financial technology start-ups made their mark on the
wealth management business. The first wave of this new breed
was the robo-advisers, automated investment platforms with
rock-bottom fees. Their success paved the way for fintech
players that seek to reap higher profits by catering to the
ultrawealthy, providing highly specialized services or even
helping human wealth managers to confront the virtual-adviser
One such newcomer is CircleBlack, launched in 2015 by John
Michel, who previously headed BloombergBlack an online
wealth management experiment that Bloomberg scuttled three
years ago and held a senior post at Merrill Edge, Bank
of America Merrill Lynchs web-based advisory service.
Besides analyzing client assets held at different banks and
brokerages as a single portfolio, New Yorkheadquartered
CircleBlack offers educational resources and peer-to-peer
information sharing; it also plans to use proprietary data to
let clients gauge their fellow investors sentiment. The
firm supports high-net-worth, sophisticated individual
investors and independent advisers, a structure that sets it
apart from first-generation risk analytics providers and
information exchanges like StockTwits, which tended to serve
only institutions or Main Street.
In the social media reality, advisers need to
differentiate themselves, CEO Michel says, noting that
CircleBlacks early individual adopters belong to a
coveted group: young professionals with significant net worth.
The firms average client is 43 and has about $660,000 in
invested assets, he adds. Self-directed, they are
reaching a point of complexity in their life where they need
more outside help.
CircleBlack also bills itself as a meeting place where
wealth advisers and service providers such as tax and estate
planners can mingle with its affluent user base. Although its
platform is still in beta mode, the firm says it has attracted
a steady stream of users through word of mouth as it prepares
for an initial financing round.
Another online business offering institutional-level
services to the private wealth industry is Tradelegs, which
allows managers and advisers without specialized knowledge of
derivatives to design and implement options overlay strategies.
Although New Yorkbased Tradelegs has a history dating
back to 2011, when its predecessor lauched, investments by
Chicago Board Options Exchange parent CBOE Holdings in 2014 and
last September boosted the firms development and helped
it to gather clients with a total of more than $250 billion in
assets under management.
We empower wealth managers to create, understand and
maintain strategies that are specific to their investment
criteria, capital and risk constraints, says co-founder
and managing director Peter Hauser. Wealth managers can
use Tradelegs to drive alpha and improve their risk-adjusted
returns. Custom-tailoring options strategies for client
portfolios is a way for advisers to stand out from the
competition, Hauser contends.
One challenge for independent wealth managers is risk
alignment. Having new clients fill out the standard
multiple-choice form to gauge their appetite for risk has
yielded mixed results at best. Grasping how much risk investors
want to take on, and how theyll react in a sudden market
reversal such as Januarys sharp equity sell-off, is no
easy task. Aaron Klein, CEO of Sacramento,
Riskalyze, has set out to simplify the process. Our
goal is to help advisers to truly understand what their
customers need, not just what they want, says Klein, who
co-founded the firm in 2011.
Central to Riskalyzes platform is a mathematical score
derived from questionnaires and follow-up interviews to give
advisers a more quantitatively valid assessment of how well
clients can withstand market volatility. Klein and his team
hope the result will be better portfolios, but they also aim to
help managers win new assets by shedding light on how a
prospects current investments mesh with longer-term
Online prospecting for clients is another headache.
Generation X and Millennial investors find many products
and services via the Internet, and both groups tend to trust
online providers over the handshake personal service that
traditional advisers offer. For registered investment advisers
and multifamily offices used to marketing campaigns executed on
the golf course, approaching these potential clients can be
Vestorly, a platform developed by tech start-up Torii, seeks
to bridge this digital divide. Among other tools, Vestorly
allows tracking of content shared by an adviser with clients as
its passed to friends and acquaintances, creating a
virtual referral network through social media and e-mail.
Since Vestorly launched in 2013, several major RIAs have
adopted the service, including Newport Beach,
Californiabased United Capital Advisors, which oversees
some $9 billion. Navigating social media while adhering
to increasingly strict regulatory guidelines for marketing is a
huge challenge for individual advisers, says Torii CEO
Justin Wisz, who worked at Fisher Investments, a top marketing
machine for RIAs, before co-founding his New Yorkbased
firm in 2012: We are focused on a simple-to-use solution
that has been thoroughly vetted to help users avoid
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