Jack Sharry: Welcome, everyone. Thanks for joining us for this week’s edition of WealthTech on Deck. We spend time on our podcast discussing strategy and technology as it plays out around the confluence of digital and human advice, as you know if you’ve listened before. But as important as strategy and technology are, it always comes down to people, clients, advisors, colleagues. It’s often said that this is a people business or a relationship business. And yes, smart strategy and good technology are critical. But in the end, we work with people, we serve people. Today, we’re going to talk to someone who has spent the last quarter century building technology and platforms to better serve clients and colleagues. As you will hear, what gets him out of bed in the morning is being able to solve for things that keep clients awake at night. He is very clear, he wants to make their lives easier and better. And he is someone who is committed to elevating the client and employee experience. Our guest this week is Darren Tedesco. Darren is the president of Advisor360. I’ll let him fill you in on his background at Commonwealth Financial Network, where he spent many years and how that evolved into Advisor360. So, Darren, welcome to WealthTech on Deck.

Darren Tedesco: Jack, thanks for having me. Great to be here.

Jack Sharry: Our pleasure. So, Darren, let’s start with you telling our audience about your background. Tell us what you… how you got started at Commonwealth, what your journey looked like there, and how that evolved into Advisor360.

Darren Tedesco: Sure. So yeah, it’s a long journey, 30 years in the making. So going back into the early to mid 90s, I started at Commonwealth mostly out of school, I was at a Fortune 500 company for, you know, basically a cup of coffee before then. But I started as a staff accountant, actually, you know, my goal in life coming out of college was to be a bean counter CPA when I grew up. So I was excited to be in that profession. And after getting a couple of years under my belt there at Commonwealth, I realized, well, I’m pretty good at math, I don’t know that I’m gonna really make a difference in anyone’s life other than our CFO. And so I decided, how about mixing things up a little? And I was asked to then go lead a group that basically was in charge of paying advisors, both commissions and fees at the time. And with Y2K, the CFO asked me to come in and build a new compensation system to ensure that you could pay advisors, that’s important to the advisors who affiliate with a wealth management firm, of course. And so it took us a couple of months, actually, it was a really quick project, we got that done. And that really propelled my career over into the newly kind of formed Technology Group at Commonwealth, where I spent a couple of years really as a business analyst, kind of a project manager trying to figure things out, spending a lot of time talking to advisors. So that was kind of one of my first kind of exposures to a lot of advisors, and really trying to figure out what was their pain that they were experiencing running their business and dealing with just day to day in the trenches with clients. And the number one thing that I heard back then was, it’s so hard to basically go to multiple systems to try to piece together everything I need to do to manage my client relationship. And they actually didn’t use the word client, interestingly enough. They used the word household. It was a common recurrence I heard in 2001/2002 that I really think of my clients as households, I manage them holistically across the households, husband and wife, partner partner, or whatever it happens to be. And even the kids kind of brought into that. So I spent the better part of kind of a year thinking through what it would mean to create a household centric system. And in 2003, we built out a household data model, and really did some auto householding with both direct business, business held direct that fund families, annuity companies, alternative investments, and in brokerage and advisory accounts, which was pretty unique at the time. Most companies, you had to go to kind of multiple places to see that, we brought that all together and then built out our first portfolio accounting performance system based on that household logic. Then we just kept bolting on pieces as part of our platform strategy, which was added CRM, added goal planning, added client portal, added a whole bunch of trading capabilities, and just kept building out this platform centric view of the household. That was really what our advisors were asking for. They were like, give me a simpler way to manage and help my households grow their wealth and de risk kind of their kind of wealth loss and help them… set them up for success. So the team spent the better part of a decade inside Commonwealth building out that platform. It was probably you know, closer to 15 years before all is said and done. And then as you know, the story kind of we spun out into Advisor360 as a fully separate company. We have our own separate board serving multiple clients and happy to expand on that if you want me to kind of go further on that.

Jack Sharry: Yeah. I try to pride myself on being a student of the business, I’ve followed Commonwealth for years. Commonwealth is based in the Boston area, some may know, and it’s where I live, and I’ve known a number of the folks that started it and have run it. Many folks over time. I’ve always admired the firm. And then when I saw you guys did this Advisor360, I’m not sure it was called that, I think it wasn’t called that at first. I seem to recall MassMutual had something to do with it. Anyway, maybe fill us in on the story. How did that all come together? And then I’d love to hear where you are now.

Darren Tedesco: Yeah, so the model was this. When I was… and I managed the technology department at Commonwealth, we, you know, at the time, we probably had, like, 300 or so people inside my department, building out the technology for a single broker dealer. And I kept coming to my partners, Commonwealth, by the way, great people there, continue to have great relationships with them there. They, I was going to my partners at the time saying we’re going to need to spend and accelerate our spend on technology to keep up with the Joneses, if you will. I didn’t mean Edward Joneses, I mean, just the Joneses in general, right. And so we really wanted to win the tech arms race, right, and we knew we were gonna have to spend more. The problem we had at Commonwealth was, it’s a slow growth model, meaning they don’t want to play a volume game of quantity of advisors, they really want to focus on quality and community of advisors. Higher end advisors, but not really playing a numbers game, which meant that we wouldn’t be able to amortize accelerating technology costs over a larger user base. So we had a couple of options. One of the options was to divest our technology and kind of do anything you want to go use advisor, go ahead and buy whatever you want. That was one strategy. Another strategy was to just continue to spend more and have kind of profit margins erode. But that comes at a cost at some point, if those erode too much, you got to make other trade off decisions. And so the third possibility was should we look at potentially licensing our technology to another broker dealer or kind of roll up RIA, and basically have a shared economics model, that we could basically grow our technology resources through shared R&D, that would allow them to basically leverage the investment we had made at Commonwealth, which at the time that platform investment was almost a billion dollars. So we had a lot of money that was invested in it, and we knew we were going to invest more to basically win the tech arms race. So, long story short, we had a lot of conversations, we initially were thinking about kind of spinning it out through a PE kind of venture type of arm. But we then ended up landing with MassMutual. So MassMutual came to us with a strategic conversation, which morphed into their CEO at the time, John Vaccaro, he’s still there, good friend of mine, said, we’re going to spend a lot of money over a kind of five year period to try to rebuild our entire technology platform. There’s risk associated with building out that platform, I don’t know if we can execute on it. I know everything that every company in the world does usually takes longer and cost more money than they do. He knew the history of just how many failed technology projects that were highly exposed technology projects in the media where and so he’s like, I can de risk this by leveraging a platform that’s already been tried and true, used by a large enterprise with some of the most productive advisors in the universe. So that kind of birthed Advisor360 as a spin out, because you’re probably very familiar with REG SP where, if you’re inside a broker dealer, you can’t see another broker dealer’s data, right? Like there’s, there’s walls that need to be maintained. So we had to fully separate as a company, Advisor360. And so I’m no longer affiliated with Commonwealth anymore, still have tons of friends. And obviously, they’re a client of ours now. But the… we had to be a separate standalone technology company so we can house multiple wealth management firms’ data on our system. And so that’s kind of the birth of the story. And we’ve been continuing to grow, we’re now at somewhere about 750 total people, of which about 500 are in our engineering and product department. So that’s kind of the promise of the shared R&D model is being delivered. Last year, we delivered about 200 roadmap items, just to kind of give you some context as to what our robust kind of roadmap and that group of engineers can do for us. So.

Jack Sharry: And as a matter of timing, when did you guys split from Commonwealth or just split… Basically, set up two separate business units. What… when did that happen?

Darren Tedesco: We announced the kind of MassMutual as a client in February of 2019. And we officially split out on April 1, April Fool’s Day of 2019. So.

Jack Sharry: Gotcha. So, talk a little bit about it. Sounds like… I didn’t realize you have such a big crew working on all this stuff. What are the sorts of things you’re working on? What are you excited about? What’s happening now at Advisor360? We’ll talk about where you’re going in a little bit. But let’s start with what you’re excited about for now.

Darren Tedesco: Yeah. So we… again, we have a pretty robust roadmap for our clients in 2023. Let me highlight some of the things that I’m most excited about. Again, there’s literally hundreds of items that we’ll be rolling out this year. So first on my list is probably a new advisor portal. So we’ve gone through multiple iterations of our advisor desktop and experience kind of over the years, we had a major upgrade to it on the household module last year. This year, we’re going to do a major upgrade on the practice or enterprise level. So how you kind of segment your business, how you look if you’re wearing your CEO hat of a business, how you look across all of the advisors or staff in their business at tasks, at notifications, at alerts, at next best actions, all of those types of things are going to get a different user experience, we’ve got a lot of feedback from our clients on how that will work. So that will be rolling out here in the fall, we’re super, super excited about that, got a lot of… a great team of people working on that. So that’s probably top of mind just simply because the company is called Advisor360. And so when you’re rolling out a new advisor portal, it’s a pretty big deal. So very excited for that one. Probably next on my list is a new client mobile app, I always kind of like to remind the team, remember who pays every single one of us in this entire industry, it’s the clients, right? It’s the value chain of a client, paying the advisor, advisor paying a wealth management firm, a wealth management firm paying me, and me paying my employees. So, you’ve got the client to thank for that. So if you can really create an amazing client experience, and we rolled out a new web based client portal last year, they’re gonna be happy. If a happier client means happier advisor, happy advisor, happy to part with money to a wealth management firm, who’s happy to partn with that money to us. That’s how it works. If you can make people’s lives better, they part with money, so that you’ve made the… because you’ve made their life better. So we didn’t at the same time, and probably would have done this a little differently in hindsight, but we didn’t upgrade our mobile app at the exact same time because we wanted to create a different experience than just a pure kind of taking the web and, and turning it into a responsive kind of site. So we’re really trying to have a new mobile experience for clients that should be rolling out here in about a month. So we’re very excited for that, that needed a major upgrade, and it’s going to get a major upgrade. I’m very excited for that. We are spending a lot of time, money, and effort in our digital onboarding efforts. That’s probably kind of the third area I would highlight. We do aim to be the best digital onboarding and account opening experience in the planet, frankly. We’ve already won several awards for that platform. The probably biggest piece for us is really getting into a true STP multi custodian world. When we were inside Commonwealth and even MassMutual, they were mostly Fidelity shops, meaning most of their advisory and brokerage accounts were housed at Fidelity. With our pipeline and our prospects, they don’t all clear through Fidelity. Some are Pershing, a lot of the RIA roll ups are Schwab, they used to be TD or Schwab. Now, it’s really just Schwab and IWS these days. So we’re basically… and we’re just finishing wrapping up our Pershing integration for digital onboarding. So that’s super exciting, which will help us serve a larger swath of clients. And then sometime in the third or fourth quarter, I don’t have the exact timing yet, we’ll hopefully be having the Schwab integration, which will basically give us the three major custodians from a digital onboarding experience. And that’s whether it’s multi account opening, so you want to open an account at Fidelity and Schwab simultaneously. It’s also bulk onboarding, so if an advisor buys a book of business and wants to bulk onboard clients onto theirs, or even for a broker dealer who has a bulk onboarding of an advisor into the platform. So again, an advisor leaves broker dealer X, and joins, call it MassMutual, they’ll be able to help onboard that advisor in a much more rapid pace through our platform. So, so a lot of great enhancements being made there that I’m super excited about as well.

Jack Sharry: So, Darren, this is terrific. I knew you guys were doing good work, but I’m kind of blown away, to be honest with you. Why don’t you fill us in, just maybe one or two more, it sounds like you had mentioned earlier that you got like 100. So maybe one or two more, just to give our audience a sense of kind of the direction that you guys have been pursuing?

Darren Tedesco: Sure. The two that I’ll lead into kind of, or end with here, we have this system we’re developing called VIDA. And so VIDA stands for virtual digital assistant. So for us, that’s really, it’s taking a lot of the data we have. So we’ve got hundreds of terabytes of data that’s in our system across multiple disciplines. So we’re an all in one system, doesn’t mean we’re in everything in one, we’ve got like 40 or 50 integration partners tied into the system as well. But what that does is allows us to go across disciplines in a very kind of interesting way to see correlation and causation across again, whether it’s CRM, planning, performance, a whole bunch of kind of data elements and put those together in an interesting way. One of the things that we’ve done for a long time is served up alerts, notifications, next best actions that are about hey, here’s the things that you should be aware of Mr. or Mrs. Advisor, whether you’re wearing your CEO hat or your advisor hat, or frankly, the assistants and staff in the office on actions you should be taking. One of the things that I’m most excited about is getting to the point where those actions are automatically being taken on their behalf. So it’s taking next best actions and kind of putting it on steroids, for lack of a better term, and really saying, hey, I can automatically send out notifications of scheduling to clients, have them schedule their own meetings, I don’t need people to be doing a lot of these tasks and automating those. So, so I’m super excited about that. The data layer is really one of the biggest challenges from all of the prospective clients we talk to, it’s one of the number one kind of struggles that they have, good, clean data. And so we’re spending a lot of time both kind of enriching and automating even more of our automation wrapped around what we call our unified data fabric, or UDF. And so that’s something that I’m super excited about and exposing that out into Snowflake, which we’ve got pilots going with our clients on Snowflake, through SDKs, and other ways to kind of get them their data in an enriched fashion, in a householded module. So there’s a lot of great stuff we’re doing with data, that’s going to be a really important part of the future. At the end of the day, most companies, not just software companies, to be clear, most companies have to think of themselves as data companies as well, in almost every single industry. There’s troves of data everyone has access to. If you don’t take advantage of your data, your competition is going to take advantage of their data. And you’re going to lose the kind of arms race in whatever industry you happen to be in. So we try to be the stewards of the data for our clients, and allow them to take that and glean insights for how they basically can either go to market better, products, marketing, whatever else that happens to be, data is essential. And if you’ve got faulty data, your software, frankly, is built on a house of cards, you’ve got to have good, clean data to really drive the future of where the whole industry is going, frankly.

Jack Sharry: So, Darren, this is incredible. Really great work that you guys are doing, very impressive. Seems like you’ve… I don’t want to say it all figured out, but pretty darn close. I’m sure there’s there’s more that you could have gotten…

Darren Tedesco: We don’t have it all figured out, trust me, Jack.

Jack Sharry: But you’ve got a really, a pretty impressive head start. So much of what I hear about the competition. That all said, where do you see the world going? Not only for Advisor360, but in general. What’s, what’s on the horizon? What’s out ahead of us that you’re excited about, intrigued by, thinking we might get to sooner than later? Talk a little about the future of advice?

Darren Tedesco: Yeah, so I think there’s probably two major areas that I would hone in on. One is really focused on planning. And I’m going to air quote “planning” here for a second because I think that’s a tricky word. That means, it’s kind of like wealth management. What does wealth management really mean, right? So some people think of it as investments, we think holistically as banking, insurance, investments, it’s managing someone’s wealth. Others might think of wealth including personal wellness and well being of the kind of clients’ mind, body, soul, even, not just wallet, right. So, but, so on the planning side, I think it’s important to, you know, the planning in financial planning, as it was looked at 20 years ago, that was a financial plan that got generated, printed out, handed to a client, and by the time that handoff actually happened, it was already out of date, right? People realize the world is moving in real time, your credit card’s being charged almost multiple times per day for just things that are recurring, whether it’s your Netflix Bill, you know, grabbing a sandwich that you tap your phone on, whatever. So, so that’s just ongoing. And so I think scaling the planning process is kind of the next frontier in where this industry is really looking to go. When you step back and look at the robos of a decade ago, most of them frankly, don’t exist anymore. But they were really designed to scale the investment management process. So there’s a lot of great companies, many who we partner with that have their own ways of scaling the investment management process. You know, models, tax loss harvesting, efficiencies on UMAs SMAs, et cetera. That’s not really kind of what it’s all about. Investments are a means to an end, by the way, you do need to kind of have the investments to ultimately help you achieve your wealth or your goals as a client. But scaling the planning process, if you think about an advisor who’s trying to grow his or her business, that’s much more challenging and much more time intensive. And so how do we help them do that? That is something that’s a heavy thesis here at Advisor360. And something we are focused on. What I’ve generally come to the conclusion on in talking to a lot of advisors, reading a lot of research and kind of, you know, brainstorming with the team here is, I believe the answer to that is co-planning. We actually have done a connected Wealth Report for both advisors and clients here as well. One of the interesting pieces that came back and this is probably very different from where we were 15 years ago, which is clients actually want to be involved in the process. I think there’s kind of some old school thinking and mentality that if I’m hiring an advisor, it’s your job, Mr. or Mrs. Advisor, to go actually do everything for me. I think there’s been a generational shift that’s happened in the last 15-20 years or so where clients actually want to be engaged and involved. Now they might not all want to have the same level of engagement and involvement. So we at Advisor360 need to design the toolset that allows the spectrum of involvement of client engagement. But if you can get a client who’s kind of entering kind of their desired dates for kind of retirement, or hey, here’s stuff that’s held away from me that I can allow you to see, Mr. or Ms. Advisor, that helps you plan better. And they’re doing all of that in real time or in their budgeting app, going and taking uncategorized transactions and categorize them in real time through a mobile app for you. That helps the advisor understand, oh, here’s how much of your expenses from a cash flow perspective go into food a year. All right, you’re spending $25,000 in your food bill. As we’re planning for retirement, this helps me figure out what you need for your necessities, your wants versus your needs, right. So it’s putting the client and the advisor on the same side of the table, they always kind of were on the same side of the table. But actually having the client do some of the advisor’s work for them, or what used to be considered the advisor’s work into the client’s hands. I think if you can enable them with the right tools, and even gamify it in some cases, they basically will be more engaged and probably be willing to pay more money to the advisors, frankly. This will also allow the advisors to take on more clients because again, one of the most time intensive parts of their day is taken away. So, so I think that’s one of the big pieces, Jack. The other biggie that I think kind of you’re gonna see a lot of, and this is actually, believe it or not, how advisors get served, not necessarily how advisors serve clients. We don’t really serve advisors directly, meaning, yes, our software is in the advisors’ hands. But we actually serve wealth management firms. We’re serving enterprises, generally companies that have over 500 advisors, those are the firms that we’re serving. One consistent theme that our prospective clients and even our existing clients are telling us is like, we’ve got kind of cost pressures from our boards, and kind of we have concerns about the regulatory environment, whether it’s DOL, cash sweeps, whatever else it might be like, they’re thinking about how do I scale the wealth management, home office kind of back office business in a way that allows me to serve more advisors more efficiently? Generally, I think the data that I was talking about is a really important part of that story. The use of AI, I mean, every company who’s not talking about AI is doing a disservice to their investors and shareholders, for sure. I think AI is really going to transform the financial services industry in a way that no one ever imagined where these wealth management firms that are early adopters, and can embrace that AI technology in a way that helps them to scale the service and support of advisors, will allow them to be the winners at the end of the day of the oligopoly that almost forms in every commoditized industry. So I believe you’re gonna see a lot moving forward in AI, both for the advisors in servicing clients, but I think even more so for wealth management firms serving advisors.

Jack Sharry: So as we look to wrap up, what are three key takeaways you want to share with our audience?

Darren Tedesco: I think the three key takeaways are wrapped around data. You’ve got to have really good, clean data. If you don’t have that, then you’re already behind. And you’re going to be at a disadvantage. And probably any software solution you’re looking for in the future is not going to really do a good job for you because you have a faulty foundation. So that’s one. Two would be again, we just covered both of these, but I really think thinking about scaling the planning process is going to be mission critical in the next six to seven years. The firms that can figure out how to do that in the best way for their advisors are going to likely win the hearts and minds of the advisors and ultimately, the clients. Remember, the clients are the ones who pay everyone in the value chain. And then the third, which again, is at everyone’s kind of newspaper, kind of headlines every day is AI. Again, AI, I’ve heard people describe it as what the internet did for kind of the last kind of 30 years of all of us, AI is going to be the next 30 years. And I actually believe that. I really believe it’s going to change the job makeup in America, and actually the world, not just America, the world, in how kind of employees work for a company, with a company, and with the technology assist that helps them get their jobs done faster and differently. So I think we’re gonna see a fundamental shift because of the data, the AI in the planning. That’s kind of my answer, Jack.

Jack Sharry: That is one of the best and most succinct answers I’ve had to that question of three key points. So thank you for that. That is great. Great, great job.

Darren Tedesco: I tried to be straight and to the point.

Jack Sharry: Yes, I totally get it and appreciate it. So, as we do on each of our podcasts, I have one last question, always my favorite. What do you do outside of work that you’re excited or passionate about that people might find interesting or surprising?

Darren Tedesco: So I’m a firm believer in mind, body, soul. And so I believe you got to basically be in good kind of shape physically if you want to be good shape mentally and there’s a spiritual element as well to me. So I spend a lot of time on all three of those. Like, to me, it’s how do I keep my mind sharp? How do I keep my body sharp? I do a lot of open water swimming, biking, running. I just ran a 10k last week down in Virginia. So that was exciting. I almost died. But I had my best time ever. So it’s important for me to have those three things that allows me to be sharp mentally. And when I’m sharp mentally, I feel like I can make the biggest difference in the world through technology.

Jack Sharry: That’s great. I really have enjoyed this conversation, Darren, this has been a lot of fun. Really, I learned a bunch.

Darren Tedesco: Agreed. As have I, Jack, thank you.

Jack Sharry: So, for our audience, if you’ve enjoyed our podcast, please rate, review, subscribe, and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. Again, Darren, thank you. It’s been a lot of fun.

Darren Tedesco: It has been. Thanks again, Jack. Great seeing you.