Robo startup will work with advisers exclusively

UpsideAdvisor.com's platform aims to attract mass affluent interested in low-cost investing, but who may also want access to advisers' advice

Jul 15, 2014 @ 1:34 pm

By Joyce Hanson

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An online startup in the investment management space now dominated by robo-advisers Wealthfront and Betterment is looking to make its mark by working exclusively with advisers.

UpsideAdvisor.com, with offices in both San Francisco and St. Louis, has announced that it has raised $1.1 million in a venture funding round from Cultivation Capital, a St. Louis venture firm whose partners include Jim McKelvey, co-founder of Square, a credit card payment company for mobile devices.

Other investors include Elaine Wherry, co-founder of Meebo, which has been acquired by Google, and Suranga Chandratillake, general partner at Balderton Capital, which also was involved in a $35 million funding for robo-adviser Motif Investing.

UpsideAdvisor's automated managed account system uses algorithms that help financial advisers work with clients online and build a client pipeline with lower account minimums. UpsideAdvisor offers advisers paperless account opening, portfolio selection, automated trading and re-balancing, a client portal and data analysis.

The startup is now in beta, with three advisers actively using the platform and giving feedback to its team of five software engineers, according to co-founder and chief executive Thomas Kimberly, a registered investment adviser who has also formerly worked for McKinsey & Co. and Barclays Bank.

In addition, UpsideAdvisor is receiving input on its online offering from St. Louis-based advisers at Wells Fargo Advisors, Edward Jones and Stifel Nicolaus, Mr. Kimberly said. The startup is also working with brokerages and custodians to get onto their platforms, he said.

UpsideAdvisor's model is built to attract mass-affluent and young emerging high-net-worth investors, Mr. Kimberly said. While the most appropriate products for those investors would be low-cost, passively managed exchange-traded funds, UpsideAdvisor also encourages advisers to offer clients their own investment strategies, he said.

“Some of our advisers see their investment strategies as part of their value proposition to clients, and we don't want to disrupt that,” Mr. Kimberly said.

The only site nearest to UpsideAdvisor.com is Betterment's recently introduced Betterment Institutional platform for advisers, Mr. Kimberly added.

However, he said, Betterment uses a direct-to-consumer model, while UpsideAdvisor works directly with advisers who already have developed their books of business and have millions of dollars under management.

“But Betterment has hit on something big in the market, and it's clear that it's something that will be part of the investment space from now on, and we want advisers to be part of that space,” Mr. Kimberly said.

Nerd's Eye View blogger Michael Kitces compared UpsideAdvisor to TAMPs and re-balancing software firms that have existed in the advisory industry for years, including Envestnet and SEI Advisor Network.

“They've taken platform pieces from TAMPS and rebalancing software and melded them together onto an online platform,” Mr. Kitces said. “It's a business opportunity. Advisers are using technology to scale their businesses.”

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