A lot of recent startups are being built around wealth/portfolio management such as Robinhood, Stash, Acorns etc. However, most of these startups are apps targeted towards mass market. To the financial advisors/PWM folk on WSO, what softwares/apps do your clients use to manage their wealth?
I'm interested because I'm exploring the idea of creating a "Robinhood for HNW individuals" where HNW individuals can manage their net worth from one single application that links with all of their assets. There are obvious complexities to creating this, but I'm curious as to if there is already a product for this. From my perspective, the problem is obvious for wealthy people to manage their net worth while their assets are fragmented across various accounts. Would love to hear the thoughts of any financial advisors!
@thebrofessor" @sfbroker" @dm100"
are you asking how you can build a DIY platform for the UHNW?
To be fair, he did just say HNW, not UHNW.
I don't think he understands that the reason most HNW individuals go to FAs is that they value their time more than the money that they pay. It's not that most of them CAN'T spend a handful of hours learning about IDGRAT strategies, it is just that their time is better used elsewhere, while the FA only needs to learn it once, then deploy it in the small fraction of situations where it makes sense.
I could learn to repair my car too, but the cost/benefit analysis just doesn't make sense. It is just easier to take it to a mechanic. (Disclaimer: when I was younger, with more time and less money, and cars were simpler, I did just fix mine myself)
For sure, I completely believe in the value of financial advisors and am not trying to create a robo-advisor replacement or DIY solution to replace them. But I do believe that HNWs have various fragmented investments and it is absolutely difficult to see the mark of each of those investments and make allocation decisions.
Essentially, I want to create a centralized app for HNWs to not only see their entire net worth in real time, but to make buy/sell trades as well. The idea would be to sell this app to HNWs as a SaaS / % of AUM (similar to PWM fees).
Apologies for the confusion; I wouldn't define it as a completely "DIY for HNW", but rather a centralized app/software to manage all of their investments (features include: mark to mark asset valuations, buy/sell trade requests for various investments, option to contact their financial advisor as it pertains to specific investments etc.). I absolutely believe that there is still a need for financial advisors to manage wealth. However, I do believe there is an opportunity to create software to help "glue" together the fragmented investments that HNW individuals have, in order to help them access and manage their consolidated net worth from a single app/software.
For example, a HNW with a net worth of $10m may have $6m allocated to financial advisors that may invest in mark-to-market mutual funds (public equities and debt), $3m towards various PE funds (primaries/secondaries etc.), and $1m to angel investments in startups. This HNW will thus likely receive recurring reports from many different asset managers!
My thesis is that HNW would be willing to pay for a centralized software to manage and mark their net worth from their smartphone. We would partner with financial advisors/wealth managers to input these HNW's various reports so that they will be able to see a "real time" view of their net worth and make buy/sell decisions from it.
Is there a software that you see your clients use that offers similar features? Are your clients often frustrated from having to call/e-mail you every time they want to make a trade/change up the portfolio? I apologize if this comes off uninformed, I'm still trying to better understand the wealth management market, but still believe there is a massive opportunity.
for a second, I thought you were asking for my advice on how to put myself out of business! this makes a lot more sense. there's definitely a place for what you're talking about, but I have no idea if it's a regulatory hurdle or a technological hurdle.
most firms already have an aggregation software, but it's weak in a couple of areas:
PE/VC as you mention is a nightmare. on my firms internal systems it only shows capital balance rather than what the total capital committed is, but if I want to go direct to the fund, there's no centralization, I have to go to the custodian bank and go line by line. so if a client has 2 hedge funds, 4 PE/VC investments at different custodian banks, it's at least half an hour of my time to get all of the info I need to prep for a meeting. I've been told that there's no way around it, but I have a hard time believing that
equity compensation. every equity comp website has the ability to see unvested versus vested and broken down by award type, but when we try to aggregate it with our own software or something like mint.com, it's terrible. I can't tell what's ISOs, NQSOs, RSUs, ESPP, etc., I just get a value and then end up looking like a moron when I go back to the client ("I added it to my investment acct login, can't you see that?")
anything with two factor authentication, I'm not sure if it's possible to completely get around it, but it's another pain point
websites that prevent being aggregated. with cybersecurity concerns, some providers actually prohibit being aggregated, so that poses problems
also if I were you, I Wouldn't go after the investors themselves, I'd go after brokers. maybe don't try to pitch UBS, merrill, and morgan all at once, but you could go for BDO, Rockefeller, or some independent shops.
on your point about clients frustrated calling/emailing, most of the time the decisions are driven by the advisor, meaning the client isn't reaching out to change up the portfolio, that's on the advisor. so I'm not sure of how valuable your idea on trading would be
Essentially, HNW and UHNW don't want this information, they want an advisor who has this information. They certainly don't want to be bogged down with minutia. Their advisors would greatly benefit from aggregation software that's more sophisticated (complete) than what's out there. Compliance related issues dealing with privacy (two digit authenticity a major one) makes this a challenge to update in real time. Actually have a rep who coded his own system to capture a snapshot of assets from brokerage, DT, Bank, 401k, etc. for feeds that fall outside our firm's aggregator. Of course that falls under the category of creating your own statements which is a big no no!
A bit mass market maybe, but Mint by intuit might be the type of aggregating software you're looking for. It can link basically any account that utilizes an online portal and give you a snapshot of all assets and liabilities while also tracking transaction data.
It's gonna be difficult to aggregate holdings via one singular platform for UNHW clients because a large portion of that demographic ties their wealth into illiquid asset classes that can't easily be valued. Also, at the end of the day, that's why they're paying us...to be that platform. We know everything and can liaise with any fund administrator, CIO, PM, or analyst that is involved with our clients holdings within an hour to get them any information we don't have readily accessible. Believe it or not the fees are actually going somewhere lol.
Coming from a position as having experience as a FA in the industry, I can tell you that the people my company dealt we with were typically HNW to UHNW individuals. What I realized pretty early on was the fact that these people, for the most part, are successful enough at their careers that they do not want to spend the requisite time necessary to manage their finances on a day-to-day basis. The applications you are referring to, such as Robinhood, seem to cater to those who want to get into the investing process but do not have the financial means necessary to open a full-service account. In addition, these people often want a more hands-on investing relationship that do many HNW clients.
I handle my own money, but I have had the good fortune of working in the industry, I got to see how the sausage is made, so to speak, and I am comfortable that I can manage my retirement account with at least as much attention as a for-fee Financial Advisor (but, I have my Series 6, 7, 63 and 65 Securities licenses as well as insurance license so I have a little more training). Plus, due to the fact that I am considered a "reliably wealthy" investor, there are investment opportunities that are not always available to those with lower balances.
All that said, there is absolutely a market where for-fee FAs are nearly indispensable. Especially if you have the money and the wherewithal to have before-tax retirement accounts, after-tax account(s), real estate and other hard assets. My old firm, depending on the FA, would not accept a new client who had less that $500k to invest. There were several FAs in my office whose minimums were 2 - 4 million. The majority of these people could care less what happened to their accounts, day-to-day, but most would never miss their quarterly meetings to go over their accounts, discuss the current investment philosophy, review fees paid during the quarter, etc. This would obviously not be an option with the platform being discussed.
Lastly, depending on account value, my former firm would assign an account consierge to everyone who had an acct balance above a certain cutoff. I was required to transfer my VG IRA to the bank associated with my company. These are people whose direct line you would have that you could call 24/7. If/when you had issues/emergencies, these people are at your beck and call until your problem is resolved. Another service not available for the DIY'ers unless that is offered through the trading platform.
Lastly, only 17% of the entire investing public use a Financial Advisor. I am agnostic as to whether that number should be higher or lower. What I am NOT agnostic about is the fact that anyone who chooses to save money and invest in the markets MUST inform themselves as much as possible, take seminars, read great books that have been written by some of the greatest investing minds in the universe (Ben Graham, Malkiel, Buffet, etc.) and take an active role in ones financial well-being. YOU are your own bet advocate. Period. No one will be more careful with how your money is invested or what it is invested in than you.
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