The past six months have seen significant changes to the financial services landscape. Beginning with the race to zero commissions in the fall of 2019, this period has seen an uptick in mergers and the increased consolidation of custodians. Combined with the financial impact of the COVID-19 epidemic, these changes have left many financial professionals uncertain about the future of their advisory businesses and the industry as a whole. But a more streamlined approach to financial planning could address some of the existing challenges and help advisors grow their practices even in difficult times.

Key Insights

  • The existing RIA business model requires the use of separate solutions for onboarding clients, funding, and managing accounts.
  • A streamlined solution could help to keep costs at bay while helping RIAs grow their practices and serve clients from across the socioeconomic spectrum.
  • Altruist positions itself as an alternative to traditional custodian platforms and aims to solve some of the most common infrastructure problems.

The Challenges Advisors Are Facing

Following the changes spurred by zero-commission trading, several of the largest custodians—including Fidelity, Schwab, and Pershing—have started changing their pricing models to offset the losses of commission revenue. This includes tiered pricing and a reduction in certain types of features. For many advisors, these price increases are making it difficult to offer clients the same level of service without increasing their fees. 

Altruist CEO Jason Wenk believes that a new custodian model could help to address those challenges. “With all the consolidation at the custodian level, you don’t have a lot of options and people are fearful about what that may mean for their clients,” he says. A more streamlined solution could help to increase cost savings and offer advisors a way to scale their practice. “A lot of advisors are saying: it’s hard for me to get new clients, once I get them it’s hard for me to onboard them, and once they’re onboarded, managing all of this infrastructure is clunky,” Wenk says. He explains that the core part of the Altruist mission is to address those operational inefficiencies with turnkey solutions.

The Altruist Mission 

Founded in 2018 in Los Angeles, Altruist has quickly made a name for itself in the financial services industry as a mission-driven company focused on making financial planning more accessible for advisors and their clients. “The impetus for starting Altruist was to tackle meaningful infrastructure-related problems like the custodial business, opening accounts, funding accounts, the cost of clearing and custody,” says Wenk. Backed by venture capital firm Venrock, the company raised its first round of funding in September 2018 and has continued to grow steadily ever since.

Offering RIAs an All-In-One Solution

Software is one of the biggest costs for many RIAs since the typical advisor relies on a variety of platforms including a CRM, financial planning software, and a portfolio accounting solution. But an all-in-one platform could take the guesswork out of working with different types of software at once while significantly cutting costs for advisors. “Part of what drives percentage-based pricing is that it’s how vendors are priced—the custodian makes their money on basis points, the major software players make their money either on a per-account basis or a percentage of basis points, so the advisor has no choice but to trickle all of that down to their clients,” Wenk explains. He and his team are attempting to address those costs through a platform that rolls all of those solutions into one. 

Combining portfolio management tools, digital onboarding and commission-free trades, Altruist’s fully-integrated digital brokerage acts as an alternative to traditional financial planning software. The company also prides itself on affordability, offering the first 100 client accounts free and just $1 per account each month after. Currently available to a limited number of advisors, the company plans to scale its services throughout the rest of the year.

The Bottom Line

When it comes to addressing RIA concerns, Wenk is candid about the scope of those challenges. “It’s a complicated journey because you’re essentially tackling the largest players in RIA custody,” he says. But finding innovative ways to work through some of those issues can also be rewarding. “The reward is that when you succeed, you can materially change the way that RIAs have been forced to do business, and actually make it to where a startup can have the same access to tools and resources as some firms that have been around for a long time and have billions in assets.” As Altruist continues to scale its business and its platform, it hopes to be able to offer more of those tools to advisors around the country.