AI tax planning startup Worthy has surpassed $1 billion in taxable client income uploads, taking a process that once absorbed hours of an advisor’s time down to 20 minutes or less.
“For somebody who knows exactly what they want to explore, they want to put that into Worthy and let Worthy do the heavy lifting, the heavy spreadsheeting, and calculations — you're probably taking something that's traditionally a three or four-hour job down to 15, 20 minutes,” Worthy co-founder and CEO Jonathan Hudacko told InvestmentNews.
Most of the client tax documents uploaded into Worthy come from Edward Jones, which has 300 associates using Worthy as part of an ongoing pilot. Another 15 RIAs are working with Worthy, including New York-based Greenline Partners and Illinois-based IRON Financial.
“Philosophically we are focused on more of high net worth [clients], ultra-high net worth, for the simple reason that they tend to have a far more complicated and messy tax profile,” said Hudacko. “That said everybody files taxes. Every financial advisor's clients have tax issues and tax planning needs, and we see in our book of business advisors working across that spectrum.”
Alongside Worthy, advisors have a growing number of products to select from for AI-assisted tax planning. Options include Hazel from RIA custodian Altruist, April, Wealth.com, TaxStatus, Taxlyfe, FP Alpha and Holistiplan.
“We're trying to build intelligence as opposed to efficiency or functionality. You see a lot of businesses, I would say Hazel's doing this as well — things like account opening, document collection, document summarization,” Hudacko said. “We're trying to build reasoning and the ability to think through sophisticated problems with the advisor and help that advisor get to a better answer for their clients. So really optimizing the client’s financial situation.”
In March, Worthy announced a partnership with estate planning platform Vanilla. Hudacko previously co-founded direct indexing provider Just Invest, which was sold to Vanguard in 2021.
“[JustInvest] creates a tax asset for the investor by harvesting losses throughout the year, and that's really the jumping point to this business [Worthy],” said Hudacko. “That creation of a tax asset really opened up conversations for us with a lot of advisors around their book of business, who would benefit from having such tax assets, and how to expand the use of tax in their practice, which got us thinking much more broadly around how advisors can leverage tax in their service offering to clients.”
JustInvest, which Hudacko co-founded with Vijay Rao and Alan Cummings, was notably the first-ever corporate acquisition made by Vanguard, but it was not a smooth transition. Last year, the ousted JustInvest founders filed a lawsuit against Vanguard, claiming the fund giant acted in bad faith to limit post-deal payouts and other misconduct.
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