While funding for technology startups is the lowest it's been in years, fintech for advisers is still an attractive investment.
Two startups offering new technology for advisers landed funding this week. Modern Life, a digital life insurance brokerage for financial advisers, announced Tuesday that it raised $15 million in seed funding led by venture capital firm Thrive Capital. On Thursday, Farther, a digital wealth management firm actively recruiting RIAs to join as employee advisers, announced $15 million in Series A funding. Farther has now raised a total of $22 million and is valued at $50 million, according to the company.
The startups' successful rounds of funding represent victories that are increasingly more rare than just a short time ago. Investments in U.S. tech startups were down 23% in the three months ended in June, to $62.3 billion, the steepest fall since 2019, according to a New York Times report using data from PitchBook. Startup sales and initial public offerings are down 88%, making once eager-to-spend venture capitalists think harder about where to place their dollars.
Most adviser fintechs haven't experienced a market quite like this one, and some have already made moves to prepare for difficult future. Wealth technology company Tifin Group laid off 10% of its workforce in June, and retail brokerage app Robinhood recently announced plans to lay off nearly a quarter of its employees.
But demand for life insurance has boomed since the pandemic. Policy sales were up 5% in 2021 while new premiums were up 20%, the highest annual growth since 1983, according to a report from insurance research group LIMRA. However, the entire life insurance industry is saddled with outdated technology, said Ryan Pripstein, head of research at Thrive Capital.
“The result is that advisors, who are responsible for 90% of the industry's distribution, are left operating without the tools they need,” Pripstein said in a statement. “With its unique focus on the advisor, seasoned executive team, and breakthrough technology, Modern Life is uniquely suited to help these professionals serve their clients faster, easier, and more confidently."
Modern Life provides advisers with a digital dashboard to manage and view client submissions, brokerage support, data-driven underwriting assessments and a product shelf that's stocked by 15 national carriers, including John Hancock, Lincoln, Pacific Life, AIG and Prudential.
While a lot of funding has gone toward various insurance fintechs, Modern Life’s focus on the adviser is unique. It could also be a better opportunity than fintechs designed to go directly to consumers, said Modern Life co-founder and CEO Michael Konialian.
“In particular, we think we’re taking a swing at the biggest opportunity, which is to empower advisers rather than try to cut them out,” Konialian told InvestmentNews.
He emphasized Modern Life as offering support for advisers rather than an innovative way to push products from carriers. “We want this to be a tool for advisers to have in their arsenal for financial protection needs,” Konialian said.
Meanwhile, Farther’s fundraising, which was led by Bessemer Venture Partners and included Khosla Ventures and MassMutual Ventures, is hoping to produce a proprietary technology platform that will entice advisers to join its growing ranks.
Beyond traditional portfolios, Farther’s technology integrates with other startups offering access to unique investments, such private technology companies through Linqto or artwork via Masterworks. Farther offers direct indexing through a partnership with Neuberger Berman and life insurance from Policygenius.
The firm said assets under management quadrupled in the first half of 2022 to over $250 million, while the number of employees doubled to more than 50.
“The Covid-19 pandemic created a seismic shift in the way that people manage their finances,” Farther co-founders Taylor Matthews and Brad Genser said in a statement. “Legacy institutions suffer from bolted-together technology, fundamentally flawed incentive structures, and costly overhead that too often gets passed on to clients. At Farther, every client receives an elite, personalized experience — with advanced technology and expert financial advice.”
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