Altruist raises (another) $152M to compete with ‘Big Two’ RIA custodians

For years, the "Big Four" RIA custodial platforms were Charles Schwab, TDAmeritrade, Fidelity, and Pershing. The notable similarity between all four platforms was that they had each arisen out of their respective firms' brokerage arms (retail brokerage in the case of Schwab, TDA, and Fidelity, and clearing for independent broker-dealers in the case of Pershing), and it probably wasn't a coincidence that those four firms in particular grew to dominate the RIA custodial landscape. Because it takes an immense amount of capital to build an RIA custody platform, from the core services of clearing and custody, to recordkeeping and compliance, customer service, building a functional user interface, and marketing to bring advisors onto the platform. But for an already-massive brokerage firm with an existing retail or independent broker-dealer customer base, many of those systems are already in place, meaning that it's just a matter of building out an advisor-facing side that meets the custodial requirements for managing assets on clients' behalf as an RIA. Which isn't nothing, but it certainly is easier than building the entire thing from scratch.

In 2019, a big shift occurred in the RIA custody landscape when Charles Schwab announced that it would be acquiring TDAmeritrade, turning the "Big Four" into the "Big Three." The majority of TDAmeritrade advisors ended up migrating to Schwab in the wake of the merger, but there were still a sizeable number who used the transition as an opportunity to explore alternative custodial options outside of the Big Three. Which opened the door for Altruist, a startup custodian that had only launched just a few months earlier, to start making inroads into the sizeable gap that TDAmeritrade had left in the RIA custodial market.

When Altruist launched, what set it apart was the technology that it offered on top of its custody and clearing functions, including digital account opening (at a time when custodians still often required physical paperwork and 'wet' signatures), robo-like automated rebalancing, and performance reporting functions – all of which had traditionally required spending thousands of dollars to license from third-party technology providers – seamlessly bundled into their custodial platform for 'free' (and able to manage and report on assets at other custodians as well, for a low fee of $1/month/account that was still far less than the cost of most third-party portfolio management technology). In the years since, Altruist has raised steadily increasing amounts of venture capital to fund its operations and invest into further improving the technology that differentiated Altruist from the likes of Schwab and Fidelity: A $50 million Series B round in May 2021; a $110 million Series C round in November 2021; a $112 million Series D round in April 2023; and a $169 million Series E round in May 2024. All of which allowed Altruist to go from starting from scratch in 2019 to being the clear #3 custodian behind Schwab and Fidelity (at least by advisor headcount) by its last fundraising round in 2024.

And now Altruist has kept the funding cycle moving once more, announcing a $152 million Series F round led by GIC, the manager of Singapore's sovereign wealth fund, the proceeds from which Altruist aims to further invest into hiring and product development.

Altruist has deployed its steady stream of venture funds in a variety of ways over the years, from moving from Apex Clearing to its own self-clearing custodial platform to acquiring the competing custodian SSG to building out a cash management account for clients, automated tax-loss harvesting, and a digital bond trading platform. And so it seems likely that new features and/or acquisitions will follow this round of fundraising as well.
To that end, the main question going forward is: What features are left to add that Altruist hasn't introduced already? If you made a list of all the features an advisor would want from their portfolio management technology, trading and rebalancing would probably be at the top, followed in some order by performance reporting, account opening, billing, and possibly a platform for outsourcing model portfolio creation. Altruist already has all of these functions, plus more niche features like cash management and bond trading.

However, Altruist's growth thus far has been driven heavily by its ability to attract newer RIA firms (either starting from scratch, or breaking away from an independent broker-dealer and needing to hang a new shingle), a space where it has been highly competitive (thanks to its tech and ability to save new advisors on third-party tech costs) and benefitted by the fact that many of its competitors have asset minimums for firms to join. Yet the bulk of RIA assets is still concentrated in larger firms, where Altruist does not yet appear to have gained as much traction (and where it's much harder to convince firms with existing clientele at other custodians to move and repaper accounts).

As a result, it seems likely that Altruist's capital focus from here will go towards expanding beyond its core portfolio management functions, and into directions that would increase its appeal to larger RIAs in particular. This might include delving deeper into CRM systems (either by building an in-house CRM, a category that has started to see more disruption over the last year, or building more deeply to Salesforce as the CRM that currently dominates amongst large RIAs), or to further improve on its workflow automation capabilities to help advisors improve the way they use the various parts of the platform (a domain that is especially conducive to leveraging emerging AI capabilities). Or alternatively, Altruist could use the funds to acquire another competitor as it did with SSG in 2023, giving it a boost in market share to leave it better positioned to compete with Schwab and Fidelity, though arguably there are few ‘independent' custodians for independent RIAs remaining that would have a synergistic fit for Altruist.

In the end, while it remains to be seen what exactly Altruist will do to deploy its fresh round of capital, what's clear is that the strategy remains what it was in the beginning: to outcompete other RIA custodians by investing more into technology improvements and creating a more seamless custody-plus-portfolio management experience for advisors. Which is likely what it takes for a firm that hopes to contend with the likes of Schwab and Fidelity (and their incumbent advantages of size and scale), especially as Altruist seeks to continue moving beyond ‘just' smaller RIAs and into the hyper-competitive domain of mega-RIAs where industry consolidation has increasingly concentrated RIA assets.

Ben Henry-Moreland is a Senior Financial Planning Nerd at Kitces.com, where he specializes in writing and speaking on financial planning topics including tax, practice management, and technology. He also co-authors the monthly Kitces #AdvisorTech column. Drawing from his experience as a financial planner and a solo advisory firm owner, Ben is passionate about fulfilling the site’s mission of making financial advicers better and more successful. 

Michael Kitces is the Chief Financial Planning Nerd at Kitces.com, dedicated to advancing knowledge in financial planning and helping to make financial advisors better and more successful. In addition, he is the Head of Planning Strategy at Focus Partners Wealth, the co-founder of the XY Planning Network, AdvicePay, New Planner Recruiting, fpPathfinder, and FA BeanCounters, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View.