Acorns co-founder believes his new technology can get clients more engaged with investments

New venture from Jeff Cruttenden looks to digitize and streamline proxy voting

Apr 16, 2018 @ 2:36 pm

By Ryan W. Neal

One aspect of the investing ecosystem that has remained decidedly analog is the framework for investors to engage with the companies and funds.

When the packet of proxy voting documents arrives in the mail, it usually goes straight into the trash. Sometimes it will get a once-over before being thrown out, but rarely does anyone take the time to vote.

What if that process could be digitized? What if a platform existed that would help investors understand what they were voting on, help them engage, and help financial institutions get a better reading on what the investing public is thinking?

That's the vision of a new startup, SAY, that announced it received $8 million in seed funding last week.

Other than trading, voting is often the only direct engagement broker-dealers and custodians have with end investors, said Jeff Cruttenden, SAY co-founder and CEO said. By giving people a greater voice in their investments, his firm could increase engagement between the client and the firm, he said.

"We think that people will prefer to keep their wealth where they can have a say in it," Mr. Cruttenden said.

The framework for this already exists, but the system is so antiquated and inadequate that it's effectively impossible for shareholders to access their full ownership rights, making it ripe for digital innovation, he said.

The idea comes from Mr. Cruttenden's previous startup, Acorns — a robo-adviser designed to introduce investing to first-timers by allowing them invest change from everyday purchases into a basket of ETFs. Just as Acorns' mission was to make investing a smaller decision, SAY can help make more people actively involved in investment decision-making, Mr. Cruttenden said.

(More: Robos with the best and worst portfolios over the last two years)

While SAY is still in its infancy, he envisions a platform that connects with investment accounts, tracks the products that are owned and alerts consumers when a vote is available. The platform would provide context on what decision is being made and will provide an avenue for shareholders to provide direct commentary on the funds they hold.

While not every investor will participate every time, he expects that certain issues will encourage involvement. The gun control debate is one example, or recent stories about Facebook, Wells Fargo or Equifax.

(More: BlackRock exploring funds that exclude gun makers, retailers)

"We think this should be a consumer-facing experience for individual investors instead of a broker-dealer compliance function," Mr. Cruttenden said. "I think the ETFs would welcome the opportunity to connect with shareholders."

SAY will first introduce the platform to investors on the Acorns platform, but down the road brokerages, custodians and independent advisers will see the platform as new way to relate with customers, Mr. Cruttenden said.

At least one custodian sees potential in the technology.

"We've always believed that the industry needs to do more to democratize access and provide the kinds of experiences that digitally-savvy consumers are demanding," said Bill Capuzzi, CEO of Apex Clearing. "Any technology that can increase transparency and empower investors is good for us all."

Rob Foregger, the co-founder of NextCapital, said the idea is intriguing, but will reserve judgment until he can see the actual platform.

(More: NextCapital gets $30 million more in funding for its digital advice platforms)

"I think the concept of allowing the individual investor to not just become an activist, but get close to the institutional asset manager is definitely different," Mr. Foregger said. "Institutional investors have been doing this forever. Proxy is the tool, but it isn't a very user-friendly instrument."

While it could be easy to scoff at the value of feedback from a single investor with a relatively microscopic vested interest, gaining the aggregate attitude of thousands of investors could be "game changing" for fund managers, especially in an era of socially responsible investing, Mr. Foregger said.

"I can say that SRI is definitely something that I think is, at this point in the industry, universally acknowledged as a major forward-looking trend that is going to the retail market," he said. "[SAY] could be a vehicle for that … Create the feedback loop between institutions and the client that today doesn't really happen."

In addition to being valuable to the institutional side of things, SAY creates a chance for advisers to have more conversations with clients and get them more involved in their portfolios, Mr. Cruttenden said. If a client feels strongly about an issue, the adviser can encourage them to vote using the SAY platform.

It could even be a way for firms to capture the elusive millennial — by showing them the democratic side of investing.

"Younger people think capitalism is at the expense of democracy. It's crazy stuff. Freaky, really," Mr. Cruttenden said. "For the next generation of investors, this may by a way to engage them, help them feel like they are making an impact."


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