AssetMark looks to acquire more technology after impressive earnings report

Like the baseball teams acquiring star players to push for the World Series, AssetMark revealed plans last week to build on an impressive earnings quarter by continuing to be an active acquirer of financial advisor technology.

AssetMark, which provides outsourced investment services and technology to independent broker-dealers and registered investment advisors, reported a net inflow of $2.2 billion in the second quarter of 2021, a quarterly record for the firm. The turnkey asset management platform has a total of $84.6 billion in assets, a 33.9% increase year-over-year.

After closing its acquisition of financial planning software Voyant in July, the remaining cash on AssetMark’s balance sheet, the company’s ability to generate more cash and its low amount of debt leave the firm well-positioned to pursue future M&A, said CEO Natalie Wolfson on a call discussing quarterly earnings.

“The final component of our growth strategy is to pursue strategic transactions by adding capabilities and scale that improve advisers' ability to serve investors and expand their businesses,” Wolfsen said on the earnings call.

While acquisitions could potentially include some smaller TAMPs, AssetMark is more focused on maintaining current organic growth, Wolfsen said in a follow-up interview with Financial Planning. The company is more interested in wealthtech companies that add more features and functionality to eWealthManager, AssetMark’s tech suite for advisors, similar to how Voyant brought along financial planning, she said.

“As advisors’ technology needs change, which we think is accelerating … we want to make sure AssetMark has those capabilities and can deliver them,” Wolfsen said.

As large broker-dealers and growing fintech platforms look to replace TAMPs as outsourcing providers, firms like AssetMark need to keep expanding the value they can offer advisors, says Gavin Spitzner, president of consulting firm Wealth Consulting Partners. Acquiring a CRM or digital advisor — or perhaps a firm that provides both — would make sense for AssetMark, Spitzner says. Or the firm could buy up a startup working with data analytics and artificial intelligence to help AssetMark compete with the capabilities Envestnet has via Yodlee.

“It’s an arms race, and everyone is trying to become this all-in-one provider and be the technology hub, versus a spoke on someone’s hub,” Spitzner says. “There’s only going to be a handful that can really offer an end-to-end solution, and it's why you see firms going public, why you see the SPACs and the private equity investments.”

AssetMark went public in 2019 and in 2021 embraced a new growth strategy under Wolfsen, who took over as CEO in March. With Wolfsen in charge, AssetMark acquired Voyant and launched a new product, AssetMark Institutional, to better serve the RIA channel.

So what sort of technology is the company looking for? While she wouldn’t give specifics, Wolfsen said acquisitions will align with AssetMark’s goal of creating a comprehensive platform that saves advisors time, facilitates conversations with clients and supports customized service to investors across the wealth spectrum.

“We’ve been very clear that we want to build out a financial wellness offering,” she said. “We’re looking at areas where there is not only increasing advisor adoption, but areas where the advisor’s workday is ripe for automation.”

One area Wolfsen would confirm AssetMark is exploring is direct indexing, a sector of wealthtech M&A that has been hot recently. Vanguard acquired direct indexing startup Just Invest in July; JPMorgan acquired competing startup Open Invest one month earlier.

“What’s great about direct indexing is it’s not only customizable for large clients, but allows for small clients to hold fractional shares,” Wolfsen said, adding that AssetMark is in the research and development phase of a direct indexing offering.