On December 8, this article was revised to include a new offer from Advisor Peak. AdvisorPeak is available for free through the end of the first quarter for any firm coming off Oranj (and that offer extends to RIAs from recently acquired Blaze or Redblack as well).
Some 500 advisory firms are facing the worst-case scenario for a practice that relies on a key piece of software. Their asset management solution, Oranj, announced in mid-November that it would shut down completely on a hard deadline of December 31, giving Oranj users a month and a half to identify and buy a replacement, migrate over their client data, and train their users on the new system.
This was an especially painful development at a time when many firms are going through the labor-intensive process of harvesting tax losses and offsetting fund distributions.
Orion Advisor Solutions stepped into the breach and offered to provide six months of free technology to former Oranj users. It was reported that Riskalyze was “flooded” with inquiries after the shutdown announcement.
But, curiously, the most obvious solution to the stranded advisory firms was unnoticed.
“We’ve been converting firms over for the past month,” says Damon Deru, founder of Layton, UT-based AdvisorPeak. “Generally, we’ve been able to convert all their data and get them all up and running in about a week – all their model data, all their account data, we can take that right into AdivsorPeak. And,” he adds, “there will not be a huge learning curve for their staff to make the jump.”
AdvisorPeak’s edge in this race for former Oranj customers comes from the fact that it is essentially the same program as Oranj’s underlying trading/rebalancing/tax loss harvesting engine. In the early-to-mid 2010s, Deru built a cult following with a program called TradeWarrior, which some believe was the most feature-rich rebalancing software on the market. He sold the program to Oranj back in April, 2017 and then, after several legal disputes, Deru took the underlying TradeWarrior programing back and founded AdvisorPeak in the summer of 2019, with the goal of (yet again) building the most feature-rich trading/rebalancing/tax loss harvesting engine on the market.
“Oranj users have been using TradeWarrior that was rebranded as Oranj,” says Deru, “and the underlying system components, the user interface, all of that is by and large the same as AdvisorPeak.”
AdvisorPeak is not the same as TradeWarrior, however. In the past year and a half, Deru and staff – including Pete Giza, founder of a rival trading/rebalancing solution called RedBlack – have done what Oranj never managed to do: They greatly enhanced the functionality of the program. “The migrating users are getting access to all the development that we’ve done,” Deru says, “and it’s been fun and interesting to hear them say things like, ‘Oh, you guys have this?’ ‘You have that?’ ‘You can do this or that in the system?’ It’s been a very satisfying set of conversations.”
What are ”this” and ”that?” Like all the other rebalancing systems, AdvisorPeak allows users to sort client portfolio data based on tolerance bands around the underlying asset allocation and by the embedded gains and losses in the individual lot positions. It goes a step further than most of its peers by automatically identifying the trades that can be made to bring the portfolio back in balance or maximize the harvested losses. The program will rebalance around a legacy position that is flagged as not to be traded.
A more recent development takes the tax-loss harvesting automation over to the buy side of the equation. Rather than simply identifying what to sell in the tax-loss harvesting algorithm, the program will look at a list of replacement securities (funds or ETFs, typically) that the advisor has identified, and then look for discrepancies between the portfolio’s current and target allocations. Finally, the program will identify buy-side trades that will not only replace the security whose losses are being harvested, but also bring the portfolio back into (or toward) its original target allocation.
An additional feature automatically generates wash-sale rule violation warnings. Another will allow advisors to plug in control parameters that prevent the system from harvesting losses that aren’t productive. “It’s a tax-loss harvesting efficiency metric,” says Deru. “For instance, does it make sense to sell a $100,000 position to get a $100 loss out of it? That’s not a very efficient trade.” Yet another feature will optimize a different goal: not to harvest as many losses as possible, but to offset year-to-date realized gains with losses and zero out the tax implications.
An integration with LifeYield Portfolio Advantage offers a more complex rebalancing/harvesting functionality. LifeYield has developed particular expertise in maximizing what is called asset-location alpha – that is, putting different components in the portfolio into the traditional IRA, Roth IRA or taxable account to achieve the maximum tax efficiency. “In AdvisorPeak, with a click of a button, our system sends all of an advisory firm’s models over to LifeYield,” says Deru. “It runs them through its analysis engine, and then it sends it back to us and say, these securities should go into these account types for maximum efficiency.”
Other new conveniences that were not in Oranj’s TradeWarrior feature set involve the management of client cash positions. “A lot of advisors have some of their clients’ money in a sweep account, and some in tradeable positions like money markets,” says Deru. “Advisors were telling us that sweep cash is different from tradeable money market cash, but their systems were treating them both as the same cash allocation.”
AdvisorPeak differentiates between sweep and tradeable cash on the dashboard and also shows, in a separate column, which portfolios have more or less cash than they need in each category – based on advisor specifications. For instance, a negative number in the sweep column tells the advisor that a certain amount of additional money needs to be taken out of the portfolio to meet a client’s upcoming cash needs – the down payment on a house, for instance, or for a child’s college tuition.
This process is automated. “If they need to raise cash,” says Deru, “they can select ‘raise cash’ and AdvisorPeak will look at the portfolio’s most over-allocated positions, look at the tax efficiency situation, and with a click of a button it will propose the trades that will raise $50,000 in cash and at the same time bring the portfolio back in balance.”
A positive number in that sweep cash column means that excess cash can be shifted into something with a higher yield. The money can be moved into the tradeable cash allocation or – more often – the advisor will click a different button, and AdvisorPeak will automatically identify which portfolio positions are under the optimal allocation and trigger buy trades in proportion, so the sweep cash is used to bring the overall portfolio back to target. There’s also an automated dollar-cost-averaging feature where the advisor can set up a schedule where a client windfall of cash will be traded into the portfolio at intervals, again to target allocations.
Despite the new features (Deru estimates that there are now about 80 that were not included in TradeWarrior), AdvisorPeak is not a client-reporting engine. So Deru has found himself playing the role of software consultant, helping advisory firms that are migrating their data identify a reporting and portal solution. He will mention the usual suspects that AdvisorPeak integrates with – Orion and Black Diamond have the most market share in that space – but firms that were accustomed to Oranj’s pricing schedule experienced a bit of sticker shock when they talked with the market leaders. He would be asked, sometimes timidly: Isn’t there something that works pretty well, but is not so, well, costly?
“If they’re simply looking for a portal replacement, I think CircleBlack does a really nice job,” says Deru. “They were Oranj’s most direct competitor, in terms of having a portal that clients can go to.” Other inexpensive options with robust functionality, he says, include BridgeFT and AssetBook’s new Pulse program.
Oranj refugees will find AdvisorPeak’s pricing to be roughly in line with what they had been paying: $650 a month for a firm with $100 million on the platform, $1,000 a month if the firm has $250 million in client assets. But the real cost savings comes when they realize that they can simply move the data to basically the same system and get two years of enhancements in the bargain. And zero staff training costs should be factored in as well.
AdvisorPeak is available for free through the end of the first quarter for any firm coming off Oranj (and that offer extends to RIAs from recently acquired Blaze or Redblack as well).
“We feel that we’re uniquely positioned to help Oranj users get transitioned quickly, given our background and understanding of the system,” says Deru. One week of data conversion, and there’s still time to harvest year-end losses.
Bob Veres' Inside Information service is the best practice management, marketing, client service resource for financial services professionals. Check out his blog at: www.bobveres.com.
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On December 8, this article was revised to include a new offer from Advisor Peak. AdvisorPeak is available for free through the end of the first quarter for any firm coming off Oranj (and that offer extends to RIAs from recently acquired Blaze or Redblack as well). 