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In light of the new proposed Department of Labor rules regarding the fiduciary duty of advisors with respect to certain retirement accounts, we thought we would re-publish our white paper on the intersection of RegTech (compliance) and WealthTech. Specifically, how technology can play a role in easing the regulatory burden at advisory firms and allowing for the outsourcing of some of the more time-consuming areas of compliance, such as direct surveillance. You can access the white paper here Originally published under qSpur Consulting.

Photo Credit: Louisa Svensson / Alamy Stock Photo JP Morgan Asset Management launching new vehicles to remove some of the friction associated with providing alternative assets to wealth management while WealthTech providers remove the rest and promote reach? I've always wondered if alternative assets would finally take hold in wealth management because of innovations in asset management or innovations in technology. Sounds like a good bet is both according to an interview with J.P. Morgan Asset Management and WealthManagement.com. From the JPM side: -Minimum investment lowered to $25k -Potential quarterly liquidity -Education and support -Lower fee structure? (would be nice) From the WealthTech side: -Ease of onboarding -Potential for "marketplace-like" storefront -Possible improvements in reporting -WealthTechs mentioned were CAIS and iCapital, but I'd also throw in Aspequity, Delio, Securitize, Kapnative, AirFund, Door, Vincent Labs, and a bunch more. Link to article here

McKinsey & Company's 2023 report WealthTech in Asia-Pacific: The next frontier in financial innovation contains several insights (1) . As I read the report, I wondered if this would finally be the big, explosive growth robo-advice had hoped for 10 years ago. Robo advice has seen robust growth in the US over the last decade or so, but probably not as much as the hype would have predicted when it all started. Many of the direct to consumer robo advice companies either pivoted, pirouetted, or perished. But things could be different in Asia-Pacific. McKinsey's report suggests that affluent investors in Asia, those with $100k-$1mm personal financial assets, will grow to $28 trillion by 2027, a compound annual growth rate of 8%. That is a lot of growth and the Asian affluent is decidedly under-advised compared to their US counterparts. McKinsey estimates the number of Asian affluent currently getting advice is only 15-20% compared to an estimated 43% for US affluent (2) . To the extent that the segment grows 8% per year and the advisor penetration rate increases to 22-27% by 2027, as McKinsey suggests, we could see a double-whammy growth rate in advice demand. It seems to us that this sort of spike in demand requires a similar spike in the number of advisors. However, it can take time to get new advisors online in terms of training, expertise, and client base. In the face of too few advisors, it could be that a good part of the demand goes to digital advice, at least as a first step. This could represent significant growth for robos. McKinsey estimates that assets under management for digital advice will grow from around $150-200 billion at the end of 2022 to $650-750 billion in 2027, 4x in just 5 years when measured from the midpoints. This is a compound annual growth rate of 32% vs an estimated 14.6% for the US robo segment (3) . Of course, 14.6% is strong growth, but 32% per year sounds transformative. I think it is very defensible that the hybrid model of digital advice will do well and all players should be gearing up for that. What is less difficult to predict is how well the direct to consumer channel will do, but there is a case to be made that it will do well and finally "make it" as a real wealth management alternative for the affluent. 1. McKinsey & Company. " WealthTech in Asia-Pacific: The next frontier in financial innovation ." October 2023 2. Cerulli Associates. “ Affluent Investors Are More Reliant on Advisors Than Ever Before .” October 17, 2023 3. Staticia. " Robo Advisors - United States ." August 2023

I liked this because it is an important topic that rarely comes up in wealth management. Advisors are keen on helping with assets, but what are they doing to help their clients with debt, the other half of their financial lives? By my observation, the answer is almost always "nothing" and I find that a strange answer for anyone who holds themselves out as a personal financial guru. My recommendation is to listen to this. It explains that debt optimization is not a service to help overextended people get out of debt. It is a service advisors can provide that helps high net worth and mass affluent individuals deploy their debt in the best possible way, make adjustments when needed, and adding a private-banking experience to the RIA channel. That seems to me to be a great way to add value, build relationships, and earn referrals. Enjoy this week's selection. https://firstrate.com/blog/mastering-wealth-management-why-debt-can%E2%80%99t-be-ignored

Financial plans created using historical returns as the expected return estimate will likely break during the next crash, leaving advisors to explain why a plan that looked solid just a few months ago now looks like it will fail. This is because you will be running the same analysis with the same growth rate post-crash, but the starting asset value will be much lower. This makes the ending value much lower and, potentially, well short of goal. The same things happens if you use some "conservative" fixed rate return. A "forward-looking" return estimate differs from one that uses historical returns because it can take into account the current market conditions. For example, it can assign a higher expected return when valuations are low and a lower expected return when valuations are high. By using an academically derived higher expected return after a market crash, advisors can unify the pre-crash and post-crash analysis to show clients they are still on track despite the market turmoil. For example, the chart below shows a sample financial plan before and after a market crash. What was a solid financial plan (blue line) becomes completely broken (green line). This is not an easy conversation to have with a client, particularly since tensions are high during times of market dislocation. Using a forward-looking return that takes into account current market conditions creates a much better comparison, as you can see below. This analysis unifies the pre- and post-crash analysis demonstrating to the client what the advisor has likely been saying all along: don't panic, just hold on and you will be ok over the long term. For more details, please read our white paper by clicking here .

DPL Financial Partners : a turnkey platform that allows advisors to incorporate insurance products into their practice is acquiring AnnuityFix : a solution that allows advisors to manage annuities without having to have a dual registration broker-dealer relationship. Hot on the heels of Thinktum's announcement that it is acquiring Illustrate, we see another insurance technology merger that touches wealth management. Apart from both DPL Financial Partners and AnnuityFix servicing the RIA community, there is potentially a particularly interesting implication here for RIA breakaway activity. When a broker-dealer rep is deciding if it is time to take the plunge and head to fee-only advisory, one of the considerations is the book of annuities they have created. This has the potential to create some stickiness with the brokerage model. The AnnuityFix product addresses this by allowing a broker-dealer rep to transition to an RIA and still keep their annuity business, removing the friction. Combining this with DPL's turnkey annuity and insurance platform could potentially accelerate or facilitate breakaway RIA creation. In fact, DPL has created a separate accelerator program just for this purpose. According to David Lau, the Founder and CEO of DPL, "Annuities are often the last asset class tethering advisors to their broker-dealer. Since launching our Breakaway Accelerator late last year, we’ve begun working with scores of breakaway teams and rollups to transition annuity books." That seems to be a happy thought for those who advocate for the RIA model. You can read the press release here .

Thinktum : a Canadian based, modular, low code insurance underwriting solution that, at least partially, services wealth managers Agrees to acquire Illustrate : an insurance analysis, proposal, and execution tool that happens to also be in Canada and is also a modular, low-code platform. Both companies are low-code platforms that can help advisors service their clients' insurance needs. One skews back-office and one skews front-office. Our thesis has been around tuck-in acquisitions, but the synergies in this case seem pretty robust. In our view, it pushes into the transformative acquisition realm. But we think it is still valid evidence of the appetite for strategic acquisitions globally. It also represents a potential blending of InsureTech and WealthTech. InsureTech has traditionally focused on making the underwriting process more efficient for insurance companies and WealthTech, in so far as it touches insurance, has focused on advisor enablement. We know that is painting things with an overly-wide brush so, in the interest of efficiency, we hereby pre-agree to all your arguments to the contrary. From a thematic standpoint, this could help advisors provide yet another service to their clients with expertise, at scale, and without an undue burden on their day. The industry has talked for quite some time about how advisors will need to transition from portfolio managers to one-stop-shop financial gurus, and that is now starting to happen. At least as far as we see it.

Yahoo! Finance acquires investor social news network Commonstock in first acquisition since going private Yahoo Finance announced the acquisition of Commonstock, a social news network with $10 billion of linked assets. It is worth noting that this is the first acquisition Yahoo Finance has made since being taken private by Apollo in 2021 and the arrival of Tapan Bhat, the new head of Yahoo Finance, in 2022. I would not be surprised to see further strategic activity as Tapan and his team look to execute on the growth plan. This also highlights two elements of what we are seeing out there in WealthTech. One, WealthTech platforms are looking to add functionality as quickly as possible in order to be that "one stop shop" for their clients. This is also true in the RIA space as wealth management platforms race to provide that single "Advisor Operating System" to scale their clients' days. Part of the rush is that "one stop shops" tend to be sticky, so they can't really rely that heavily on turnover once initial demand is met. The race is on. Two, while the appetite for financial buyer transactions has dried up a bit, at least in comparison to the frothy days of 2021, the appetite for strategic transactions remains strong. While some may argue with us, we place private equity-backed strategics squarely in the strategic camp. Courting private equity-backed strategics requires the same specialized approach as non-private equity-backed strategics and should be treated accordingly. Link to Article

For this month's WealthTech Strategy Challenge, we ask that you stop leading with your demo when you present to a prospect. Back in the day, a slick UI/UX would razzle-dazzle people into believing they needed your product. Those days are long gone. Now having a slick UI/UX is just table stakes. Put another way: if they are not leaning forward and wanting your product before the demo, it is unlikely that they will be after the demo. The answer is to take the time up front to really talk through why you are there and why they need you. Once you feel that your value proposition is clear, compelling, and aligned with their needs, then you can finish with a demo or schedule a demo for later. It is true that some people are visual learners, but if your arguments are clear and compelling, you can still get them to lean forward into your presentation. I understand that many sales folk will see this as a bit of heathen thinking and that the proper way two win over a client is to come charging into the room wielding a shiny demo like a two-handed sword. Our challenge this month, if you should chose to accept it, is to try talking it out first. I believe the worst thing that happens is you get a better understanding of the key points of the value proposition as people see them.

BOSTON, MA -- WealthTech Strategy Partners, a strategic advisory service focused exclusively on WealthTech, announced today that it has acquired qSpur Consulting, a sales, marketing, and emergency revenue consultant catering to emerging WealthTech companies. The transaction strengthens WealthTech Strategy Partners' desire to incorporate the benefits of traditional revenue growth consulting with the capabilities of a creative investment bank to best service earlier stage WealthTech companies struggling with a diminished funding environment and shortened runway. The two companies will operate as a unified brand and complimentary service. "There are a lot of emerging WealthTech companies with amazing technology and vision, but a shortened runway in the new funding environment," comments Kendrick Wakeman, CEO of the combined company. "Our approach is to combine the revenue-building services of a traditional consultant with the execution capabilities of an investment bank. Founders and Venture Capitalists know that we won't just drive them to a transaction. We take the time to really get to know the business and help build revenue first, which leads to much better outcomes if it comes to raising capital or a strategic transaction. We are delighted to lever the IP and databases of qSpur through our unique business model to achieve better outcomes for WealthTech founders." Marshall Smith, Head of the Advisory Board at WealthTech Strategy Partners, commented that "by incorporating pre-transaction consulting into our services, our clients get us involved earlier in the process, which achieves the best outcomes." He further adds that "whether our clients raise additional capital, bootstrap or choose to find a strategic buyer, we can help them get there. We are targeting the underserved market of WealthTech firms in the $500K-$5M ARR range. While other investment banks see this market as too small to serve, WealthTech Strategy Partners enjoys working with these firms." Terms of the transaction were not disclosed. WealthTech Strategy Partners LLC 101 Federal Street Suite 1900 Boston, MA 02066 Press Contact: Vivian Getorix vgetorix@wealthtechstrategy.com WealthTech Strategy Partners is a tactical and strategic advisory that focuses exclusively on WealthTech, associated RegTech, and InvestTech. With such an exclusive niche, we can focus on bringing deep industry knowledge, contacts, and skills to boost revenue, raise funds, or find a strategic partner. Our partners and advisor each have an average of 25+ of experience, making it one of the most tenured advisory firms of its kind with expertise ranging across startups, technology, finance, investing, wealth management, fundraising, and mergers & acquisitions. This allows us to take on the more difficult jobs that a traditional investment bank would not accept. More information available at www.wealthtechstrategy.com . This release was published on openPR. Link to Press Release: https://www.openpr.com/news/3072405/wealthtech-strategy-partners-acquires-qspur-consulting

PitchBook is reporting that the average early stage company has only 6-9 months of runway left. That is a danger zone in this new funding environment. As always, action now, backed by data and clarity of thought, will produce significant results. The difference in the current environment is that inaction will also produce significant results, just not the ones you are looking for. When funding was plentiful, it was accepted that you could go out and raise 12-15 months of funding, which would give you 9-12 months to hit your milestones and still have 3 months for the new funding to appear at the higher valuation. That was a great strategy for limiting dilution and leveraging success, but in this funding environment we believe it is an avoidable train wreck. The ratio of supply and demand in the early-stage market has completely reversed from 2021. PitchBook estimates that in 1Q21, for each $1.00 you were looking to raise, there was almost $2.00 looking to invest. In 1Q23, that estimate dropped from $2.00 to only $0.65 per $1.00 of capital needed. For late-stage ventures, it declined to $0.34. If you think you can wait out the market, that is an excellent strategy. But a word of caution: in our experience, funding environments grow slowly and shrink quickly. So, please plan for a longer wait than you might be thinking. Work hard to develop creative and aggressive strategies for building revenues, raising capital, and maintaining or cutting expenses. It’s hard to do while putting out fires and dragging your company forward yard-by-yard, but if you make this the hardest working summer you have ever had, we think you won’t regret it. As always, we are here to help. Schedule a call with a consultant, not a salesperson, here . #wealthtech #fintech #startups #venturecapital

PitchBook has released their 1Q23 US VC Valuations Report and the conclusion can be fairly well summed up in one quote: "We estimate that Q1 2023 marks the most investor-friendly market environment observed in nearly 10 years." Below is a link to the report. It's long, but they do a good job of summing it up in the Key Takeaways section. We launched WealthTech Strategy Partners not in spite of the current market but because of it. In our over 30 years of experience, we have seen these cycles come and go. Buyers dry up, deal volume declines, valuations come in, those that can ride it out can, those who can't need to get very creative. We are here to guide you through regardless of which path you walk. Link to report