Pershing gives ex-LearnVest the mandate to create an ‘end-to-end’ solution for RIAs from scratch, but his first step is to buy the medium – direct indexing



Custodian RIA invests Ainslie Simmonds with the capital and mandate to create the industry’s first all-in-one solution from a blank page.

BNY Pershing poached a visionary known to hunt one of the guard industry’s great white whales under a mysterious name more akin to science fiction than financial services.

Jersey City, NJ clearinghouse hired Ainslie Simmonds and tasked her to lead “Pershing X”, a giant, all-in-one, plug-and-play repository of technology and investments for RIAs and other advisers.

Jim Crowley: “Pershing X will provide the industry’s leading end-to-end consulting platform. “

She became president of Pershing X in October and started her tenure with a small step. It bought Optimal Asset Management, one of the last direct index companies still in operation after similar companies were swallowed up by other acquirers.

“We felt that Optimal Asset Management offered the best technology. Direct indexing is a new capability for BNY Mellon. This acquisition is a key part of the solution portfolio we envisioned for Pershing X. It will allow us to accelerate the launch of Pershing X’s. advisor platform, ”says Simmonds.

Pershing CEO Jim Crowley said “Pershing X will provide the industry’s leading end-to-end consulting platform,” according to a statement.

“Wealth management companies can select a custodian and often rely on several different technology providers, each operating under a separate stack. This creates a patchwork of applications, data redundancies, and an inefficient experience for advisors and investors.

“Pershing X is set up to solve this very problem,” he added.

Intuitive counter

Crowley’s Pershing X will swim in waters that have swallowed similar efforts by Schwab Advisor Services, TD Ameritrade (TDA) Institutional, and Fidelity Custody & Clearing.

Tim welsh
Tim Welsh: “We’ll see with Pershing X, but the odds are definitely against it. ‘

Schwab’s “Project C”, TDA’s “VEO”, and Fidelity’s “WealthCentral” all splashed heavily before sinking below the surface.

Pershing will struggle to create an all-in-one RIA capability. But even technical success does not guarantee that it will meet its business goals, says Timothy Welsh, founder of Nexus Strategy.

“I think Pershing X will end up like every other failed custodian tech bundle,” he adds.

“While this all looks great on paper, it fails to recognize the underlying principles of the RIA market.

“Consultants are independent for a reason and want their technology to be too. Additionally, most, if not all RIAs, work with multiple custodians and will always need a middleware solution independent of any custodian. ”

He adds, “So we’ll see with Pershing X, but the odds are definitely against it.”

Ripe fruit

Getting into the indexing arena is a challenge, says Iraklis Kourtidis, CEO of Rowboat Advisors and creator of Wealthfront’s DI.

“No one wants to be the first to do anything, but neither does anyone want to be the last, or – worse – to be left behind. not enough DI companies to buy. “

What might be sub-optimal about buying Optimal is that some of its bigger and better competitors have found themselves in the hands of Pershing’s competitors and have gotten a head start on the changes. for the wider market.

“A lot of companies bought the easiest to hang fruit,” Murphy said.

Earlier this year, Vanguard bought Just Invest, a direct indexing company, and the terms of the deal were not disclosed. A year ago, BlackRock spent $ 1.05 billion to buy Aperio in 2020, which held more than $ 39 billion in assets at the time of the transaction.

Iraklis Kourtidis
Iraklis Kourtidis: “No one wants to be the first to do anything.

Goldman Sachs also bought Folio and Charles Schwab Corp. purchased Motif. Morgan Stanley bought Eaton Vance, parent company of the Parametric index company.

Earlier this year, JP Morgan bought OpenInvest, which manages $ 105 million. See: As part of the sale to JP Morgan, OpenInvest orphans RIA clients and fires the startup’s direct index sales force

Pershing himself has made his own efforts with “X” marked software – the most famous being NetX360 before 2010. See: Nevin looks under the hood of NetX360 after getting 100,000 new users and a few redesigns

Fidelity is also on a new ‘X’ round with FMAX – also undertaken under the specter of an overwhelming RIA guard force in the ‘Schwabitrade’ suit. See: Fidelity’s Mike Durbin Launches FMAX As ‘Schwabitrade’ Comes To Life, But If They Build It, Will Distrustful Advisors Join It?

Essential solution

Even though Pershing may seem late in the direct indexing game, Simmonds says that in the grand scheme of things, no one is far ahead.

Brian murphy
Brian Murphy: “Many companies bought the easiest fruits to hang”

“In fact, we think we are in the early days of direct indexing,” she says.

Pershing will start offering more direct indexed products on a phased basis by 2022, she said.

Direct indexing is available to Pershing Wealth Solutions clients through Pershing X and will be offered to BNY Mellon Investment Management clients over time.

Simmonds says direct indexing is essential for RIAs. “Advisors compete with each other on the quality of advice, the personalization and choice they can offer.

“Customizing a portfolio for a client allows advisors to enhance the conversation and relationship between the client and the advisor to implement personalized ‘just for you’ style portfolios that more accurately reflect the client’s interests,” rather than putting clients in one of the “size fits most” style bundled investment vehicles, she explains.

She maintains that Pershing X is not just for RIAs, so there is resource support from a broad base within the BNY Mellon conglomerate.

“The advantage of the Optimal Asset Management – Pershing X relationship is that we can bring its benefits to clients of Pershing and BNY Mellon Investment Management. “

Direct indexing frenzy

Direct indexing is a form of separately managed account that allows investors to buy stocks in an index without having to buy a mutual fund or ETF. The kicker is that it also allows a way to tilt an index towards ESG goals.

Vijay Vaidyanathan
Vijay Vaidyanathan: “A big thank you to my future new boss. “

BNY Mellon Pershing has bought Optimal Asset Management to ensure it can profit from the direct indexing frenzy, which is expected to grow from $ 350 billion in assets under management in 2020 to $ 1.5 trillion by 2025 , she says.

Optimal, an RIA, manages $ 981 million in assets for 96 clients with a large pension fund, according to its ADV. The ADV lists four employees, not counting office workers.

Pershing, who did not disclose the purchase price, said he would use Optimal’s solution for its RIAs and also wanted Optimal to develop additional solutions.

Optimal founder Vijay Vaidyanathan, PhD, and the rest of the staff will move to Pershing. Vaidyanathan was enthusiastic about the acquisition on his LinkedIn page.

“Many thanks to my future new boss Ainslie Simmonds for running the business and the warm welcome on board. We will be building some breathtaking technology.”

Optimal gives Pershing a head start to be able to create new indexing products, says Brian Murphy, Founder of Pariveda Inc. “They all want that technological capability in-house.”

New management

Murphy says Pershing has gained very specialized knowledge and understanding.

“It’s not just about taking the product as is and putting it on the platform. I think Vijay brings some interesting stuff for Pershing to deploy it.

“There are fundamental things he understands and can deliver at Pershing,” says Murphy. “You are buying from people who are dedicated to working on this particular problem.”

Murphy suspects Pershing of launching new products within a year.

When asked if Pershing would retain current Optimal customers, Simmonds declined to answer.

“We plan to integrate current Optimal solutions into the Pershing X platform. Over time, we may improve or develop new solutions,” she said.

Lockwood can also be a piece of the Pershing X puzzle, Simmonds said in an email. “Lockwood is certainly going to be involved in this integration and the subsequent product offering. “

Proven winner

The move is the latest in a series of Pershing, which became the third-largest default custody company, following the Schwab / TDA merger in 2020. It now sits behind Schwab and Fidelity Institutional.

At Simmonds, he has a rare and proven winner in digital wars.

Although she was debauched by PIMCO, she established herself as the quiet force that made LearnVest, Inc. a huge success.

Simmonds worked at LearnVest Inc. as COO for almost seven years starting in 2011. Northwestern bought the financial planning software vendor in 2015 for an incredible $ 250 million (at the era).

From 2017 to 2018, she was Executive Vice President of Digital Products and COO of Northwestern.


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