Motif Investing and U.S. Bank’s Ascent Private Capital Management are teaming up to put new digital tools in the hands of Ascent's advisors – making it the latest example of the intermingling of Silicon Valley and the wealth management industry.
“We’re ahead of the curve with this partnership,” says Hardeep Walia, founder and CEO of Motif, adding that he sees more partnerships in the industry with technology-starved investment managers and Silicon Valley down the road.
Motif, a technology start-up and online brokerage firm, has recently formed other partnerships with big name financial services firms. In October, the firm said that initial public offerings led by J.P. Morgan will be made available to clients on Motif’s online brokerage platform.
Several digital-first firms have also built bridges into the wealth and asset management industries. Financial Engines, the original robo-advisor, just inked an agreement to acquire the Mutual Fund Store from Warburg Pincus for $560 million. In September, Betterment launched a 401(k) plan administration offering while digital start-up Next Capital followed suit with its own 401(k) offering.
Now, with this latest deal, Motif has established a link with the high-net-worth and ultrahigh-net-worth space. The firm will help Ascent’s advisors identify and act on specific social, economic, technological and demographic trends for their clients’ long-term, multigenerational thematic portfolios.
“What’s interesting about this partnership is that we’re bringing together a large firm and their capabilities with that of a Silicon Valley start-up,” Walia says. “We’re bringing together the best of both to rethink the world.”
Dan Rauchle, head of investments at Ascent, sees partnering with a technology firm as fundamental to serving his firm’s clients. Wealthy clients have a need for comprehensive information on all their investments and wealth, and they want to see that aggregated into one entity.
By adopting technology from firms like Motif, “it gives us a huge advantage in implementing some of the longer term strategies that we’re talking about,” Rauchle says.
For big organizations like U.S. Bank, it is impossible to be ignorant of what is going on in technology world, Rauchle says. He was recently at the Battery in San Francisco, an exclusive and private tech-meets-savvy investor club, where leaders in fintech and financial services were intermingling.
“It’s actually fascinating to watch large institutions that know that all the people around them will disintermediate what they do, and see that they’re not sticking their heads in the sand and pretending they don’t exist,” he says. Big firms want to be in the know and identify fintechs for strategic partnerships.
Walia notes that large firms have a clear sense of where they want to go with the market and their investments. However, they need small fintech firms to help them move and execute their objectives at a faster pace. “Small firms will help them speed that process. The challenge we have is how can we get them there quicker.”
For ultra-high net worth clients who require long-term strategies in their portfolios, handling their wealth becomes increasingly complex, Rauchle says. Their investment goals, objectives and strategies become more unique. When you get to a portfolio that has large asset sizes, complex asset allocations, and a different set of tax rules, it’s very hard for software to offer tailored financial advice.
It is also hard to automate a portfolio because the inputs become very different, especially as wealth increases, Rauchle adds. You need to rely on high touch and high tech solutions to create highly customizable portfolios for wealthy clients.
“When you have any degree of wealth, the relationship component becomes strategic,” Walia says. The more sophisticated your wealth, the more you will need an advisor."
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