Wealthtech startups look to compete with RIA aggregators

Wealthtech startups are buying books of business and hoping an advanced in-house tech stack is enough to lure financial advisers, and their clients, away from more established wealth managers.

Savvy, a newly formed fintech, plans to acquire existing registered investment advisory firms and wealth managers and pair them with proprietary software that advisers and clients can use to manage their finances. 

The New York-based fintech closed on $7.3 million in seed funding last month and has about 12 employees on staff who cater mostly to wealthy professionals.

“It’s not your typical off-the-shelf stuff,” said Ritik Malhotra, co-founder and CEO of Savvy.

“We brought in a team ... with significant experience building consumer-facing tech,” he said, adding that much of his staff spent years with top tech companies like Airbnb Inc. 

Savvy's target acquisitions are generally RIAs with around $200 million in assets, but the company is willing to make offers on up to $1 billion in managed assets. Most advisers who come on board become employees and are in the middle of their careers and looking for growth, Malhotra said. The company is even targeting wirehouse breakaways.

“The tech looks visually appealing and advisers are saying clients like the user experience,” he said. “It’s not spitting out a 90–page report.”

Another fintech, Farther Finance, is also bringing on advisers from RIAs to work for their company as employee advisers. The fee-only wealth advisory startup provides its advisers with proprietary technology, also built in-house, to manage clients' investments. 

The New York-based adviser employs about 20 advisers and caters to wealthy professionals.

These next-gen platforms are struggling to solve a major problem for wealth managers: technology. Advisers and clients are notoriously underwhelmed with their software platforms, and the industry routinely lands on the bottom of J.D. Power client satisfaction surveys that rank features like mobile apps and client portals.  

A recent study from Refinitiv found that 63% of wealth platforms show significant digital capability gaps compared to investor expectations. Just 37% of investors give their platforms top scores for the digital experience.  

Both Savvy and Farther recently landed on a short list of startups to watch that analysts are calling the next generation of wealthtech.

“It kept eating at me that the industry has very low tech adoption and that really peters down to clients,” said Malhotra. Most communication he receives from wealth managers is still being sent through email, snail mail and Excel spreadsheets, he said, and that needs to be remedied. 

“No one has really cracked it, yet,” Malhotra said.