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An RIA innovation co-op is born with Fidelity and Pershing among the founding members

Schwab Advisor Services declines comment and TD Ameritrade respectfully declines, citing a full plate of Veo initiatives

Tuesday, August 19, 2014 – 12:14 AM by Lisa Shidler
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Bill Hortz: I'm not going to waste anyone's time.

Brooke’s Note: It is a favorite refrain of custody heads — that there is so much more that unifies RIAs and RIA custodians than what divides them. In other words, we don’t need to raid each other’s assets because most of the pie is out there in banker, broker land. That said, RIA custodians thus far have seemed far less unified than the wirehouses and banks. There is little to point to as far as pooling resources, forming a unified front in Washington and forming a coordinated marketing attack on natural adversaries in the marketplace. So it is notable that Mike Durbin and Mark Tibergien, heads of Fidelity’s and Pershing’s RIA custody, respectively, have put their collective shoulders behind a single wheel — at the same time that peers have apparently abstained. Steve Lockshin has been quite vocal about how the custodians showed less than rousing support for his co-op, Advizent. Unlike Advizent, this effort by Bill Hortz is less of a shooting of the moon and more specialized in its mission, albeit under the mega-category of 'innovation.’ Is there room for another effort with that moniker? A good one, yes.

Fidelity Institutional Wealth Services, Pershing Advisor Solutions and a host of others have joined up with an entrepreneur to create a shared hub for advancing the RIA business.

The Boston- and Jersey City, N.J.-based RIA custodians are founding members of the Institute for Innovation Development, whose mission is the acceleration of business growth through smarter thinking and use of technology.

Annual membership costs $500 for individual advisors, and the founding firms are paying an undisclosed amount that is more than $10,000. There are 50 individual advisor members and five founding-partner firms.

The other founding sponsors are Ultimus Fund Solutions LLC, Innovation Equity Partners and Financial Advisor magazine. The institute doesn’t break down the exact services provided to the founding members. But as an example, the Institute helped create a road show for more than 70 Pershing advisors.

As part of the membership fees, advisors get templates and hands-on support for creating local think-tanks of members. They also have access to web and interactive tools, regional innovation forums and discounts for things such as insurance and innovation conferences.

The organization is also welcoming to participants from other industries, says Bill Hortz, founder and dean of the institute. For the last five years, he ran his own consulting firm, Strategic Account Management Solutions Inc., and before that he was director of strategic accounts at OppenheimerFunds Inc.

Wisp of Advizent

The founder of the Tampa, Fla.-based entity has glancing overlap of mission to Advizent, which was founded, then suspended indefinitely, by Steve Lockshin and Charles Goldman. See: What led to Advizent’s end and why Steve Lockshin is unfazed, even energized.

To many industry observers, the effort seems to have come out of nowhere, and they believe it faces a tough road in getting sufficient resources and overall oomph — particularly since the whole idea of innovation is being approached from many angles by many players.

Certainly, Hortz doesn’t have the same brand-name as others who have tried and failed, says Joel Bruckenstein, co-producer of the annual Technology Tools for Today (T3) conference.

“I don’t know them and I’m not familiar with them. I don’t know anyone who has mentioned their name,” he says.

The effort is going to be an uphill battle, says Bill Winterberg, founder of Atlanta-based FPPad. Many entities, including his own, provide innovative coaching, and practice management solutions for free.

“They are joining a very crowded field,” he says. “Every one of these sites will live and die by the power of its exclusive content. So, if Bill Hortz is able to assemble a dynamite power of content providers, then he’ll have a dynamic business. If he’s not able to do that, then it won’t last. There’s no benefit to paying for an annual membership when you can get information for free.”

Hortz is up to the challenge.

“I am aware we will have a lot of constraints and money will be an issue, but the best way to innovate and come up with new, effective ways of doing this will be born from working with constraints in an imaginative, creative and resourceful way. So, I plow forward,” he says. “We will be covering tech issues, as part of innovation, but my focus is on the greatest innovation tool out there – the human brain and the power of mindset. We are about human capital and ingenuity.”

Why join?

But, Hortz has pulled off a minor coup by wooing over two of the four major RIA custodians and having them show public enthusiasm.

Pershing executives are excited about the Institute, e-mailed Rich Bingham, director at Pershing LLC who oversees the company’s innovation initiatives.

“Pershing and BNY Mellon are committed to innovation on a global scale with a concerted effort that touches every part of our company. As part of that effort, Pershing is working with the Institute for Innovation Development to share ideas and best practices and to help promote new thinking in our industry. It’s important in every industry to take a fresh look at the way we do business and to see if there are new and better ways to tackle challenges and uncover opportunities. We know that innovation isn’t just for startups, and we’re glad to help the institute to promote this message in the financial advisory space.”

Fidelity executives found much to like about this effort too, says Erica Birke, spokeswoman for the company.

“The idea for building an educational and business innovation catalyst for growth-oriented financial advisors aligns with Fidelity’s focus on helping our clients to grow. Fidelity decided to become a founding sponsor to help get this concept started.”

Hortz says that Pershing and Fidelity come aboard in a spirit of trying new things — and knowing that it puts them with big RIAs in a shared effort.


“Pershing wanted to do some experiments,” Hortz says. “We met with their RIAs and talked about innovations and business tools for the growth-oriented advisors.”

The RIAs most interested in innovative strategies are the larger firms that have growth on the brain.

“The advisors we worked with were very high-brow and were the biggest RIAs,” Hortz adds. “You weren’t born to do innovation, but it’s a process.”

Why not?

Still, TD Ameritrade chose to abstain because its plate is already full of efforts to propel technology solutions, according to its spokesman, Joseph Giannone.

“TD Ameritrade Institutional has been committed to that same mission for many years, working closely with independent advisors to help improve business management practices and implement innovative technology. We collaborate, for example, with more than 80 technology companies to integrate their applications for advisors through the Veo Open Access Network,” he e-mailed.

Right now, he says, the firm has chosen to respectfully not join the institute.

“While we appreciate being invited to join the Institute, at this time we are focused on delivering several key innovations — our integrated Veo dashboard and iRebal, among others — that we believe will help advisors better serve their clients and achieve their business goals,” he added.

Schwab spokesman Greg Gable declined comment about why his company chose to forgo membership — and whether the decision could change over time.. Schwab has an in-house cooperate effort called RIA Stands For You. See: Schwab to pump millions of dollars into promoting RIAs as a channel. That effort has stayed relatively quiet since its founding.

No cross technology

Though the custodians are competent in their consulting efforts, Hortz believes he brings that something extra. As part of his consulting business, he was constantly exposing himself to non-advisor innovation-minded conferences to spark creativity. He was always stunned that such conferences were widely attended by people from a variety of industries — service, retail, manufacturing and many others — but not those in financial services. See: How the RIA business made a dent at the 2014 Finovate conference in San Jose.

For years, Hortz feels, financial services has lacked innovative ideas and its after getting the founding members signed up leaders should be looking to other industries to glean ideas. He began forming the Institute in the spring of 2013 but had just gotten it up and running this month after signing on the founding members.

“The first nine-months I spent really exhibiting that this is a pretty serious effort and I’m not going to waste anyone’s time,” Hortz says. “I started the consulting business, but it really evolved into this Institute, and this is my baby.”

The institute is a for-profit entity, and Hortz will receive a salary. “What I’m trying to do is provide the best values and resources at the group’s direction,” he said. “The founding members helped with the startup capital. It’s a member-benefit organization and we want to benefit the members.”

Right now, he has a staff of four — and a more-the-merrier approach to driving membership..

RIAs and broker dealers

In fact, if wirehouse advisors want to join, Hortz says he’ll happily accept them, but so far he envisions that most of the advisors will come from RIAs.

The key is to offer advisors something unique, Hortz says.

If he can come up with a way for the fragmented RIA business to consolidate some of its efforts at clinical trials of ideas, he will have avoided the trap of trying to create something unique in a world that to most cynics, and some skeptics, has nothing new under the sun to be brought to bear.

“I am working not to build a cash-dependent marketing organization at core but an innovation institute that will help advisors with consulting, shared resources, using free or low cost delivery systems”

Low-cost means mostly distributed by the Internet as opposed to print materials or at convention center gatherings.

Lisa Shidler is off for a few days. Direct any article thoughts to. Brooke@RIABiz.com

Mentioned in this article:

Fidelity Clearing & Custody Solutions
Asset Custodian
Top Executive: Sanjiv Mirchandani

Pershing Advisor Solutions
Asset Custodian
Top Executive: Mark Tibergien

Consulting Firm
Top Executive: Bill Winterberg

Technology Tools for Today
Consulting Firm
Top Executive: Joel Bruckenstein

Stephen Winks

Stephen Winks

August 20, 2014 — 4:15 PM

The great news is Pershing and Fidelity are interested in innovation, the question is whether Hortz has the background to manage the desired result, not having a technical background in advisory services, prudent process, advanced institutional technology not available to retail advisors or work flow management.

An interesting real world correlation is when we asked top advisors at a major wirehouse (most of which had more than a half billion in assets and far more with an ample sampling of institutional accounts held to fiduciary standard) what they needed in support, and responded precisely to their request, they said that was not what they really needed. This establishes the need for enlightened leadership—support expert fiduciary standing based on objective non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters with no exceptions. This sort of leadership can not be advanced in a brokerage format and requires by definition leadership and accountability. Innovation without context only confuses the end game. Everyone feels good, but nothing gets done.


Brooke Southall

Brooke Southall

August 20, 2014 — 7:08 PM


Part of the slant here is that Mr. Hortz can bring in ideas from outside the advisory business. But, yes, that is only good if he is fully steeped in the existing business.

There seems to be a growing slant I hear that the advisory business has software that was left behind by other industries. But I’m not sure I really have a clear sense of how that is the case. People like Victor Fetter, Bill Winterberg and Joel Bruckenstein seem to have a decent grasp of the broader picture and bring that knowledge with them.


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