Advisor fintech firm Oranj closing at the end of 2020

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Wealth management software company Oranj is telling customers that it plans to close at the end of the year.

Two financial advisors and current Oranj users, who requested not to be named, have received emails from the firm stating “the company will be shutting down” on Dec. 31. Until that date, the company will continue maintaining its platform, which includes portfolio management, trading and rebalancing, reporting and an investment model marketplace, according to the message, which was seen by Financial Planning.

The company is offering meetings to discuss the transition to ensure as little disruption as possible to advisors’ business.

People familiar with the matter say Oranj founder and CEO David Lyon announced the decision to employees last week. Notices to advisors were sent out Monday.

Lyon declined to comment. A spokesperson for the company confirmed that Oranj is “winding down operations.”

Lyon founded Oranj in 2014 and employed 45 people, mostly in the Chicago area. The company was named in February as one of Financial Planning’s Best Fintechs to Work For.

In October, Oranj announced it would launch Playbook Portfolios, a program to provide advisors easy access to third-party investment strategies, "in the coming weeks.”

One advisor, who became a customer after Oranj acquired trading and rebalancing software TradeWarrior in 2017, is already in the process of transitioning to Riskalyze’s trading platform due to high turnover and “mission-critical outages” at Oranj.

“The platform never really felt like they had direction,” the advisor told Financial Planning in an email. “They kept rolling out features that seemed really disconnected from what we needed as a user.”

While he isn’t surprised at Oranj’s closure, the short notice gives firms a truncated timeframe to find a new trading service, the advisor says.

“We would be scrambling in a bad way if we hadn’t made these other plans,” the advisor says.

In a private message to the advisor, an Oranj relationship manager apologized for the abrupt announcement.

“This decision was shocking in many regards and in some regards, not so much,” the Oranj employee wrote in the message. “While we were accomplishing amazing things and making plans for 2021, ultimately the CEO did not think the company was where it needed to be for us to continue on. It's almost like a portfolio — diversification is key — and when you have a company completely self-funded by one man, your eggs are in one basket, and thus, you open yourself to the whims, the waves, the ups and downs of that one individual."

Former TradeWarrior CEO Damon Deru, who launched a competing trading and rebalancing software AdvisorPeak after a legal battle with Lyon, says his company is already receiving calls from Oranj advisors looking for an alternative.

“We can confirm that we’ve heard from multiple clients that [Oranj is] closing down,” says Deru.

Some industry insiders are wondering why Oranj didn’t re-capitalize or get acquired by another firm. A competing technology platform, AdvisorEngine, sold to Franklin Templeton in May, and LPL acquired trading and rebalancing software Blaze Portfolio in October.

“I always thought [Oranj] should be bought out by a big wirehouse,” says Yang Xu, CEO of robo-advice firm TradingFront. “I guess all the big wirehouses now have their fintech solutions, so a tech hub like Oranj is no longer attractive, or too overpriced, to them.”

Oranj’s closure also demonstrates the limitations of model marketplaces as a business, says Manish Khatta, president and chief investment officer at Potomac Fund Management.

“Firms that have the means to execute their own trades typically have an investment management team on staff,” Khatta says. “Why outsource if you are not gaining a significant amount of scale and upside?”

Following its purchase of TradeWarrior in 2017, Oranj began offering its core software to advisors for free if they implemented a portfolio from its model marketplace. Instead of charging advisors, Oranj would generate revenue by charging asset management firms to make products available on the marketplace, says XY Planning Network co-founder andFinancial Planningcontributor Michael Kitces.

But the asset management distribution business is “brutally competitive” and favors companies with a deep roster of advisor relationships, Kitces says.

“Oranj, unfortunately, found that asset managers were willing to pay for distribution, but appears to have struggled to get traction with advisors to distribute to,” Kitces says. “Merely offering low-priced access to investment management is not an ‘If you build it they will come’ solution, whether it's being sold at a low price to consumers or even for free to advisors.”

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