In a hugely successful, decade-plus long advertising campaign for Reese’s Peanut Butter Cups, one person carrying chocolate would collide with another carrying peanut butter, leading the first to say:
“Hey! You got peanut butter in my chocolate!”
And the second:
“Hey! You got chocolate in my peanut butter!”
Then, each tries the new mix and express surprise as the commercial’s tagline is spoken in a voiceover: “Two great tastes that taste great together.”
Fintech has a metaphorical chocolate and peanut butter.
The chocolate would be decentralized finance, fintech applications that put the power of banking, lending and investing directly into the user’s hands, with less reliance on financial intermediaries, or no reliance on them at all.
The peanut butter would be wealthtech, and more specifically, the technology that at its heart makes the delivery of wealth management and investment services by already existing intermediaries more efficient and automated.
Chocolate companies would be blockchain companies like Circle, Compound and Aave, peer-to-peer lending apps; Uniswap, a decentralized crypto exchange; asset managers like GnosisSafe; and alts payments providers like Request Network. More traditional-like apps that significantly disrupt traditional business models, like Robinhood, Revolut, Chime and Stash, as well as Kabbage – a small business-lending platform, Transferwise – a low cost service for international transfers, and FundRise – a direct real estate investing platform.
Peanut butter companies include companies like iCapital and CAIS – alternative investment platforms, InvestCloud – a Swiss army knife ‘digital solutions’ service that includes CRM, data analytics and accounting; Practifi – a CRM and compliance-aware workflow automation platform; ForwardLane – an AI-powered data aggregator; Advisor360 – a CRM, performance reporting, and financial planning platform spun off from Commonwealth as an SaaS; and Addepar – an immensely popular portfolio analytics, data aggregation and performance reporting platform.
But today there are Reese’s Cups fintech companies that are blending the chocolate world of decentralization with the peanut butter world of wealth management. FusionIQ and Alto are among fintech companies combining the concepts of decentralized finance and wealthtechs in ways that may disrupt the disruptors.
FusionIQ, with roots as an investment research firm, also offers a digital workstation for financial advisors and their clients enabling co-planning and self-directed investing by the client, as well as other direct-to-client digital investing experiences, and practice management support for the advisor.
The platform is custodian agnostic and easy to set up as a white-labeled offering, essentially allowing existing asset managers, wealth managers, credit unions, advisory firms and other technology providers a roboadvisor or a Robinhood-like investing service that can be created with a turnkey experience.
For an RIA, it means that the end-client can have their own Robinhood-like experience or roboadvisor experience with assets that no longer have to be considered held away, making it easier for the advisor to address these assets in planning and respond to changes clients make in these types of accounts.
“Now advisors can have a full conversation with clients about the state of their financial portfolio without the client having a bifurcated experience,” said FusionIQ CEO Mark Healy. “They can bring it all together, know what’s in the 401(k) and know what’s in the self-directed portfolios. It creates a frictionless experience for the advisor and end client.”
FusionIQ’s platform is capable of handling alternatives like private securities and cryptocurrencies – or anything else – and the end user can interact via a mobile device. It also offers a “bring your own model” feature for users, allowing advisors and other wealth managers to create model portfolios using all of their own assumptions and deliver them at low costs to the end client.
FusionIQ is also associated with an SEC-registered RIA that can provide RIA services for clients as a direct advisor or subadvisor.
Healy said that over the past year, FusionIQ has seen five-to-six times its normal growth. Now with 62,000 unique accounts on its platform, he anticipates FusionIQ growing to 250,000 to 300,000 accounts as larger RIAs and credit unions move to adopt its technology.
Alto, on the other hand, is a digitally enabled custodian that offers IRAs for alternatives and cryptocurrencies. These offerings, the Alto Alternatives IRA and the Alto Crypto IRA, enable the end investor to hold any investment in a retirement account. Alto currently supports traditional, Roth and SEP IRAs.
“I identified three hurdles to investing in cryptocurrencies and alternatives in retirement accounts,” said founder and CEO Eric Satz. “The first was education, people don’t know that you can do it. The second was the complexity and time requirement and the third was the cost. That became the North Star for me.”
But that’s not unique – there are several alternative asset and cryptocurrency IRA providers out there, like Kingdom Trust’s Choice IRA. What sets Alto apart is its integration with cryptocurrency and decentralized finance firms.
The most formidable integration is with Coinbase, which enables Alto IRA holders to hold over 40 different digital tokens in their retirement accounts, and allows Coinbase users to open up an Alto IRA directly from Coinbase’s platform.
However, the company has pursued integrations with dozens of alternative asset managers, linking with AngelList, a venture investing platform with $1,000 minimums; Masterworks, an art investing platform built on fractional shares with $100 minimums; Wefunder, a crowd-funding platform; AcreTrader, a farmland investing platform with $1,000 minimums; Bioverge, a healthcare venture capital platform; Equiam, a platform offering accredited investors access to the pre-IPO space; EquityMultiple, a private real estate investing platform for accredited investors; and Bitwise, Greyscale,and SkyBridge Capital, cryptocurrency fund providers for accredited investors – and that’s only a portion of Alto’s partnerships.
Users of most of these integration partners can open and fund Alto accounts directly from the partner’s website or app.
Deal sponsors and other integration partners, in exchange, can now more easily access the $30 trillion residing in Americans’ retirement accounts.
Alto charges the end user flat fees for accounts and investments, another attribute that sets it apart, which enables “more transparency” for alternative investing, said Satz, who added that the company currently custodies approximately $500 million in investor assets.