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Altruist CEO and founder Jason Wenk
Altruist CEO and founder Jason Wenk

Altruist's $50 Million Investment Raises Eyebrows, and Questions

Altruist founder and CEO Jason Wenk, vowing to take on the incumbent custodians, landed an eye-popping $50 million in a Series B round of funding and added Vanguard as an investor. But the sales pitch has shifted, observers say.

On Wednesday, advisor software developer Altruist announced that it had raised $50 million in a Series B funding round and officially added Vanguard, alongside Venrock and Insight Partners, as an investor in the company. In doing so, it moved further away from the custodial aspirations it shared with advisors back in 2019—particularly hints that it was gunning to be the next Charles Schwab—and more toward providing the low-cost, enterprise-grade RIA-focused dashboard that’s the North Star for a number of tech firms.

With its latest round of funding, Altruist will be adding support for different account types, according to Jason Wenk, founder and CEO. He also committed to adding integrations with financial planning and CRM software providers. Advisors using Altruist have been eager for the addition of those features.

The firm will also be adding oversight. Jon Rosenbaum, principal at Insight Partners, is joining the board at Altruist, while Insight co-founder Jeff Horing takes “an observer seat.” Wenk said he expects to tap into their “enterprise SaaS” experience and scaling expertise as Altruist seeks to expand beyond its user head count of less than 1,000 advisors.

Over the past two years, Altruist has attracted a devoted, if small, customer base, even as it navigated plenty of twists and turns.

How It Started

The world has shifted under Altruist and Wenk since its introduction in late summer 2019. No-fee commissions are now common among startups and incumbents. Firms that were once squarely a single-point service, such as providing risk metrics or financial planning, have been acquired or expanded into areas like trading and rebalancing. No-fee trading and a “digitally native RIA custodial platform,” were once featured prominently in descriptions of Altruist.

Despite the changes in the industry, Wenk said Altruist’s mission has remained unchanged. “We’ve been hellbent on making financial advice better and more inclusive,” he said, noting that a slide from the first pitch deck he made, which stated that the firm was creating an “all-in-one investment platform,” is still in circulation.

“What we mean by that is we're taking the key things that a custodian would do, the key things that a portfolio management system or portfolio accounting system would do and integrating them really seamlessly,” he said. “Then we're adding in tools like automated, really low-cost model portfolios and a client mobile application.”

Nevertheless, he acknowledged that Altruist has “matured” its pitch.

In fact, direct custody is not on Altruist’s road map, said Wenk. The firm used Citibank and DriveWealth for custody and clearing, respectively, as recently as last year. In October 2020, Altruist began using Apex Clearing for custody and clearing.

The firm’s look and focus has evolved as new investors joined the firm. Vanguard, in particular, wants to steer clear of the custody business, it stated in a report earlier this year.

How It's Going

While the timing of Vanguard’s investment—and its influence—is unclear, Wenk said Altruist is working on improving the advisor experience on the front end of the software. “The bulk of our focus right now is more on the features advisers need, rather than back-office infrastructure,” he said. “What people need is something that's more all-inclusive.”

Changes in messaging have caused confusion among some in the industry.

“In the early days Altruist positioned itself as the next generation custodian, which was exciting for all of us,” said Alan Moore, co-founder of XYPN and CEO and co-founder of AdvicePay. He was at the 2019 XYPN fintech competition where Wenk introduced Altruist. “However, with Altruist's move to join RobustWealth, Betterment for Advisors, etc. as an Apex overlay—and rolling out their model marketplace—it appears Altruist is set to become a tech-friendly TAMP that builds on Jason's roots as a mega-TAMP builder.”

“Altruist is providing an important focus on the lack of technology progress made by the custodians over the last decade,” he added. “I am hopeful that this all spurs Schwab, Fidelity and new custodians to invest in the advisor and client experience.”

Wenk chafed at the characterization. “Anyone who said that probably has never actually seen the platform,” he said. “It’s nothing like a TAMP and I guess I should know probably better than anyone considering I’ve built a pretty large, successful TAMP.”

What Is Altruist?

Altruist “is not an asset management platform. It's an independent, sort of all-in-one platform where you can do a lot of things in one place,” Wenk added. “We're technically a broker/dealer, just like a custodian would be, whereas the TAMP is just an RIA that nests on top of someone else.”

The firm's evolution does resonate with some industry observers. William Trout, director of wealth management at Javelin Strategy and Research, said Altruist is positioning itself as “far more than a custody provider,” as he draws comparisons between Altruist and Advisor360—the latter being another advisor-focused SaaS provider (which came out of Commonwealth Financial) that brings trading, rebalancing, performance reporting and other capabilities, and that works with multiple custodians.

Vanguard’s investment in Altruist is notable, he said, because it’s a shift from a “cold shoulder” the asset manager gave to the RIA channel “a generation ago.”

“Vanguard can’t afford to sit on the sidelines, not least given the hyper-charged growth of the RIA business,” Trout said. RIAs are "increasingly armed with an array of digital tools that remove friction from account opening, rebalancing, reporting and other client-critical functions. What’s noteworthy is that Altruist offers a full suite of these tools, making it far more valuable from Vanguard’s standpoint than a run of the mill custody platform.”

“Distribution into the RIA channel is the name of the game,” Trout said.

What's Next

While Wenk argues that Altruist is on the same path it’s been on all along, advisors using its services have seen the evolution of the firm. Altruist integrating with Apex was a major milestone, said Ian Bloom, owner of Open World Financial Life Planning in Raleigh, N.C., which has under $1 million in AUM and is an Altruist user. The switch to Apex as custodian “required [Altruist] to retool a lot of the platform from scratch,” he said. “Performance reporting was impacted for a while, and they had to work with Apex to rebuild the feature.”

Support for separately managed accounts, solo 401(k)s and integrations with popular financial planning software providers is currently missing from Altruist, according to advisors on the platform.

But those issues are far from fatal for those using Altruist. Advisors wanting those features are typically waiting for their development so that they can fully move over from their existing custodian, such as TD Ameritrade.

While Altruist is moving away from seeking comparisons to custodians, it's having planted those seeds may nonetheless be bearing fruit.

“The issues that cause most advisors to want to leave the bigger custodians have more to do with the lack of fully integrated technologies,” said Bloom. “The larger custodians simply have not kept up with what Robinhood, M1 Finance or any other retail product is offering. Altruist is attractive for those reasons.”

In the minds of some Altruist users, custodians are becoming identity-less, largely interchangeable utilities, much the way some younger investors view banks.

“I don't see that [Altruist] is going to become a custodian,” said Michael Reynolds, founder of Elevation Financial in Westfield, Ind., which has $3.3 million in AUM and is an Altruist user. “But for all practical purposes, they are my custodian.”

“I don't really care that it’s Apex,” he added. “For all I know, Altruist is my custodian.”

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