FWR's US correspondent, Charles Paikert, recently sat down with a figure in the wealth management space who has strong and clear views about a number of big firms, their strategy and transactions.

Alois Pirker is one of the most knowledgeable observers of the wealth management business. The Austrian native covered the industry for Boston-based research firm Aite Group for more than 16 years and most recently was research director for the firm’s wealth management practice.

After Aite was sold to private equity firm Pamlico in 2021, Pirker decided to strike out on his own as a strategic consultant. Pirker Partners opened for business this month, partnering with London-based The Wealth Mosaic, a tech and data-oriented consulting and research company.

Pirker shared his always candid – and often prescient – insights regarding the industry with Family Wealth Report, in an interview condensed and edited for brevity.

What’s your vision for your new firm?
Market needs are evolving quite rapidly. I want to provide strategic advice to help firms respond to the changes they will be facing and in order to position themselves better. As the market evolves, new approaches are going to be needed in investment management, mass customization and data management.

What are the key issues facing the wealth management business?
Companies need to be more horizontal, but too many still operate in product-silos. There has to be more customization and unbundling. The industry has to expand beyond plain vanilla product types. While there has been more diversity of product types, the process is not as streamlined as it should be.

We are already seeing and will continue to see a repositioning of the various market participants along the wealth management value chain. The key question is who captures what share of the client fee. 

Wealth management firms need to own more of the value chain, which requires revisiting the question of what needs to be controlled and customized for the firm and what needs to be outsourced. Vendors have to adjust accordingly, which some WealthTech firms will find hard to accomplish.

Why do you think Goldman Sachs’ entry into the RIA business, following its acquisition of United Capital three years ago, has been so lackluster?
It may not be in their DNA. Goldman Sachs is a trading firm. The retail advisory business is not a cash cow, and may be a bit of a stepchild, especially when the firm has so many other challenges.

For investment bankers, products go in and out of style. Like a race car driver, bankers are either at full speed or take their foot off the pedal. That doesn’t work in the RIA business. You have to go at a steady pace.

CI Financial has also pulled back after their RIA spending spree in 2020 and 2021. What are their prospects?
CI might have missed the window a bit with an IPO. It might be a better deal for them to sell their RIA assets to an aggregator. I think a sale is more likely than an IPO.
 

What about Envestnet?
Envestnet is the firm in this space that has a bullseye on their back, much like Microsoft years ago in the PC world, which went from strength to weakness to strength.

Envestnet has a very diverse set of best-of-breed capabilities and an extremely diverse set of data, which are the results of many acquisitions. This allows them to meet just about any need that a financial institution might have. 

But Envestnet also faces major challenges. The market is changing rapidly and Envestnet needs to address current market needs – and time is of the essence.

The company still operates very much like a set of stand-alone businesses. They have to start moving into a “solutions” approach, very similar to what Morningstar did a number of years ago. Envestnet also has to address RIAs' need for customized propositions in the front-office and around investment management. Vendors like Envestnet are going to have to adopt an “Intel Inside” model, which may be challenging, because the economics are vastly different and platforms are often built in a monolithic way. 

Now that Schwab has absorbed TD Ameritrade, do you see any competitors challenging Schwab, Fidelity or Pershing in the RIA custody space?
I would keep an eye on FNZ, the New Zealand-based platform firm that bought State Street’s custody business in 2020, which gave them immediate street cred. They have a global presence and are very active in the UK market. Usually custodians don’t have great tech and firms with great tech aren’t great custodians. FNZ has both capabilities. They could give Schwab, Fidelity and Pershing a run for their money.  (See a story here about FNZ's funding plans.)

[Editor’s note: Envestnet CEO Bill Crager announced late last year that Envestnet is entering a custody partnership with FNZ that is set to launch in the US market later this year. And FNZ announced last week (January 19) that it has agreed to acquire YieldX, a Miami-based fintech that has a digital platform for fixed-income investing.]

What is a particularly pressing issue in wealth management?
The horizontal data layer is a need that all financial institutions, including RIAs, must solve sooner rather than later. The big challenge is that the market is littered with point solutions such as financial planning tools, CRMs, and portfolio management software.

All of these solutions cover a portion of the data needed to be truly horizontal and client-centric, but most of these point solutions are badly equipped to incorporate all aspects of a client's needs. Newly-emerged platforms such as InvestCloud were built with a horizontal data layer that underpins their functionality, but quite often the firms are not using these platforms that way.

What wealth management development has impressed you recently?
I’ve been super impressed by the mid-size RIAs, with approximately $600 million to around $2 billion in AuM. They’re playing a fantastic game and have been very nimble. They have made smart fintech acquisitions, have been very strategic on data and are engaging with larger financial institutions on their terms. 

These mid-sized RIAs demonstrate that being successful is much more about being agile and strategic than just sheer size.