RIA 'Shark Tank' backs a digital adviser out of the gate

Despite a crowded market, RIAs bet InvestmentPOD has what it takes to build a better mousetrap

Jul 17, 2018 @ 2:00 pm

By Ryan W. Neal

Consolidation among consumer-facing digital advice firms isn't stemming the flow of funds into robo platforms designed for financial advisers.

ScratchWorks, a Shark Tank-esque program for financial technology founded by five independent registered investment advisers, announced Tuesday that white-label digital adviser InvestmentPOD will receive its first investment.

InvestmentPOD bills itself as "the first multi-strategy, automated investing platform" that combines the benefits of digital advice technology (automated trading and rebalancing) with the sophisticated asset diversification strategies needed to serve high-net-worth clients who require more than a buy-and-hold portfolio.

The POD stands for passive, opportunistic and defensive.

While existing robo-advisers provide passive investing, InvestmentPOD lets advisers customize automated portfolios to take advantage of opportunities in the market with individual stocks, bonds or ETFs, or protect against downside with hedging strategies.

(More: Robo advisers are stepping up their financial planning)

Marty Bicknell, CEO of Mariner Wealth Advisors and one of the five RIA members of ScratchWorks, was an early investor in Betterment for Advisors, but he said he hasn't seen any technology that integrates all of these strategies in one product. This is what ultimately convinced him and the other ScratchWorks advisers to get behind InvestmentPOD.

"I can tailor the technology to my practice instead of having to tailor my practice to the technology," Mr. Bicknell said.

While there's nothing wrong with a white-label robo that offers a preselected menu of investment models, InvestmentPOD makes it easier for him to include his firm's proprietary strategies, he said.

"I do believe that from an industry perspective, there are a lot of advisers who believe their value proposition is how they run money," Mr. Bicknell said. "This gives them the ability to fit in to the digital space."

As with the direct-to-consumer robo-advisers, InvestmentPOD's challenge will be getting advisers onto the platform in a market increasingly crowded with other independent vendors as well as products coming from custodians, broker-dealers and the wirehouses.

Ken Schapiro, the president of Backend Benchmarking, said there is still space in the B2B market as many advisers still haven't adopted robo-advice technology in their practice. That is probably because existing products on the market aren't doing enough yet to convince advisers to buy in, he said.

"You need something that works a little bit better with what the advisers already do," Mr. Schapiro said.

(More: Wirehouses using digital advice technology to boost cross-selling)

While he isn't familiar with InvestmentPOD, he said something more customizable than other robo-advisers could stand out as unique and be attractive to both advisers and custodians looking to improve their tech offering.

ScratchWorks' involvement in InvestmentPOD, both financially and by advising the company on its development, could help the technology grow into a better mousetrap that will attract independent advisers, Mr. Bicknell said.

As firms like Merrill Lynch and Morgan Stanley introduce their own automated investing technology, there's even more urgency to develop a product for the independent market that provides unique capabilities.

"The more technology we can have to serve more households per adviser is a great thing for the end client," Mr. Bicknell said.

InvestmentPOD will use the investment from ScratchWorks to further build out development resources, hire new talent and invest in emerging technologies to become the go-to resource for RIAs to automate and expand their investment management services through the InvestmentPOD technology platform.

The five RIAs that make up ScratchWorks manage more than $60 billion in AUM for high-net-worth clients and include: Mariner Wealth Advisors, RMB Capital, Covenant, Brighton Jones, and The Colony Group.


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