WisdomTree pledges $30 million of cash and 56 year-old seller will pour his energies into building $1.2-billion RIA with new roll-up strategy

January 2, 2018 — 10:28 PM UTC by Brooke Southall


Brooke's Note: Greg Friedman built an industry-leading RIA software company without ever having to take a giant risk. It was more of an insider trade. He simply built CRM software for his own RIA firm because nothing existed in the marketplace. It worked and other RIAs took notice and he began selling it to them. But for Friedman's next best shot at disruption, he may have had to take a series of big, new risks accompanied by all the hustle that goes with them. Some entrepreneurs might have hung in simply because they have nothing else to do. Friedman doesn't have that issue. As CEO of Private Ocean, he's gearing up to run it much more aggressively but also to do more of what he loves -- dealing with investors face-to-face. Seeing a fork in the road, he wisely took it.

Greg Friedman is selling the CRM company for RIAs that he founded by accident to spend more time building the RIA he built it for in the first place. 

The 56-year-old CEO of Junxure will pocket the "majority" of the $30 million allocated by WisdomTree Investments, Inc. to the deal, according to a release, which says that $22 million arrives at closing with $8 million to follow later. Leftover cash will go to hire of more engineers and to meld the company's software with New York-based AdvisorEngine Inc. See: Greg Friedman rallies RIAs at Junxure conference -- then news of Envestnet-FolioDynamix deal turns up the heat.

Ted Tsung: The speed of innovation is just too fast for most of them to catch on.

For WisdomTree it'll bring to $50 million the VC cash bet on AdvisorEngine and its CEO Rich Cancro. AdvisorEngine is backed by about $57 million in total. WisdomTree dumped in its first $20 million tranche in 2016. See: Charles Schwab & Co.'s vertical play to monopolize ETF market -- to be its low-cost maker, distributor and manager -- diesels ahead as ETF OneSource grows again.

CRM Software, which makes Junxure, and its 50 employees are mostly based in Raleigh, N.C.

Though Friedman is excited about collecting a check for the company he founded in 2001, he expresses greater enthusiasm about not having to run it anymore -- especially considering he's also CEO of Private Ocean, his RIA in San Rafael, Calif., which manages $1.2 billion. 

"There's no question that two is a lot," he says. "Either one is more than a full-time job."

Friedman says he didn't feel stretched too thin in his early years of running two companies but that the acceleration of the CRM business in the last five years made him feel like he was juggling too much. Junxure began when he paid friend and co-founder, Ken Golding, to build connections between Excel, Microsoft Word and Outlook. Soon 100 RIAs said they wanted to license the Golding hack and the rest is history. See: At FPA's Norcal event, wary advisors are told how to stop worrying and love the cloud.

But back then it was low-tech, low finance and slow innovation. None of that holds true anymore, says Ted Tsung, president and chief technology officer of AppCrown LLC, a Salesforce reseller based in New York. 

"The speed of innovation is just too fast for most of them to catch on," he says.

Friends to frenemies

John Rourke: We happily went from friend to frenemy today with the acquisition of Junxure.

One big challenge for Junxure was that until the past few years it was sold as desktop software. Though Friedman was able to bring a cloud version to the marketplace, it took several more years of development to make it feasible for big RIAs to make the leap. In fact, Friedman admits that Private Ocean itself only went to Junxure Cloud in 2017. He couldn't make the move until Junxure was compatible with his document management software. See: At Junxure confab No. 2, Friedman kvells about his 6-week-old Cloud and announces closer ties with Pershing.

AdvisorEngine has real value to tap from Junxure, according to Joel Bruckenstein, producer of the T3 conferences.

"I think Junxure does a really great job on the client service side," he says. "I think AdvisorEngine is a little more cutting edge on the tech development side. They also have an infusion of cash to invest in further development."

Junxure administers 12,000 users managing over $600 billion in assets.

Still, it'll create a new channel dynamic between AdvisorEngine and third-party CRM providers.

"We happily went from friend to frenemy today with the acquisition of Junxure," says John Rourke, Wealthbox CEO. (Wealthbox is a CRM made by Starburst Labs Inc., with locations in New York and Providence, R.I.) See: VCs back Wealthbox with another $6 million as improbable play to upend CRM giants like Salesforce, Microsoft and Redtail by 'Facebooking' its look and shanghai-ing data from LinkedIn.

Whether AdvisorEngine becomes more friend or enemy depends on how the integration gets managed, he says.

Joel Bruckenstein: I think Junxure does a really great job on the client service side," he says "I think AdvisorEngine is a little more cutting edge on the tech development side.

"Rich Cancro and the AdvisorEngine team are skilled people, but they’ll need to be careful against Frankensteining their product platform with an older CRM technology amid a unique business model for CRM. Product synergies can turn into shit shows, but I think Rich and team can pull it off."

Michael Kitces, principal of XY Planning Network in Sanford, N.C., says in a tweet that Cancro is doing all the right things based on his strategy of being a non-custodian. "This continues Cancro's evolution towards being a full-stack advisor platform. The Wealthminder acquisition last year gave them financial planning software capabilities. They (already) are portfolio accounting/reporting. Now they have the CRM component with Junxure." See: An e-marriage of Schwab and Fidelity, a reflective Ron Carson and good jargon-bashing made T3 take off like that helicopter outside

Never a sure bet

There may be a good reason why Friedman, who mostly bootstrapped Junxure during its 17 years of existence, would prefer that AdvisorEngine and WisdomTree fund the kinds of improvements that will drive the next round of adoptions and conversions to Junxure Cloud, Tsung says. (Friedman said a few years ago he accepted some outside cash from friends and family for the first time.)

"The ROI for tech investment is never a sure bet. The advisors are always looking for a 'perfect' fit if they have the budget. The traditional players like Junxure and Redtail can't really do that even if the advisors want to pay the big bucks to get it customized. Salesforce, on the other hand, is designed from the start to do that. As the advisors grow in their practice, the need to make it personalized to the business becomes more common." See: Caveats galore, Redtail attempts CRM revolution based on texting starting with 27,000 firms who use its software.

The Private Ocean blue team will be glad to see more of their captain.

WisdomTree is a publicly traded company with a market cap of $1.6 billion that produces ETFs and licenses indexes.

The number of RIAs using Junxure on the cloud is nearing 50%, Friedman says, finally as the buildout of features catches up to what can be done on the desktop. Much of the online conversions occurred recently, reflecting the features. For example, there was simply no page for estate planning.

Eye on other RIAs

Three years ago, Friedman began exploring ways to sell Junxure. He was slowed by the nature of the offers, which he felt might not have his customers best interests in heart.

Somewhat cryptically, Friedman says he saw deal opportunities involving being swallowed by a whales. "We had some chances on that side."

Now that he is back on the RIA side full-time, he says he is accelerating his plans to roll up other RIAs en route to building a multibillion-AUM RIA.

Mentioned in this article:

CRM Software
Top Executive: Greg Friedman

AppCrown, LLC
Outsourcer, CRM Software, Tech: Other
Top Executive: Ted Tsung

Technology Tools for Today
Consulting Firm
Top Executive: Joel Bruckenstein

Consulting Firm
Top Executive: Michael Kitces

Financial Planning Software
Top Executive: Rich Cancro

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Ken Golding said:

January 5, 2018 — 3:12 PM UTC

WTF, do you not even verify what you write? THE GOLDING HACK?, written with Excel WORD and OUTLOOK. Do you not even verify your articles before you publish. For your information Junxure was originally written in MS Access and NEVER was written in Excel, word or Outlook. The evolution took it to a SQL Database and on to DOT NET. Once it was completed it integrated with Excel, word and Outlook, but I would in no way classify a product that served over a thousand offices for many many years a HACK. Very disrespectful. I don't know why you felt you needed to take a shot here, but that is way out of line if you ask me.

Mark Wickersham said:

January 10, 2018 — 1:34 PM UTC

Junxure was always a bit of a unicorn in that it was a homegrown application that was commercialized. Those days are over and I think this spin out attest to the fact that technology is moving too fast for this approach to success anymore.

Cole Steel said:

July 26, 2018 — 7:56 PM UTC

I worked for Junxure a few years back. Junxure had a money, or, "log jam" problem where they could not afford enough fast working, talented SQL employees to do the intricate work needed to migrate enough new customer databases from whatever Product they were coming from, into Junxure. I knew after only a couple of weeks at Junxure, that Friedman would eventually have to sell. I could smell it. I saw no other choices. Friedman was stuck between a rock and a hard place if he wanted to move forward. Surging forward was not going to happen without an infusion of money, or flat out selling Junxure to another company that could fix the log jam occurring at the Migration side of things. Junxure could only grow if it had a "free flow" of new customers migrated into the Junxure tool, without any lengthy hold ups. And there were numerous migratory hold ups in the new Junxure customer pipeline and not enough programmers to get them migrated in quickly. Also, the word was at the time, Friedman wasn't even using his own Junxure tool at Private Ocean. In any case, selling and pocketing a cool $20 million and focusing on his first baby, PO, was a no brainer. My humble opinion.

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