Altruist raises $112 million to challenge Schwab, Fidelity

Altruist CEO Jason Wenk

The Los Angeles-based custodian's latest funding round was led by Insight Partners and Adam Street Partners.

Altruist has new funding to fuel its rapid growth as a competitor in the independent advisor custody business.

The Los Angeles-based firm announced a $112 million Series D round of funding led by Insight Partners and Adams Street Partners. In addition to a previously undisclosed $110 million round in November 2021, led by Declaration Partners, Altruist has raised a total of $290 million.

Big names in the advisor industry also invested, including former Vanguard CEO Bill McNabb, Carson Group founder and CEO Ron Carson, and Mariner Wealth president and CEO Marty Bicknell.

The fundraising comes less than a month after Altruist’s purchase of Shareholders Service Group, a brokerage and custodial platform, which brought 1,600 registered investment advisors to Altruist. The deal pushed the total number of RIAs doing business with Altruist past 3,000, making it the third-largest custodian, behind Fidelity and Schwab, in terms of number of firms served, according to CEO Jason Wenk.

Altruist has its sights on putting even more pressure on the current market leaders. The new funds will be used to make Altruist accessible to a greater number of RIAs, including firms that manage between $100 million and $1 billion,

“While the RIA industry has evolved rapidly over the past 20 years, the custodians serving them have not,” Wenk said in a statement. “Legacy custodians have little incentive to innovate and rebuild technology that would enable advisors to scale and reach as many people as possible.”

Fidelity’s commitment to innovation, especially around technology and digitization, is what helped Fidelity grow into a market leader in clearing and custody, according to a Fidelity spokesperson.

“Fidelity’s private ownership also gives the company the independence to invest in areas that serve the best interest of customers instead of shareholders. This includes our consultative, personalized approach to provide advisors of all sizes and complexities with exceptional support,” the spokesperson said in an email.

Charles Schwab is publicly traded, while Altruist is backed by venture capital and private equity.

In March, Altruist cut ties with Apex Fintech, which had provided custody and clearing services to Altruist for three years, to launch its own brokerage operation. The company’s pitch to RIAs is that it’s the first company to combine clearing, custody and an all-in-one technology suite that’s built on top of a modern digital infrastructure.

“A vertically integrated platform that puts clearing and custody at the core is a game changer for advisors,” Jon Rosenbaum, managing director at Insight Partners, said in a statement. “It’s a deeply technical problem at every level that the team has solved with an intuitive user experience that’s unlike anything the RIA industry has ever seen.”

Altruist also vows that it will focus exclusively on RIAs rather than go directly to retail investors, as Schwab and Fidelity both do.

Schwab has strict policies and guardrails in place to avoid intentionally or inadvertently competing with any RIAs, said Joe Giannone, director of communications at Schwab Advisor Services.

“Specifically, we don’t contact or provide recommendations to advisors’ clients, nor will we market advisory services to the clients of RIAs,” Giannone said in a statement. “We’ve also made clear that if an advisor ever feels we’re approaching a prospect they are pursuing, Schwab will stand down.”

For venture capital and private equity investors, backing Altruist is a chance to tap into an RIA industry that managed $128.4 trillion at the end of 2022, according to the Investment Adviser Association, and is growing rapidly, with more than 3,000 new firms launching annually, according to RIA Channel. By offering a more efficient alternative for custody and clearing, Altruist says it can make RIAs affordable to a greater number of Americans.

“We’re incredibly bullish on Altruist and the RIA market more broadly,” Brian Stern, partner and co-head of growth equity at Declaration Partners, said in a statement. “I have seen few investment opportunities in my career to back a team with this level of domain expertise and depth of vision, and applied to such a significant and compelling market need.”

Wenk says his company nearly tripled its total assets under management in 2022 and grew revenue by 1,700% year over year. The company expects to reach profitability this calendar year.

[Editor’s note: This story was updated to include a comment from Schwab Advisor Services.]