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  5. WealthTech Startups to Watch: How Altruist Is Redefining the RIA Tech Stack

WealthTech Startups to Watch: How Altruist Is Redefining the RIA Tech Stack

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3 January 2024
Chris Bendtsen

Is the RIA industry being disrupted? After a monumental year from one late-stage WealthTech startup, the answer appears to be yes.

WealthTech Startups to Watch is a Celent blog series that identifies compelling WealthTech startups and discusses the implications for incumbent wealth management firms. This edition covers Altruist, a fully digital custodian for independent RIAs that provides streamlined account opening, funding, trading, billing, and reporting, all in one platform.

Here are some of Altruist’s notable achievements in 2023:

  • Became a full-service custodian by launching a self-clearing platform, Altruist Clearing.
  • Acquired Shareholder Services Group, another brokerage and custodial platform for RIAs.
  • Raised a $112 million Series D funding round from Insight Partners, Adams Street Partners, and other investors.
  • Eliminated portfolio account software fees for advisors who custody entirely with Altruist.
  • Announced new integrations with Orion, Redtail, Kwanti, Moneyguide, IncomeLab, and eMoney.

Based on those strategic moves, it is clear the digital custodian aims to disrupt both the custody and advisor tech spaces. Altruist is redefining the RIA tech stack in two ways:

  • Effectively combining custody with front, middle, and back office advisor software
  • Lowering the costs of advisor software

EFFECTIVELY COMBINING CUSTODY WITH FRONT, MIDDLE, AND BACK OFFICE ADVISOR SOFTWARE

Altruist’s value proposition is an all-in-one custody platform that streamlines advisor workflows across the front, middle, and back office. Traditional custodians have not gotten this right yet, as advisor tech solutions are typically purchased from multiple providers.

Front Office: One of Altruist’s major differentiators compared to traditional custodians is its fully digital account opening. Altruist’s API-led architecture enables account opening in minutes instead of days, and advisors can complete Automated Customer Account Transfers (ACATs) in under a minute.

The significance of a fully digital, seamless account opening experience cannot be understated. In fact, Oliver Wyman research finds account opening to be the most important capability for the end client experience.

Middle Office: Altruist’s portfolio management capabilities include rebalancing, fractional shares, direct indexing, and unified managed accounts (UMAs). Other custodians either don’t offer all those solutions or must rely on third party integrations that require another vendor.

Back Office: Altruist offers custody and clearing, billing, and portfolio reporting. Again, not every incumbent custodian has all those capabilities (e.g., fee billing).

LOWERING THE COSTS OF ADVISOR SOFTWARE

Altruist’s all-in-one advisor platform is not novel compared to TAMPs like Orion, EnvestNet Tamarac, and others that have similar full-stack offerings. The difference, however, is that Altruist now has magnitudes higher potential revenue streams after becoming a self-clearing custodian in March 2023.

This economic advantage allows Altruist to transfer cost savings to its clients by setting advisor software fees substantially lower than competitors’. Altruist’s advisor software—including the client portal, performance reporting, fee billing, portfolio rebalancing, and portfolio accounting—is free for an advisor’s first 100 brokerage accounts and just $1 a month per account after that. As of September 2023, Altruist eliminated the $1 monthly fee for advisors who custody exclusively with Altruist.

It is not likely that Altruist will take meaningful existing business away from incumbent custodians or well-established TAMPs. But where disruption lies is with net new RIAs. Free advisor tech will be difficult to pass up for the next generation of advisors opening their businesses, giving Altruist a significant advantage.

Wealth managers and solution providers outside the RIA world should pay attention to how Altruist is impacting the broader wealth management industry:

  • The Altruist platform is an example of what the ideal advisor experience should look like—automating and integrating advisor workflows to save time and costs.
  • Lowering fees could lead to advisors charging end clients less, democratizing wealth management services to a much broader audience who previously couldn’t afford it.
  • Should Altruist move upmarket to serve larger RIAs with more client assets, the platform experience and zero software fees could entice more breakaway advisors to leave their firms and start their own RIA practices using Altruist.