Skip navigation
fintech report card promo

Riskalyze Fintech Report Card: September 2018

Riskalyze CEO Aaron Klein gives the thumbs up or thumbs down on the biggest news to hit advisor technology in the previous month.

Facet Wealth Raises $33M in Series A

What happened: Facet Wealth raised $33 million in Series A funding from investment firm Warburg Pincus and venture capital firm Slow Ventures. The digital wealth management platform, which has $23 million in assets under management, acquires smaller clients from RIAs but promises to offer them back if client assets reach $1 million. “We want to be seen as a partner to the industry, not as a competitor,” Anders Jones, CEO and co-founder of Facet Wealth said.

Why it matters: I can see how this would be an interesting way to take unprofitable small account clients off an advisor’s hands. But on the other hand—I’m skeptical that you can just “sell” a client back and forth between firms, like some call option. Ultimately, shouldn’t the client be the one who decides who they want to work with? How well this works for firm and client remains to be seen.

Square’s Cash App Looks To Expand Into New Turf

What happened:  Square CFO Sarah Friar at Recode’s Code Commerce 2018 said that the company was considering expanding into new turf. On the table: savings products like those consumers could expect from neighborhood banks and functionality that would allow customers to purchase stock, just like Cash users today can purchase bitcoin. “Anything you do today with a bank account, you should look to the Cash App to begin to emulate more and more of that,” Friar said.

 Why it matters: Square already has incredible built-in distribution and expanding into this new turf is disruptive to Wealthfront, Betterment and discount brokerage firms. But I think it's time to kill the "robo advisor" moniker and call it what it is—a self-directed investing service. In the end, it creates more investors and creates a rising tide for financial advisors.

Orion and Schwab Build Account-Opening Tool

What happened: Schwab Advisor Services’ new Digital Account Open tool, announced at Orion’s Ascent conference and unveiled at the fintech firm’s FUSE technology competition, utilizes APIs and allows advisors to open a client brokerage or retirement account, end-to-end, in roughly seven minutes. The straight-through processing and full integration with Orion and Schwab is in pilot mode. The goal is to roll out the product to all advisors with Orion’s November release, according to Orion CEO Eric Clarke. Increasingly, complex accounts will be added over time.

Why it matters: This is a (frustratingly) complex part of an advisor’s workflow—so kudos to Orion and Schwab for working to make it easier for their joint clients. That being said, we’re still generating pretend pieces of paper inside a computer and pretending to sign them. It will be great when a purely digital solution can make this process just a few clicks. The custodians have got to decide to make it a priority.

Entreda Rolls Out Second Gen Cybersecurity Platform

What happened: Entreda launched the second generation of its Unify platform . The new platform aims to safeguard independent broker-dealers and registered investment advisor firms from a wide spectrum of digital threats and stay a few steps ahead of hackers, phishing scams, and cyber attackers. “We focus on customized education about the missteps that can compromise client data integrity, the regulatory standing of firms and advisors, and by extension, their continued business viability,” said Entreda CEO Sid Yenamandra. 

Why it matters: Financial advisors need to protect not only their business but their clients as well, so one-size-fits-all security just doesn’t work. A dedicated cybersecurity platform is a win for advisor technology. If the industry has any chance of beating the black hats, cybersecurity has to be top of mind and tailored to fit. 

And I guess I’m kind of partial to any product that thinks about cybersecurity risk by calling it a CyberRisk Number. ;)

ScratchWorks Fintech Competition Accepting Submissions

What happened: The advisor-focused fintech competition ScratchWorks is accepting submissions for Season Two. The competition is also reducing its application fee until mid-November. The hope is that a more diverse panel of judges, a reduced application fee and opening the submissions earlier than last year will increase the breadth of ideas presented at the competition. Two of the inaugural competition’s finalists, InvestmentPOD and Snappy Kraken, received investments following the competition.

Why it matters: The “Shark Tank of Fintech,” helmed by Tim Welsh, is still finding exciting ideas to invest in, and I’ve enjoyed following the finalists after the competition. Reducing the application fee should hopefully attract even more talent. Here’s an idea: sign Mark Cuban for season two and have Cuban and Marty Bicknell fight over investing in the next great fintech startup. That would be some real must-see TV.

Betterment Deepens Partnership with RightCapital

What happened: Betterment for Advisors and RightCapital have a new partnership that includes a joint go-to-market strategy with cross-selling components. RightCapital will help advisors develop investment workflows using Betterment for Advisors's digital platform, and advisors already using Betterment for Advisors will get easier access to RightCapital's interactive financial planning features with a single login. Cara Reisman, head of Betterment for Advisors, indicated that while the partnership today is more about "helping each other identify like-minded advisers," it could mean deeper technology connections in the future.

Why it matters: Maybe this is a sign that Betterment is going for the part-custodian, part-investment-platform angle—not just a “robo.” The challenge, however, is that their strategy doesn’t address a large market of advisors—BDs see platforms like these as taking away their assets; RIAs generally want more independence and control. Still, working with an outside technology partner is a step in the right direction. We’ll see how it develops.

New York Files Complaint Over Online Banking Charters

What happened: Maria Vullo, superintendent of New York’s Department of Financial Services, and New York state’s top banking regulator, sued the federal government to void its decision to award national bank charters to online lenders and payment companies. Vullo argued the decision was unconstitutional and put vulnerable consumers at risk. Vullo oversees more than 2,200 banks, financial services companies and insurers with about $7 trillion of total assets. “Financial centers like New York, which have developed comprehensive and well-functioning regulatory bodies, should not needlessly bear the harmful brunt of an overreaching federal agency,” the complaint said.

Why it matters: Patchwork regulations are confusing and stifle innovation. 50 different states and 50 different sets of rules? Who has time for that? We need to cut the red tape and make innovation easier for everyone. 

Africa’s Jumo raises $52M led by Goldman to bring its fintech services to Asia

What happened: Jumo, a company that offers loans to the unbanked in Africa, revealed plans to expand into Asia. The company landed a massive $52 million investment led by banking giant Goldman Sachs to fuel their growth and has opened an office in Singapore to lead the way. Jumo launched in 2014 and specializes in social impact financial products such as loans and saving options for those who sit outside of the existing banking system, particularly small businesses. The company claims to have helped nine million consumers across its six markets in Africa and originated over $700 million in loans. With 350 staff spread across 10 offices in Africa, Europe and Asia, Jumo is no small endeavor and was part of Google’s Launchpad accelerator in 2017.

Why it matters: It’s always exciting to see how technology can pave the way and bring access to capital to the developing world. With Goldman coffers and the Google pedigree, Jumo’s off to a good start.

TD Ameritrade Adds ESG Funds To Robo Platform

What happened: TD Ameritrade announced the launch of Socially Aware options for robo-advisor clients, aimed at helping investors align their portfolios with their values by considering environmental, social and governance (ESG) factors when they invest. The company added five Socially Aware portfolios to its fully digital robo-advisor platform, Essential Portfolios. They provide exposure to ESG investing through well-diversified exchange-traded funds (ETFs) that are designed to suit different risk preferences and investing goals.

Why it matters: It’s cool to see TD make “investing in your values” more easily accessible. I was hoping the announcement might be able to brag on superior, or even comparable, returns to the broader market. That’s still the greatest hurdle facing ESG.

Avant Launches SaaS Business

What happened: Personal loan startup Avant announced that it would spin off its lending infrastructure tech business into a new platform, Amount. The new software as a service (SaaS) business will build consumer-lending products for major banks. “Avant is two businesses under one roof—one is the lending company, and the other is a pure technology company supporting large banking institutions,” Avant CEO Al Goldstein said. “If banks don’t want to devote hundreds of millions of dollars and years of work to build their own lending technology, Amount can help them do that with a lower dollar investment and a higher likelihood of success.”

Why it matters: Color me skeptical. This is a typical pivot for those startups that are not wildly successful at using their tech to create a disruptive outcome for consumers. These startups instead take the tech they developed for the consumer market and try to sell it to other businesses in the hopes those businesses are A) too busy to build it themselves, and B) rich enough to not mind paying for it. (FutureAdvisor, Jemstep and SigFig are all in the process of trying to do this, and it’s not easy.) Somehow, I think most banks already have sophisticated lending technology, but I guess we’ll find out if this latest case is a success.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.