January 19, 2012

WEALTH ADVISER: Dynasty Win Tracks Broader Trends

By Thomas Coyle

–Upstart support platform wins big-name client

–Alexandra & James prefers unbundled providers

–Trend tracks software’s move into the “cloud”

Alexandra & James LLC, a New York wealth-management firm associated with the Lebenthal brand, has ditched several wealth-service providers in favor of upstart Dynasty FinancialPartners.

Besides giving year-old Dynasty a big-name client, the switch points to a trend favoring companies that integrate products and services from different providers rather than produce them in-house.

“We’re always looking for the best of what’s available–and what was available 10 or even five years ago was limited compared to what’s out there today,” said Alexandra Lebenthal, chief executive of Alexandra & James, whose municipal-bond business still carries the name, Lebenthal & Co., that made her family famous in the retail-bond market.

So when she and Michelle Smith, head of the company’s wealth-management business, took a hard look at their outsourcing last year, they decided that Dynasty, a firm that provides investment and technology services from other companies, was the way to go.

In general, Smith says independent advisers–especially those with ambitious growth plans–want flexible partners who aren’t married to home-grown systems.

On this theory, Dynasty can react to change more quickly than some of its rivals because it isn’t weighed down by infrastructure. It uses Callan for research, Envestnet for execution and Black Diamond for reporting, but there’s nothing to stop it from replacing or augmenting these providers with nimbler competitors.

“Advisers and independent firms want choice, and so, ultimately, do their high-net-worth clients,” says Smith.

Among other providers Alexandra & James dropped in favor of Dynasty was Fortigent, which provides outside-manager research, in-house reporting and other wealth services to investment advisers and banks. Smith said Dynasty is a “better fit” because it could be more flexible than a firm with built-in capabilities.

Fortigent Senior Managing Director Scott Welch said the firm’s offerings “can be unbundled and delivered a la carte if that is appropriate for the advisor’s firm and business model.” In addition, Fortigent integrates with “a variety of third-party service providers,” he said.Rockville, Md.-based Fortigent is slated to be acquired by LPL Investment Holdings (LPLA).

Dynasty board chairman Todd Thomson says independent advisories want outsourcers that are focused on helping them solve problems, not figuring out how to make old systems pay. “As an integrator, we’re adding value for our partners where we can, not trying to recreate the wheel,” he said.

The growing reluctance among wealth firms to deal directly with hardwired providers is analogous to the software industry’s move into the “cloud,” according to Kip Gregory, a technology consultant in Washington.

“Given the speed at which technology is changing, people are afraid of getting stuck with stuff,” says Gregory. “So, whether you’re talking about software or social media or investment capabilities, no one wants to get involved with solutions they can’t get themselves out of pretty easily.”

Alexandra & James manages around $1 billion in client assets.