems, potentially saving them thousands of dollars each year.

To Yang Xu, why an RIA would choose to use TradingFront over other software is obvious.

“They don’t need a Rolls-Royce, they only need to drive a Honda,” Xu, the founder of TradingFront, told RIA Intel. Most advisors only want to pay for a Honda, too, he says.

The costs of running an independent RIA add up fast. Most brokerages stopped charging financial advisors commissions to trade stocks and ETFs last fall, but wealth management firms generally still require some supporting software and that comes at a price. Together — they are often independent services and expenses — portfolio management and rebalancing software, a client relationship management system or CRM, reporting tools, and more, often translate into thousands of dollars annually.

At some RIAs, those expenses might be unavoidable due to the complexity of the portfolios they manage or how they choose to operate (they might simply prefer one service or decide it is better for their specific clientele). And large firms managing hundreds of millions, or billions, of dollars can afford both the software and the personnel to maintain it.

But smaller RIAs, especially those managing less than $100 million, don’t have those resources. They are stuck with many of the same bills, for software they don’t fully utilize, and a lack of resources to keep it running smoothly, Xu said.

To help those advisory firms, TradingFront announced Wednesday that it launched a relatively inexpensive platform that will fulfill the needs of smaller RIAs and replace others.

TradingFront has digital client onboarding, a CRM, customizable questionnaires to help clients set goals, and portals for both advisors and clients. It also includes a portfolio management system with rebalancing, compliance features, performance reporting, and data aggregation of held-away assets. “We’re certainly not doing anything new, we’re putting the pieces together in a better way,” Xu said.

The company is not currently, and doesn't intend to, manage investments for advisors or become a turnkey asset management platform, or TAMP, Xu said.

TradingFront also built a mobile app with popular robo-advisors in mind that it hopes will woo clients with its simplicity and function. Along with the ability to manage their accounts, clients can view investment performance and documents, and use it to message with their advisor. 

TradingFront can also white-label the platform, to streamline the client experience advisors provide. The platform starts at $100 per month for the first 100 accounts, then advisors have two choices. Beyond 100 accounts, advisors can pay up to $1.50 for each additional account (based on the number of managed accounts), or be charged based on a percentage of their assets under management. The first $10 million on the platform are free, and advisors are charged a maximum of 0.08% per year based on the average daily AUM. There is no cost to start using the platform.

There are already more than 30 RIAs using TradingFront, meaning they have opened and funded accounts, Xu said. 

For now, the only RIA custodian that supports TradingFront is Interactive Brokers, an investor in UP Fintech Holding Limited (ticker: TIGR) known also as “Tiger Brokers.” TradingFront is a wholly-owned subsidiary of UP Fintech. Although, Xu said his company intends to eventually partner with other custodians. “We just need to make the integration the best of the best,” Xu said, before working with another.

Which custodians it might partner with or when, Xu did not know. However, it is unlikely one of those will be TD Ameritrade, which Charles Schwab agreed to acquire last fall. That deal is expected to be approved or denied by regulators in the second half of this year. “We’re not so sure about an integration [with TD Ameritrade] in the next six to eight months. It might not exist,” he said.

Xu expects that same uncertainty might lead RIAs that currently custody with TD Ameritrade to consider TradingFront and Interactive Brokers. 

As a wholly-owned subsidiary, Xu said TradingFront doesn’t have to worry too much about its own funding, Xu said, although it is focused on building a sustainable company. “You have to be really careful choosing your partner these days. Anything can happen overnight without notice.”

Some of the RIAs using TradingFront were previously using Motif, a portfolio management software company that suddenly closed in April. (Weeks later, Schwab bought Motif’s technology, intellectual property, algorithms, patents, and source code).

Other companies in wealth management have identified longtime advisor pain points and started businesses to remedy them. Vise, another portfolio management software company that uses AI to manage investments for advisors, recently raised a $14.5 million Series A round of funding led by Sequoia Capital. The company says it will replace reporting software and help save advisors time and money.

Altruist, a new digital, commission-free custodian for RIAs that launched early this year, also replaces much of the software advisors would want or need and says it can save RIAs as much as 90% of the related costs. “There’s been very little innovation in terms of tools for financial advisors. How much has really changed over the last 10 years? The change is way overdue. It’s not like this is some epiphany for us,” Jason Wenk, the founder of Altruist, told RIA Intel last fall.

Still, Xu isn’t too worried about competition to serve the growing RIA segment of financial services.

“We’re not here to compete with all different service providers. There are so many good providers in each of those categories,” the executive said about the different services providers. But no company will be able to do everything for every advisor. There is room for more than one company to succeed, he said.

Related Content