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Fintech Report Card: April 2018

Below is the April edition of the Fintech Report Card, a monthly piece by Riskalyze CEO Aaron Klein originally published in

Wealthfront Cuts Fees After Fund Backlash

What happened: When Wealthfront’s risk-parity product was introduced, the additional fee of 50 basis points was much higher than customers were used to, and the firm said that a number of these users reached out to the company to address it. The risk-parity feature also required clients to opt out of, rather than into, the costlier portfolio. “In hindsight, we should have delivered it at [25 bps] to begin with,” said Wealthfront’s Chief Executive Officer Andy Rachleff.

Why it matters: Wealthfront went from slobbering all over Charles Schwab, trying to get them to acquire the company, to attacking Schwab for high fees and anti-customer behavior. Cue the hypocrisy … launching a new fund that triples your revenue and quietly opts your customers in to a higher-fee portfolio is not only anti-customer, it’s highly questionable under fiduciary rules. Not a good look.

E*Trade/Trust Company of America Acquisition Complete

What happened: E*Trade completed its $275 million acquisition of Denver-based Trust Company of America, bringing its $18.3 billion in institutional assets, $1.6 billion in customer cash, and 200 registered investment advisors under the new umbrella.

Why it matters: E*Trade was the last of the big discount brokerage firms to not have an entrée into the advisor custody business, and they’ve accomplished that with the acquisition of TCA. The custodian, while on the smaller side, is beloved by many of its customers for their unique capabilities. The rebrand to “TCA by E*Trade” puts institutional backing and heft behind their efforts.

Savings App Qapital Raises Additional $30 Million

What happened: Qapital lets customers set up specific goals—short- or long-term—for which they want to save. They can attach images to those goals. Then it takes an “if this, then that” approach to setting money aside. In August, Qapital added a checking account and debit card (backed by Lincoln Savings Bank) to its savings product (which is backed by Wells Fargo). It’s also beta-testing a robo advisor it developed that it plans to launch sometime in 2018.

Why it matters: How many micro-savings apps can the world handle? I guess we’ll find out. Stash, Acorns and Qapital are all trying similar things. Connecting these to a self-directed investing service is what many of them see as their logical next step, but it’s hard to see how they turn this into a business that justifies the investment. Maybe the venture capitalists accumulated $30 million after rounding up their debit purchases, and that’s where they got this spare change to invest.

Goldman’s “Marcus” Bank Buys Clarity Money App

What happened: This acquisition could strengthen Goldman’s hand in the highly competitive market for online loans and accounts. It pays 1.6 percent on deposits and charges rates of 6.99 percent to 24.99 percent on loans of 36 to 72 months. At the end of 2017, it had more than $2.3 billion in loans and $17 billion in deposits. Clarity Money provides a free app that helps consumers manage their personal finances, using machine learning to provide suggestions based on customer financial activity. According to Goldman, this acquisition will bring it more than 1 million additional customers.

Why it matters: Maybe this is the strategy for all those money management apps we just talked about? Hopefully, the other big banks are in a mood to copy Goldman Sachs.

No-Fee Robo Advisor WiseBanyan Secures $6 Million

What happened: WiseBanyan raised $6.6 million in their latest round, according to documents filed with the SEC. At a base level, the platform offers robo-investing services with no management, trading or rebalancing costs. Fees kick in when clients purchase à la carte premium services like detailed investment strategies, increased personalization or additional automation services, the firm’s website says.

Why it matters: Self-directed investing services, who like to find a way to call themselves “advisors” but have little to do with advice, simply haven’t found a path to profitably acquire customers. Maybe WiseBanyan will, but I wouldn’t bet on it.

Former LPL Executive Derek Bruton Joins Chalice Wealth Partners

What happened: Derek Bruton, who previously served as head of LPL Financial’s independent advisor services in 2014, joined Chalice Wealth Partners, an end-to-end wealth management shop catering to independent advisors, as managing partner and chief operating officer. Bruton will also serve as president of the firm’s broker/dealer and the firm’s RIA.

Why it matters: This is a really interesting move for Bruton, who leaps into a firm that appears to be starting a broker/dealer, a corporate RIA, a TAMP and a technology company all at the same time. I’d say he’s going to have his hands full and we wish him a lot of luck!

Hedge Fund Billionaire Steve Cohen’s Venture Firm Goes All-In on Fintech

What happened: Steve Cohen’s venture capital investing arm, Point72 Ventures, led a $3 million investment in Extend, a startup which has built a mobile technology business owners can use to share their corporate credit cards with employees and freelancers. Point72 also closed an investment in a company run by one of Cohen’s former traders, Imperative Execution, and was in an $8 million investment in a New York startup called Say, which is building technology to help shareholders participate in proxy voting. Point72 was created by Cohen four years ago as his family investment office. He returned outside capital when he shut down his former hedge fund, SAC Capital, after settling with regulators over failing to supervise traders. Regulators banned him from managing outside money until earlier this year.

Why it matters: Steve Cohen is an interesting character, to say the least. Marred by an insider trading scandal (documented in the book Black Edge), Cohen is working to get back in the game and fintech appears to be on his target list. He’s well known for spending $155 million on a Picasso, but color me a tad skeptical if he will find a single masterpiece in fintech to which he’ll write a similar-sized check.

Addepar Reaches $1 Trillion in Assets

What happened: Since Addepar was founded in 2008, more than 300 financial services firms, including broker/dealers, registered investment advisors and private banks, have partnered with the firm to aggregate and analyze investment data, freeing up time for advisors who were previously committed to doing some of those tasks manually. “It seems like just yesterday we were celebrating our $500 billion mark,” said Justin Rockefeller, Addepar’s global director of Family Offices and Foundations. “There’s, internally, tremendous excitement about the momentum and product, and our place in the marketplace.” Rockefeller said the company just celebrated the $1 trillion milestone, but that it continues to focus on growing the business and is “aggressively hiring” new employees.

Why it matters: Addepar is a very interesting company, funded by a venture capital firm that prides itself on investing only in companies that commit to spending 50 percent of OpEx on engineers and R&D. They’ve definitely built some very interesting capabilities catering to performance reporting for esoteric asset classes like stakes in venture capital funds, hedge funds or private placements. Orion Advisor Services clearly has their eyes on putting up a fight with the recent launch of their alternatives platform, so this will be an interesting space to watch.

Revolut Secures Additional $250 Million and $1.7 Billion Valuation

What happened: Fintech firm Revolut raised $250 million, bringing its valuation to $1.7 billion. The London-based firm provides a debit card that allows people to spend money in 150 currencies with no fees at a real-time exchange rate. It has since expanded services to offer a current account, cryptocurrency trading and insurance. DST Global, a company that was early investors in Facebook and Spotify, led the funding round, which included other high-profile venture capital firms Index Ventures and Ribbit Capital. Revolut has now raised $340 million since it launched in 2015.

Why it matters: What a fantastic and interesting idea. We gave Revolut a thumbs up in July 2017 and it’s great to see them cross into unicorn territory.

Orion Buys $10B TAMP

What happened: Orion Advisor Services is buying a $10-billion TAMP to vault itself to Envestnet’s level in bidding for mega-accounts. Through its parent, NorthStar Financial Services Group, the Omaha-based performance reporting software company is acquiring FTJ FundChoice for an undisclosed sum.

Why it matters: Congratulations to Eric Clarke and Dean Cook on putting this deal together to combine FTJ FundChoice with NorthStar and Orion. This will create even more fascinating capabilities for Orion in the upmarket space it has been focused on with its blizzard of rollouts, from ASTRO to alternatives and now a TAMP. Does Eric Clarke ever sleep?

Aaron Klein is CEO at Riskalyze.

Editors note: The views expressed in this column are Aaron Klein’s, and do not necessarily reflect the opinions of

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