Wealth Management Startups See Funding Rise

The ultra-rich run family offices, hire wealth managers and hold stakes in private investment funds.

For those who are well-off but hardly jetsetters, however, portfolios look much more mundane. Typically, their largest asset is their home. Other holdings might include a 401(k), a few stocks, a bank account and a car.

There’s nothing terrible about this sort of asset assortment. But, given that over the years we’ve seen a persistent pattern of the ultra-wealthy getting wealthier, it’s reasonable to think the bottom 99.9% might also benefit from the tools and investment vehicles the rich have at their disposal.

Startups in the wealth management space seem to think so. Whether it’s access to private funds, estate planning or tax-minimizing investment vehicles, we’re seeing a flurry of recently funded companies focused on opening up once-exclusive options to more of the masses.

Investors are backing their visions as well. So far this year, seed- through growth-stage investment to companies in the Crunchbase wealth management category totaled nearly $1.8 billion — roughly triple year-ago levels.

That includes some big rounds. Among U.S. startups, some of the larger investments went to Human Interest, a 401(k) provider for small and medium-sized businesses, Farther, a technology platform for investment advisers, and Vanilla, an estate planning specialist.

For a broader view, below we culled a list of 16 startups funded this year with a focus tied to wealth management.

True, investment is still well below levels reached around the market peak roughly three years ago. That was a funding high point around robo investing and tools to automate personal finances, with giant rounds for companies such as Wealthsimple, Acorns and Betterment.

Complexity, made simpler

This year, by contrast, is of course a banner year for AI funding. Thus, it’s not surprising to see that investors and founders are enthused about its applications in wealth management.

“Technology is finally getting to the point that you can take many of these “financial superpowers” and open them up to more people,” said Caesar Sengupta, co-founder and CEO of Arta Finance, a wealth management startup with operations in Silicon Valley and Singapore.

In his take, superpowers include an ability to buy stakes in top-tier venture and private equity funds, build portfolios with a personalized investment theme, and take advantage of tax-advantaged strategies without high advisory fees.

In the U.S. in particular, Sengupta sees potential in the large number of people who qualify as accredited investors. Securities regulators have estimated that more than 24 million Americans meet the threshold for accreditation, which requires either $1 million in assets besides one’s home or an annual income over $200,000.

Meeting or exceeding this threshold confers the ability to invest in a slew of assets reserved for well-off individuals, including many private company shares and investment vehicles. As such, there’s been a multiyear trend of funding to investment platforms offering such options to the masses.

This includes Forge Global, now a public company, and Nasdaq Private Market, which raised $62 million in a February financing. Arta, meanwhile, is offering stakes in funds managed by big names in private equity like Kohlberg Kravis Roberts and The Carlyle Group.

Among this year’s funding recipients, Yieldstreet, a 9-year-old company focused on income-producing debt funds and private investments, is one of the more heavily capitalized. To date, the New York company has raised around $300 million in equity funding and another $500 million in debt financing.

Globally dispersed

We’re also seeing tech-driven wealth management platforms targeting markets outside the U.S. Arta’s most recent disclosed investor, for instance, is Singapore-based EDBI, which came on board this year as the startup puts more focus on Asian markets.

Another good-sized round went to Singapore-based Syfe, an online investment platform for wealth management that raised a $27 million Series C in August. A month earlier, Mumbai-based Dezerv closed on $32 million to help customers build custom mutual fund portfolios.

Assets for the somewhat-well-off masses

While it is still early days, what we seem to be seeing is the increasing availability for the merely well-to-do of financial tools and strategies once limited to the truly wealthy. In addition, startups are ramping up efforts to make managing an asset portfolio simpler, cheaper and potentially more risk-adjusted.

Today, while many of us are worried about our jobs going to AI in the coming years, it could be helpful to have the same technology on our side when it comes to overseeing the wealth we’ve managed to accumulate. After all, making money requires trying to make money. And at least for now, most of us have limited time and resources to devote to the effort.

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Illustration: Dom Guzman