Managed account outsourcing for independent planners.
I've rarely written about Adhesion Technologies over the past seven years of writing about technology (although my colleague David Drucker did pen a piece about the firm in Virtual Office News in 2005). I've steered clear of Adhesion because I had a hard time understanding exactly what its core business was. At various points in time, it seemed to be focused on technology, outsourced portfolio management, and account aggregation. There was also a period of time when the firm appeared to have little interest serving the typical RIA firm; the thrust of its marketing message at that time was clearly aimed at larger financial institutions. Because I wasn't sure what Adhesion's value proposition was, and because I wasn't sure that it was interested in servicing my readers, I chose not to write about the firm.
Over the past several years, however, I sense that Adhesion Technologies had evolved into a more focused enterprise that now clearly targets independent RIA firms. According to Barrett W. Ayers, senior vice president of product management: "Our WealthADV platform is cost effective and scalable. While we serve a few independent broker/dealers, our clients are primarily fee based and fee only advisors. Some of our clients fall into the $50-$75 million AUM range, while others have between $2 billion and $3 billion AUM."
Adhesion offers two core services: The Op Center and the Investing Center. Each center is appealing in its own right, but the WealthADV platform should be most enticing to those who plan to use both centers. Those who do can avail themselves of an almost fully integrated turnkey investment platform that sports a number of unique features. I say "almost fully integrated" because one feature currently missing that most turnkey solutions include is a proposal generation tool.
When I last looked at WealthADV a few years ago, my recollection is that it included such a tool. I asked Adhesion about this and was told that the omission of a proposal builder is a temporary condition. A new, improved one is currently in the works and should be available soon. Assuming it arrives on schedule, I'll withdraw the "almost" qualifier.
The ideal advisor/client for the Adhesion Technologies platform is one who will make use of the full suite of products, so let's assume for the moment that you are interested in going that route. If you are, you will most likely be outsourcing a good portion of investment/portfolio related tasks to Adhesion, which will free you up to spend more time interacting with clients and growing your business, but there could be exceptions, which I'll get to shortly.
In a typical scenario, the advisors will assess a client's risk tolerance and/or income need and then assign a client to one of a number of model portfolios that the firm maintains. In creating model portfolios, the advisor would first decide which asset classes to hold in the account and in what proportion. To keep this example simple, let's say that the model we assign to our sample client is model A, composed of 75% equities, 20% bonds, and 5% cash.
Next, we would select the appropriate investments that correspond to each of the asset classes. We can assign one or more investment to each asset class. So, for example, the equity portion of the portfolio could be composed of 25% Vanguard's Total Market Stock Market ETF, 40% a domestic equity SMA, and 35% a foreign equity SMA.
When using Adhesion Technologies Investment Center, assets are held in a Unified Managed Account (UMA). This means that we can mix and match separately managed accounts, mutual funds, and ETFs within a single account and offer a consolidated report that includes all household assets.