After a time of tumult, InvestCloud is divulging a reimagined business model where alts are the main course -- but analyst is wary that it's really just another TAMP
CEO Jeff Yabuki says the company had to 'take a little step back' but can now use its APL machinery to go back on the attack for an awesome objective -- to become the central clearinghouse of alternative investments to wealth managers via model portfolios
7 min read- InvestCloud pivots toward alternative investments within third-party model portfolios.
- Yabuki emphasizes InvestCloud's data utilization for personalized advisor and customer insights.
- Analyst views InvestCloud's strategy as potentially just another TAMP offering.
- InvestCloud aims to be the technology provider for fund sponsors in the alts space.
Brooke's Note: Are SMAs an investment management product, or are they more of a unit of fee-based advice? The naysayer might hold they are neither fully fish nor fowl. The SMA champion might say they are the best of both worlds. Jeff Yabuki surely leans toward the latter on separately managed accounts as he bets his company, InvestCloud, truly has their best days ahead. In fact, SMAs – at least in their evolved form as model portfolios – are, to his thinking, the only vehicle by which alternative investments will get out of the slow lane and into mainstream ownership. Yes, we have heard similar pitches before, but Yabuki emphasizes that he is holding plenty of market share face cards, maybe an ace. What stood out as much, however, is that Yabuki evinces – despite being installed by private equity nine months ago – a sense of patience. Alts might not break through for years. No matter, he says. He'll be there and ready. The payoff will make any wait seem nominal.
InvestCloud took at least one false step, but now CEO Jeff Yabuki is offering a first peek at why step two or three may be the charm – a crack at owning “alts” when they finally emerge as a giant share class.
The New York City amalgamation of mostly Tegra119, Naviplan, and InvestCloud cobbled together by Motive Partners will go big in facilitating the use of alternative investments in third-party model portfolios, the company reported today (Oct. 1).
InvestCloud's reveal is the culmination of Yabuki's hiring in January and McKinsey & Co.'s onboarding in March to help architect a reboot.
In keeping with Yabuki's hints to date, APL, the oldest asset by far – and perhaps the most analog – will be better leveraged.
“Sometimes you have to take a little step back to take a great leap forward,” he says in a phone interview with RIABiz.
The new wrinkle is that APL's guns will be turned on throwing the InvestCloud hat in the ring to dominate the it's-coming-no-really-it's-coming market of alternative investments.
Yet, even with that wrinkle, one analyst questions whether InvestCloud and McKinsey have really broken new ground with the approach so far.
Grand strategy
It just looks like another TAMP [turnkey asset management provider], says Andrew Besheer, of Besheer & Associates, LLC in Bronxville, NY.
“I guess I’d have been more excited if this was part of a broader strategy to accelerate the integration of their advisor desktop assets (legacy InvestCloud and NaviPlan) with their connectivity and managed accounts trading capabilities (legacy Fiserv),” he says by email.
“I think getting that done four-plus years after the companies were merged would be a tremendous step on their part to creating something that could be much bigger than the traditional TAMP.”
Jeff Yabuki puts InvestCloud 'brand identity' under McKinsey & Co. review and signals that no job is safe as Pete Hess exits: report
Yabuki says that the NaviPlan and [legacy] InvestCloud assets will come to bear in a grander strategy of the broader InvestCloud brand.
“The essence of our strategy is the utilization of the significant data that underlies our broad set of technology solutions to enable our clients to deliver personalized, actionable insights and real intelligence to their advisors and customers when, and where they need it," he says.
"Broader distribution of alternatives in a model-based environment is in the sweet spot of our business, and one of several important use cases where InvestCloud can provide differentiated value to the firm, financial advisors, and the end customer.
“We are focused at delivering this value through any number of important use cases facing the wealth industry, today, which will benefit our clients in the short and long term,” he says.
Alts tech provider
InvestCloud envisions itself as the Intel-inside for a far wider swath of “insides” by acting as the technology provider to fund sponsors.
“Having that privileged position with our clients is - in and of itself - an important edge,” he says.
“InvestCloud is the technology provider for the SMAs [separately managed accounts], and our client is the sponsor,” the company wrote in response to a question.
“We are proud to sit behind the brand of our clients, helping to make them successful.”
Story Timeline
“[The alternative investments revolution] is going to happen through SMAs because all wealth managers want a model portfolio, and we have 1.1 million models.”
"People are saying, ‘How do we modify for that [alts-infused] eventuality?’ You need to be in front of that."
Well-positioned
“BNY just announced a similar focus on rolling out an alts platform; Envestnet and their partnership with the ‘Gang of Four’ (SSG, Blackrock, Fidelity, Franklin) came out with alts as part of their ‘Strategist UMA’ and ‘HNW Consulting’ offerings," Besheer notes.
“You already have CAIS and iCap and some others out there in the space, as well, and I think we’ve seen some of the managers launching alts strategies, as well, as they expand their offerings.
“Nine months and how many million dollars later, and they come up with the same strategy that everyone else seems to have already decided on? I’m sort of underwhelmed if that’s all there is,” he adds by email.
What Yabuki is banking on for InvestCloud is that it has a headstart before it even gets started because of existing infrastructure and relationships.
“InvestCloud clients represent more than 40% of the $132 trillion in total assets globally,” the company said in response to a question.
"While it’s unclear when the full democratization of alts will happen, we know with 100% certainty that the majority of that will happen through managed account structures.
Better understanding
“Wealth managers will utilize this broader distribution across model portfolios, and with 1.1 million models on our APL platform -- the largest SMA provider in the country – we are incredibly well-positioned to capitalize on this important market opportunity,” the company added.
“We also see opportunities to help our clients better understand their customers through the data, especially where clients have multiple relationships with the company.”
InvestCloud does not plan to have an alts research team.
“Our role in this would be in the presentation of the data to advisors/clients/customers depending on our relationship, not the original research itself. For this, we could be more of a ‘publisher,’” the company says.
Catching fire
Yabuki landed in this direction after InvestCloud's board, in April 2023, purged its entire “InvestCloud” management team, including CEO, John Wise. The company drifted sideways as it searched for a new CEO before installing Yabuki, one of its own.
Yabuki has since measured twice before cutting once in forming a definitive strategy – to use the oldest technology to tackle the newest market – alternatives – even if the moment it truly catches fire could “happen in 2025 or 2035.”
Nothing new is needed except the mixology.
“We are combining the assets of this company in new ways," the CEO says.
Yabuki, 64, was CEO of Fiserv – owner of Tegra119 and APL – from 2005 to 2020, where he nearly tripled revenue and delivered a shareholder return of 969% through 2019.
Yabuki also serves as the Sheldon B. Lubar executive in residence at the Lubar School of Business at the University of Wisconsin–Milwaukee, where he teaches and mentors students in fintech strategy and leadership.
Rely on RIABiz? Tell Google.
Naming us a preferred source puts our reporting first in your Top Stories and AI Overviews. Takes one click, and only you see the difference.