Since Paul Gamble became CEO of 55ip in 2017, the fintech startup has undergone several changes.
The firm provides investment strategies to financial advisors based on clients' tax needs. It was founded as part of the TIFIN Group, an early-stage startup incubator.
Two months after forming a partnership with 55ip for its model portfolios in October 2020, J.P. Morgan Asset Management acquired the company from the TIFIN Group for an undisclosed amount. 55ip has remained an independent subsidiary since the deal became final.
In November 2023, Raymond James Financial began integrating 55ip's tax management technology across its managed account platform to make tax-smart transition, rebalancing and ongoing tax-loss harvesting available to its advisors.
Gamble took the time to speak with WealthManagement.com about operating 55ip before and after being acquired by J.P. Morgan Asset Management, the company’s burgeoning relationship with Raymond James Financial, using machine learning, monitoring changes in tax law and more.
This Q&A has been edited for style, length and clarity.
WealthManagement.com: You’ve been the CEO of 55ip since before its acquisition by J.P. Morgan Asset Management. How has this transition affected the business?
Paul Gamble: We are operating as an independent branded subsidiary. We help wealth managers, financial advisors and enterprises deliver personalized tax smart management at scale. We also work with other asset managers and enterprises across the asset and wealth management spectrum. Our platform is used by other large asset managers like BlackRock and Fidelity Investments. It also allows us to work with large enterprises, including Raymond James Financial. J.P. Morgan Asset Management allows us to operate independently but then take advantage of the strength of their balance sheet, operations and controls. It has been a nice marriage for both companies.
WM: I’m glad you mentioned Raymond James Financial because that is where some advisors I’ve spoken with have encountered 55ip in their work. How did that partnership come about and how do you see the two companies moving forward together?
PG: We’re excited about the relationship with Raymond James, which is one of the largest wealth management platforms in the U.S. Wealth managers will often have different investment programs for their advisors. We feel privileged that after a long search Raymond James selected us to be the tax management technology overlay provider for their models, SMA and UMA programs. We’ll help advisors figure out how to transition from one portfolio to another and mitigate the tax consequences. Once you’re in the program and product of choice with your client, we can manage all the rebalancing. We can take advantage of tax loss harvesting opportunities to mitigate tax consequences over time.
WM: 55ip started under the TIFIN Group, which has been heavily investing in AI. How do you use this technology in your work now? How do you see it being used in the future, both in your company and in the industry in general?
PG: One of the things we’ve tried to do at 55ip, which a lot of fintech companies do, is figure out how you use algorithms and technology to help financial advisors and make better decisions for their clients. Tax management has been a manual process for advisors historically. They’ve either had to outsource the process to a third-party money manager, or they’ve had some rudimentary tools where they’ve hunted and pecked at the end of the year to find tax loss harvesting opportunities. We’ve created algorithms to help determine how to transition a portfolio and to read the underlying tax lots and positions on a regular basis to determine if it makes sense to harvest a position. Within those algorithms there are a lot of machine learning aspects that allow us to have a larger data set to make better decisions on when to make those complicated decisions related to tax management.
Where I see AI playing the largest role for 55ip and for the fintech and wealth management industry overall going forward is related to explaining what is happening, why it’s happening and the benefit for the advisor and the client. I think that’s where the wealth management industry hasn’t served clients as well or advisors as well as they could. For something like tax management, it’s hard to show the potential value of what you just did in a consumable way. AI will open a lot of opportunities to close the loop.
WM: What specific changes to tax regulations have you been watching lately and how has that changed how you do business?
PG: One of the things you need to do if you want to keep this up to date and scalable is you’re constantly monitoring what’s happening with the tax laws. There were a lot of conversations about tax loss harvesting changing with the 2020 presidential election. Those things for the most part didn’t come to fruition. The tax laws related to tax loss harvesting haven’t really changed over the last few years, but with an administration change, it can. You need to monitor that and make sure you’ve not only built your algorithms, but your operating model to support those changes and to be able to communicate those in a scalable way to clients. That’s part of how we operate daily. One of the things that did not end up happening after the last administration change was limiting the ability to get the advantages of tax loss harvesting for high-net-worth individuals. We were prepared for that, but it ended up not coming down the pike. We think about: What is the client set that the services make sense for based off the regulations coming out of Washington?
WM: What are your guiding principles for 55ip as we begin 2024?
PG: The problem that a lot of fintech companies are trying to solve right now is when you look at the financial advisor, they’re asked to do a lot more with a lot less time. They’re asked to be money managers, financial planners and life coaches. And, they need to do it all with more clients over time. That’s why creating a platform that allows them to do more but to spend less time doing it is the most important thing that any fintech company can do. If you’re solving a real problem they have with their client base, that’s super important. If you’re running a fintech company, you must make sure what you’re delivering is a painkiller not a vitamin. Because it’s very difficult to drive revenue and build a business if you’re nice to have. You must be a need-to-have that is solving a real problem for your target client.