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Altruist Raises $112M on the Heels of SSG Acquisition

The series D round brings the custodian’s total funding to more than $290 million; investors include PE firm Adams Street and RIA leaders Ron Carson and Marty Bicknell.

Fresh off the launch of its own self-clearing platform and its acquisition of Shareholders Service Group, Altruist has raised $112 million in series D funding. The latest round was led by Insight Partners, new investor Adams Street, as well as existing investors, and brings the custodian’s total funding to more than $290 million.

Bill McNabb, former chairman and CEO of Vanguard; Ron Carson, founder and CEO of Carson Group, and Marty Bicknell, CEO and president of Mariner Wealth Advisors, also invested. 

“Until Altruist, independent advisors had to choose among providers, custodians and platforms offering dated technologies and platforms at considerable expense and not meeting customer expectations,” said Brian Stern, partner and co-head of growth equity at Declaration Partners, one of the return investors. “Altruist has built a vertically integrated and digital capability, enabling RIAs to spend more time with their customers, operate their businesses at much lower cost, delivering customers the modern experience that they expect.”

With 3,300 RIA firms on its platform, Altruist is now the third-largest custodian, behind Schwab and Fidelity, by number of RIA customers, though not by assets under management, which Altruist declined to disclose. Altruist CEO and founder Jason Wenk said assets tripled over the past year even before the SSG acquisition, and that the firm grew revenue by 1,700% year over year.

The company said it expects to be profitable by the end of this calendar year. But Mazi Bahadori, chief compliance officer and executive vice president of operations at Altruist, said the company may decide to not distribute those profits in favor of investing back into the business.

The bulk of the funds from the capital raise will go to research and development, Bahadori said, with a focus on building out the firm’s self-clearing platform, a capital-intensive business.

“A lot of the money will continue to go right back into the product for things like better account opening, easier, faster transfers, elegant, simpler rebalancing, intuitive fee billing, bespoke performance reporting for advisors—all of those things that advisors and their clients need,” he said. “If we see an opportunity to save an advisor five to 10 minutes of his or her day, we're going to invest in an engineering squad to figure out what they need to do to automate some sort of workflow.”

Some of the additional resources will be used to broaden its market reach, Altruist says, namely to the midsize RIAs with between $100 million and $1 billion in total assets. The firm has historically been built by catering to sub-$100 million RIAs. Those midsize advisors have different needs, such as account access and credentialing.

“We want to be able to make sure every single brokerage account type you could possibly open is available, fully digital, completely paperless. Every single security type you'd want to be able to trade—you can do that in our platform. Every type of portfolio model you'd want to construct and rebalance feature you'd want—we have available. Every tax minimization and tax loss harvesting strategy we have available. Those are the types of things that as we continue to invest in them, they just certainly make us even more attractive for the potentially larger advisors.”

Alan Moore, CEO and co-founder of XY Planning Network, said it was a similar task when AdvicePay was looking to go upmarket and serve larger firms. These advisors are looking for a full feature set, he said, which Altruist is working toward by going self-clearing and acquiring SSG.

“Midsize firms, like they’re talking about, they don’t want to be multicustodial,” Moore said. “It’s too much of a pain. And so you’ve really got to be able to serve the majority of account types and services and all of that that they’re looking for, for them to make a move like that.”

Moore added that Altruist has a lot of things going for it; it’s now the only RIA custodian that doesn’t have a retail business. The technology was built API-first, by developers, not financial people, so that’s a win.

But he is concerned that the custodian is still not revealing much about its financial health, something many advisors and clients are becoming more concerned about in the wake of the recent banking crisis. It’s not that Moore believes Altruist is doing something nefarious, but if an advisor doesn’t know the financial situation of the custodian, how can they verify that for clients?

“In the end, custodians make their money not in the billions, but in the trillions of AUM,” he said. “And so, I'm interested to see if they can be successful in scaling operations to a point to where they can remain a standalone custodian. Because so often, when you're raising big amounts of money, big valuations, it means you have extremely high growth expectations. And this is a tough business to grow in. Getting people to move custodians is really hard.”

Bahadori says the company’s total capital raise gives advisors some comfort in the balance sheet, and in the fact that it has little overhead. (Altruist has about 350 employees.) 

With regard to concerns over the safety of client assets, Bahadori points to SEC rules, requiring that for every dollar you take from a customer, you need to segregate that dollar and hold it in the name of the customer. If the client holds it in cash, Altruist sweeps their cash out to a network of 40 different program banks, ensuring enough FDIC insurance to cover all of the client’s funds. The company also holds excess SIPC insurance with $40 million aggregate coverage, Bahadori said.

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