Jack Sharry: Hello everyone. Thanks for joining us for this week’s WealthTech on Deck podcast. Welcome. For today’s show, we’re going to be doing another in a series of special podcasts we call WealthTech in the Weeds. A recent Cerulli study showed that over half the advisory firms in the industry, 53% in fact, are working on building a UMH, a unified managed household, and 37% of those firms have made it a top priority. That’s up from 22% who said that in 2022 so the industry is hard to work trying to figure out how to manage multiple accounts in a risk smart, tax smart way. Of course, our industry has been kicking this idea around for more than 25 years, and until recently, the industry has been primarily focused on single products, single accounts, single technologies. For most of this time, the focus has been quite narrow. Coordinating all the elements to produce better outcomes for investors, advisors, and firms is hard, or as we say here in Boston, wicked hard. But that’s changing. Today, we’re going to talk with folks who have been building the critical pieces of what it will take to develop a comprehensive and coordinated platform. This platform of the future is designed to help investors, advisors, and firms enjoy improved financial outcomes and greater peace of mind. I’m very pleased to have Jeff Benfield of SEI and Martin Cowley of LifeYield join us for today’s discussion, where we will get into the weeds on what it will take to develop a more comprehensive approach. Jeff is head of advisor solutions at SEI. He has developed many advanced product and platform capabilities that are being used by independent advisors and RIAs across the industry today. Martin Cowley is the chief product officer at LifeYield. Martin and the LifeYield team have more experience at more different firms in building comprehensive and coordinated platforms than anyone in the industry. For today’s discussion, we’re going to focus on the pieces SEI has been putting together in line with connecting the dots to empower advisors to provide guidance across a client’s full portfolio. Jeff and Martin, thanks for joining us on WealthTech in the Weeds.

Jeff Benfield: Thanks for having me, Jack.

Martin Cowley: Yeah, good to be here.

Jack Sharry: So Jeff, as I pay attention to smart things being done in the industry, I keep finding out new and very attractive offerings you and the SEI team have been developing. If you would, please share with our audience your strategy, on a high level, around building a multi account, UMH kind of approach.

Jeff Benfield: Yeah. Thanks for having me today, Jack. I really think part of what we did and where we went right is we started with the foundation. So as you’re building a house, you build the foundation first, and you build up from there. Part of the SEI wealth platform, which is the core custody, trust accounting and technology platform that powers the wealth industry from an SEI perspective, was built with the basis of a relationship centric platform architecture in mind. So what does that mean? That means, one, we moved away from the COBOL, Fortran, and green screen technologies, but also we moved into a more multi account, multi factor kind of relationship. So when we sat back and said, how are we going to build the platform of the future, or think about the platform of the future, everything was account centric. So everyone focused on a single registration, focused on a single risk, focused on that singular nature. However, advisors and their clients weren’t thinking about those relationships as single accounts. They were managing families. They were managing households. They were solving the problems of sort of the unity of that family. But they didn’t have exactly the technology to support it. I think the push from financial planning, holistic advice, and other areas within our industry has really moved the pendulum into that relationship based or client centric based approach. What we did was really put the foundational pieces together at SEI with that wealth platform, and then we’re able to build from kind of the bottom up, from a platform perspective, to then enable all of the other tools around it, or the surround systems, if you would, to still read off of that you know, kind of multi account, multi relationship type approach,

Jack Sharry: And we’ll talk some more about where that leads. But clearly, you’ve built the foundation for what seems inevitable across the industry. Martin, you’ve worked with some of the largest firms in our industry who are developing their version of a multi account platform of the future. I know you’ve been doing some work with Jeff of late. What stands out to you regarding what you see and that Jeff the SEI team have built and continue to build?

Martin Cowley: I’ll riff off what Jeff said about the bottom up approach. So one thing that we see with a lot of our clients and in the industry in general is much more of a top down, and that’s because of a variety of reasons. Sometimes there’s multiple legacy systems in play that don’t connect as well as they could and have separate user interfaces. Other times, there are third party tools that are potentially fairly well embedded and established. So that puts up some walls between other functionality that, aside from all of the other plumbing that’s there to manage things on a per account basis. So there’s lots of challenges that we we see our clients, and really everyone in the industry dealing with. So I think, as Jeff was saying, the bottom up approach is much… that’s the right way to do it. You just don’t always have the opportunity to work in that way. That’s the thing that I think we’ve seen is quite different from the way that we’re working with SEI in that there is more of a holistic view of things. Let’s get this UMH underpinning right there at the bottom of the stack and build on top of it. That’s really the big difference, I think.

Jack Sharry: Yeah, that’s what I’m hearing. So, Jeff, let’s dig a little deeper, because I know you’ve been building this foundation for a while. You got a lot of great capabilities, and thinking particularly of your advisor portal, where you’re starting to make these tools available. They’re not fully connected as yet, but I imagine that we’ll hear some more, I’m sure, in a moment. I imagine they’re gonna be connected over time. So you keep adding smart tools and capabilities. What are some of the things you’ve been adding to help advisors operate more efficiently and that are designed to help advisors help their clients achieve better results and at the same time grow their business? So tell us about some of the tools and capabilities you’ve been building.

Jeff Benfield: Yeah, I think, Jack, the idea around efficiency or creating time for advisors isn’t new or novel. We’ve heard about it in the industry for now, years, decades. It’s really the golden goose with the statistics to support how much is client facing activity versus admin activity, and how we think about sort of changing that dynamic, or changing that ratio to be more efficient for advisors. So a lot of what we focused on, really is the age of digitization. So moving those things that used to be paper based, form based, kind of manual in nature, moving it into a digital environment, moving it as digital first, frankly mobile first, and then working backwards from there to automate the tasks that then support each one of those functions and activities. I think a lot of it, too, is around user experience. So when you think about kind of the evolution of both not just the advisor experience, but also the investor experience, the bar or the bell that’s been set by those in the market in general has just gone up. So everybody expects a more elegant user experience. So the comprehensiveness of the tools is sort of a double edged sword. It’s, you want to be comprehensive and complete, but it’s extremely important to have usability, and the ability to actually be able to use and utilize helps to support that efficiency when you go and move into digitization. So that balance of, you know, adoption and the ability to use married with not just kind of the technical side, but the digitization element, I think that coming together is really where we’re focused, and ultimately where I think the, frankly, industry is moving to when you think of those tools that are smarter, more automated, and, frankly, more intelligent as well.

Jack Sharry: Yeah, that’s been my observation a lot of people working on this, these multi account platforms. And the challenge is, how do you improve outcome? That’s the objective. But if you don’t make it easy to understand, easy to use, as Rob Pettman, now at TIFIN, formerly at LPL, says that if you need a training manual, there’s a design flaw. So clearly, what I’m hearing with this bottom up, top down approach that you’re both talking about, Martin, you’re more inheriting top down challenges, and would love to hear some more about that, but really the idea is, how do you improve outcome? How do you make it easy for the user. And the user is not only the advisor, and… it’s the advisor and the client. Really, they got to both use it and if you can do it so the client can get it on their own, hopefully, potentially all the better for the advisor. So, Martin, why don’t you fill us in on some of the things you’re seeing? I know you work on all these issues on a regular basis with a variety of different kinds of firms.

Martin Cowley: Yeah, well, so I think that… totally agree on the fact that ease of use is key. We, from the LifeYield side, we tend to be a headless system. We’re API first, so we tend to plug into the back of other systems, as you know, but certainly when we do have user interfaces, such as when we’re doing social security optimization, that’s an area where we’re very focused on streamlining it and making it easy, not throwing too much at the user, and you worry about click count and how long does it take somebody to perform an operation. So I think whereas we do see that goal of efficiency all over the place, it breaks down when you’ve got more than one system and you have to swivel chair in between the two. You could have two really efficient systems, but you’ve got a big moat in between the two of them. So that’s something that we do see as a struggle that folks have. Now when we’ve been doing some of the work with SEI, going back to the point about owning the whole stack, that makes things a lot easier, you can truly make a difference with click count and usability when there’s a single system that the user is doing pretty much everything they need to do through that system, it’s like the Alan Kay quote, what was it, people who are really serious about software should build their own hardware… So I think the same thing applies here. You want to own the whole stack. You want to be able to add layers without disrupting anything, and certainly without fragmenting the workflow for the user.

Jack Sharry: I have to say, Martin, there’s nothing quite like a software joke.

Martin Cowley: Oh, absolutely.

Jack Sharry: Thank you for that. That gave me a real chuckle. Sorry. So, Jeff. You’re putting a lot together. There’s more to go. As you all know, the ultimate objective is to connect and coordinate a variety of tools. So if you’d share with our audience how you see things playing out over time, because you’re part of a larger system and ecosystem, Martin’s favorite concept. So comment, if you would, about how you’ve built… what you’ve built so far, what you’re intending to build, how that all comes together around all the pieces you’re pulling together around data and financial plans and proposal systems and ongoing portfolio guidance and income generation and the key levers to potentially improve financial outcomes across multiple accounts, namely risk and tax. So that’s a mouthful. So talk a little bit about what you do, about how you connect the dots?

Jeff Benfield: Yeah, I want to touch on something that Martin actually just mentioned previously too, which is, you know, the partnership model, but the idea of API first and data integration to avoid the swivel chair. So Martin, you talked about the swivel chair and the concept of the swivel chairing. I think very intentionally, at SEI we’ve determined partnerships to make sure that the data moves seamlessly to avoid the swivel chair concept. Because ultimately the integration problem, Jack, as far as the industry goes, we haven’t solved it. I mean, we talk about it a lot. We talk about integration as a concept and a core concept, but from a platform and kind of an overall perspective, there’s still challenges without picking the right partner to be able to integrate to and making sure you’ve created the architecture and the platform to be able to support multiple functionalities, capabilities, and frankly, parts of the platform that both can stand independent but also work well together. Data, in my mind, is key to that. So as we think about kind of the future, I want to actually take a step back, because the history is built on upgrading that core custody system. But we actually started in the UK, so the first release of the new wealth platform began in the UK, and it’s actually where our partnership began with LifeYield and SEI as well, was in the UK householding problem that existed. Now there’s different registrations, there’s different account types, there’s different taxability. But the reality is that the partner selection led us to saying, how do we build an integration and a partnership that allows us to go across each one of those functions that you talked about, and the levers to pull to say there’s portability across both global, US and, frankly, other jurisdictions, when you get the core of the concept correct, and that was really the origination story, if you would, of kind of those. Now, as we continue to evolve and expand, a lot of this is saying, how can we, SEI, take what is the complexity for an advisor’s office and let SEI actually be the capital allocator for the firms that we support? So rather than the firm spending money in order to allocate their capital to specific things, let SEI do that. We’ll build out the capabilities. We’ll look at it holistically. Because ultimately, leaning into things like tax, leaning into things like regulatory and regulation, risk, compliance, but also the front end systems, proposal generation, portfolio management, frankly, the core portfolio construction capabilities, if there’s a competency that we can then go and say we can make it bigger, better, more efficient, more effective, but frankly, pick partners to then enhance or create that differentiated experience by combining those things. That’s really the direction that we see, Jack. But it’s, it’s built off of that history of kind of where we started, how we select partners, and then ultimately, how we evolve.

Jack Sharry: Great. Jeff, you’re speaking Martin’s language. And that, I don’t mean English as in the King’s English or Queen’s English, because our partnership started in the in the UK and I hadn’t fully considered the further complexity of currencies and understood the regulatory aspect of it, but just lots of complexity and how do you build systems to accommodate all of that, whatever the country might be, or wherever, but wherever it might be in, obviously, Martin, most of our work at LifeYield has been done here the United States. I’m sure you have thoughts on all this issue of complexity and how you build systems, because you’re largely entering from the top down, where you’re inheriting systems, where the foundation may not have been as well laid, if you will. So why don’t you comment on some of the things that Jeff has just talked about, just dealing with all this complexity.

Martin Cowley: Yeah, I think there’s a good division of responsibility between, in that UK case, what LifeYield was responsible for, versus the SEI side of the equation. We talked about multi currency, he mentioned multi currency, and that’s something that is squarely on the SEI part of the integration with base currencies and having to worry about exchange rates and everything multi currency naturally sits on SEI, and then on the LifeYield side, we’re effectively mono currency. We can take everything, regardless of the currency involved, and operate on a household as we do in the UK, and that feeds over into the US environment quite nicely. So I’d say that the thing that we were worried about and that we were really focusing on with our first integration with SEI in the UK was there are some tax differences. There’s no such thing as married filing jointly that we’re all familiar with in the US, you really file individually, and then one person can claim a credit based on being married to the other person, but it’s very individually focused. There’s rules around capital gains that we’re familiar with in the US, around long term and short term gain realization, where it’s you’ll get criticized if you realize a short term gain, whereas that doesn’t exist in the UK, those problems don’t exist. There’s no differentiation between short and long term. And the list of rules goes on, as you can imagine. My favorite is probably the wash sale rule in the US is very charmingly referred to as the bed and breakfasting rule in the UK, which sounds a lot more cozy. So we had to design with a lot of that in mind. And what we want to do from a product perspective, is we don’t want to have two different products. We don’t want to have a UK version and a US version and then a version for every other jurisdiction we might go into. So as we delve deeper, we found there are a lot more commonalities than you might think from the wording differences, and we were able to put those into the LifeYield API and the LifeYield engine, and have it work with minimal changes between the UK and the US. And that’s reaping benefits with everything that’s going to then happen on the US side as we introduce that same system onto the US side.

Jack Sharry: Gotcha. So, Jeff, it’s one thing to talk about all this, the design, the architecture, all the different wonderful theoretical capabilities. It’s quite another to do it. So why don’t you talk a little bit about the challenges of operationalizing this, because that’s where the rubber meets the road, particularly, by the way, at scale.

Jeff Benfield: Yeah. I don’t think we need to dance around the topic, which is, if you build an enterprise platform, it’s hard. There’s multiple segments, there’s multiple jurisdictions. It takes time. It’s making sure that you’re meeting all of the needs that you have of the client base and keeping the client or user at the center of everything you do. But there’s a lot of complexity in taking something that is challenging and keeping it simple. And keeping it simple means, how do you create the operational scale that you need to run large institutions, mega institutions, but keep it elegant so that your users will actually use, adopt, create, modify, maintain, and do all the things that they need to do. I think one of the things that’s important here, Jack, really, is we believe in eating our own cooking. So we’ve created an enterprise platform, but how we test operations and scale and continue to do so is we use it. So we use it for our own internal businesses. We use it across SEI as an enterprise, we use that as the underpinning, which allows us, then both as a user as well as sort of a provider, to make sure that we see those places that we need to invest, we see those places where we continue to kind of expand and differentiate, and we, frankly, are our biggest critics, but also our biggest supporters. So I think when we we take a step back, a lot of the times we take for granted that our platform runs for very large institutions and institutional clients. Think large wealth managers, kind of the large US banks of the world and multinationals, but that single platform is what powers all of those segments. It’s the same operations. Our SEI Private Trust Company is in the back end, so that’s our back office, our middle office capabilities support each one of those businesses. So we’ve really found a way to sit when you talk about operationalization and scale, to say, how can we apply a single platform infrastructure and architecture to multiple verticals within the wealth segments to be able to provide services and support across technology, asset management, and custody and operations, to be able to kind of bundle those together to create that platform that allows us to kind of build for the future.

Jack Sharry: Martin, do you want to weigh in? You’ve done a fair amount of operationalizing in your day, so talk a little about some of your observations, what you’ve learned along the way.

Martin Cowley: Yeah, on the ops front, one thing that we’ve been strict about, and this wasn’t the case early on in LifeYield, where we did have a big database behind the scenes, we ended up creating another reconciliation point for anybody that wanted to do household management. We moved away from that probably 10 years ago, if not longer. So we moved to a stateless, API first environment, where we could be plugged into the back of other systems, including SEI’s. And that removes a lot of operational hurdles that were otherwise in place. So that’s one thing. I mean, that’s really more of an architectural product design choice that we made that avoids introducing some unnecessary ops headaches. But then, I guess the other thing is that we’ve often seen people very eager to jump in with both feet on householding. And we have a lot of functionality in the LifeYield APIs and engines that it’s tempting to try and use too much all at once early on, so we normally help ease people in. So eventually you get to the destination that you want to get to. And you may have something that is pretty robust on the householding front, but there are certain things that you can focus on early on, household management and asset location. There’s a lot of benefit in doing that and focusing on after tax returns, using the characteristics of different asset classes and different account types, and then you can grow from there all the way through to smart withdrawals and income sourcing, even over a long period of time in retirement. So it’s that not doing too much, not biting off more than you can chew at the beginning that really helps ease in and mitigate some of the ops problems that might be introduced otherwise.

Jack Sharry: So, Jeff, I know you’re in motion on a lot of what we’ve been describing. A bunch has been built. I imagine there’s a bunch more that’s in the queue to be added. Why don’t you talk a little bit about the future, and also just some key takeaways, kind of a combination, if we could, just, where do you see things going? And then some, maybe some advice to those that are brave enough to try to pull off what you guys are trying to pull off. Please tell us.

Jeff Benfield: Yeah, I think where we’re focused and where we’re putting our time in really is relationship centric views. And not just the relationship centric views, but the capabilities that surround those views to act at a relationship level, at the center, that’s personalization as a theme, but personalization really manifests itself taxes and then goals. When you think of goals, it’s cash flow, but tax as the center of what we do, and our ability to lean into that, to make sure that we’re the platform that is best suited to solve that problem of the household balance sheet, and how we’re able to solve the tax problem is really where we’re going and utilizing and leveraging the technology that’s built and currently kind of coming out, to make those smart tools, make them intelligent and really give that personalized feel, is where we’re leaning into and I think the other piece, Jack, is really to say we’ve built a institutional grade platform for our users, and let us really invest the capital to let advisors and firms invest their capital to grow. We’re strategically aligned with growth oriented firms. We want to continue to be able to enable that growth. I think really, as firms are thinking about doing it, it’s really about selecting the right partners in order to make that successful. We’ve looked at that, frankly, through the lens of our partnership with LifeYield and how we’re able to take capabilities and bring them to market faster than we would be able to do ourself. When we look at a platform, we look at it the same way and advise our clients to say, think about it as a partnership, and who you want to be partnered with in order to take you to the future. We think we’re well positioned to do that as well.

Jack Sharry: I have to say, that’s great. One of the things that, just some background for those of us who are listening might be interested. We got together with SEI now a few years ago, and it started with a client request for asset location in the UK. That was the starting point. My observation, having gotten to know SEI a bit over the past two years, is they are very, very client centric, and then trying to figure out how to solve problems. And they were already, they were onto this tax thing a while ago. I know they built that capabilities, and if you want to check it out, check out their website. They really got great wherewithal. It’s really what caught my attention is we talk a lot about this stuff each week. And of course, Martin, from where you sit, you work with a variety of firms beyond SEI as well as SEI itself. What are your observations about where our industry is headed? What are some key takeaways from where you sit in terms of what people should be mindful of as they might engage or try to determine how to move forward in this space?

Martin Cowley: I’d say the move towards householding is happening, and it’s pretty widespread. Some people are further ahead than others, and some of the points from earlier on about the disparate systems that don’t connect well, and the swivel chair workflow, there’s definitely some difficulty. And there’s difficulty in place. There are some barriers that are up that make it more difficult to move in a UMH direction. As far as our work with SEI goes, Jeff had a point earlier on about how nobody bats an eye at doing financial planning at the household level. And yet, when you get through to implementing the accounts, then it is account by account. So just trying to smooth that whole workflow out and have the theme of householding truly carry through to the accounts that contain the investments that were talked about during planning, obviously makes an awful lot of sense, but it’s not real yet in a lot of cases, I think SEI is definitely pretty far ahead in that front just with the new system that’s being built. And the fact that it’s multi currency, multi jurisdiction, is just icing on the cake. It’s very powerful. And the other thing I’d say is going back to I think I say this in every podcast that we’ve done, Jack, just the land and expand philosophy, where it’s always good to pick something that’s valuable, focus on that, really support people in using it, the advisors that are using the system, and also their clients, so they understand the incremental benefit that they’re getting. Often when we talk about asset location, sometimes it’s unfamiliar and it takes a while to really get people comfortable with it. So that’s another benefit of the land and expand approach.

Jack Sharry: So, Jeff and Martin, this has been a real pleasure to talk with you both, both really doing super smart stuff, and exciting to see our industry is moving ahead in a really important way. Move is on to UMH. Check out my recent article in FA Mag about what’s up with UMH, give you some more detail that might be useful. My conversation with both of you, gentlemen, has been a lot of fun. I’ve enjoyed it. For our audience, this is another in a series of what we call WealthTech in the Weeds podcast. We will announce more guests on this topic over time. If you’ve enjoyed our podcast, please, rate, review, subscribe, and/or share what we’re doing here at WealthTech on Deck. We’re also available, not only wherever you get your podcasts, but you can check us out on our dedicated website that we recently started, called wealthtechondeck.com. All of our podcast episodes are there, along with the blogs and curated content with many folks around the industry. We, for those of you that would like to weigh in, we’re receptive to hearing what your comments are in this whole notion or whole concept of multi-account, UMH management, so please contact us. So, Jeff and Martin, thanks so much. It’s been a wonderful conversation. I look forward to our next.

Jeff Benfield: Thanks for having me, Jack.

Martin Cowley: Thanks, Jack.