As banks elbow into investing, RIAs fight back with cash management and lending

As banks continue to encroach on the brokerage business, RIAs are pushing back by adding banking services.

Last week, Orion Advisor Solutions brought the cash and credit services it developed with Focus Financial out of a beta test period. The services, which include FDIC-insured deposits up to $60 million and securities-backed loans, are now available to all 2,200 advisory firms using Orion.

These services can help RIAs become the single destination for all a client’s financial needs, said Jason Moore, Orion’s chief solutions officer. For more than 20 years at Morgan Stanley, Moore saw first-hand the advantage of a single firm offering clients banking and lending alongside investment and wealth management.

“Nearly half of all investors say they want a single financial institution to handle their money needs, but only a third are actually receiving that kind of service,” Moore said.

The idea isn’t new. For example, Wealthfront CEO Andy Rachleff has been talking about turning the robo advisor into an-purpose financial institution for years. Wealthfront launched securities-backed loans in 2017 and high-yield savings accounts in 2019. Traditional RIAs like Carson Wealth also offer clients checking and savings accounts.

Though rock-bottom Federal Reserve interest rates made cash a much less desirable asset, the trend of empowering independent advisors to offer banking services has not slowed. Envestnet provides access to lending with its credit exchange, and Mass Mutual Life Insurance acquired Flourish to give RIAs cash management capabilities (before going into Bitcoin).

Last week, Raymond James spent $1.1 billion to buy the Pittsburgh-based bank TriState Capital Holdings. In a call to discuss the deal, Raymond James CEO Paul Reilly said TriState will operate separately and that advisors will continue to use Raymond James Bank. However, Raymond James sees an opportunity to grow TriState’s business among independent advisors and leverage some of the bank’s digital lending technology, Reilly said.

“In watching what they’ve done in terms of the front-end and back-end processing, we will probably, as we develop our technology, use some of that in our approach,” he said.

Raymond James declined additional comment.

It’s part of the push toward “comprehensive wealth management” that spans the entire financial services industry. Expanding into cash management and lending can deepen client relationships and make it harder to leave an advisor, Moore said.

“Clients want to see that their advisors have full capabilities,” he said.

Offering new services can also help independent advisors fend off increasing pressure from banks and wirehouses, which are building out their investing, financial advice and wealth management capabilities to keep consumer banking clients from taking assets to a brokerage, said William Whitt, a strategic advisor on Aite-Novarica’s wealth management team. Just last week, TD Bank became the latest to launch an automated investing service while Citizens Financial CEO Bruce Van Saun said his bank is looking to buy its way into wealth management.

Wealth management

How private banks are courting the next generation of wealthy investors

October 18, 2021 10:30 AM

“This is a way for RIAs and smaller broker-dealers to really strengthen their offering and compete on more even footing with the large institutions and banks,” Whitt said. “Everyone is converging on this comprehensive wealth management model.”

For Orion, deposit accounts and securities-backed lending are just the beginning. It could add things like commercial real estate and even mortgages in the future, Moore said.

“We want the advisors to be able to compete with any space today,” he added. “If an advisor wants to leave a wire or big bank, they have the opportunity to have the same services out on their own.”