Andreessen Horowitz, one of the most prominent venture capital firms in Silicon Valley history, cut the largest check in its history this week, giving $350 million to Adam Neumannn for his new real estate startup, Flow. The investment values Flow, which isn’t expected to launch until 2023, at $1 billion.
In case you missed both the documentary and the drama miniseries about him, Neumann is the entrepreneur who founded WeWork and raised its valuation to $47 billion before crashing the entire thing with a botched IPO and mismanagement. Today, WeWork has a market value of $4 billion, according to the New York Times.
Flow has a laudable stated goal of addressing critical issues like the housing shortage in the U.S. and the increasing inability of many people to buy a home. The question is whether Neumann, architect of one of the most notorious collapses in Silicon Valley history, is really the guy to handle that. Or as Vox’s Rani Molla put it — why does the WeWork guy get to fail up?
The investment also highlights ongoing issues in the venture community, including the “cult of the founder” and ongoing gender and racial inequality. The sum that Neumann raised for a company that hasn’t even opened its doors yet is more than for all Black-founded startups in the U.S. combined in the second quarter of 2022, according to Fortune. Kathryn Finney, an investor and the author of “Build the Damn Thing: How to Start a Successful Business If You’re Not a Rich White Guy,” called the fundraise a “slap in the face.”
“It sends a signal that you can really mess up as a white guy and still get second chances to win,” Finney told Fortune.
These are issues the fintech and venture capital companies need to come to grips with if diversity in the industry is ever going to improve. And hopefully Neumann doesn’t screw this one up — a home is much more precious than a shared office space.
Here are the rest of the week’s fintech headlines for advisers.
RIAs on the Dynasty Financial Partners network can now fully manage a client’s 401(k), 403(b) or other held-away accounts thanks to a new partnership with fintech company Pontera. Pontera’s technology lets advisers trade in held-away accounts in a secure and compliant fashion, while integrations with portfolio accounting systems let advisers run performance reporting, analytics and surveillance on these accounts in the same way they would custodied accounts.
Pontera is rapidly expanding its partnerships with large wealth management firms, and it's not hard to see why. A recent Cerulli report found that of the $3.3 trillion eligible for distributions last year, 73% remained in plans, while a J.P. Morgan study found that 62% of plan participants wish they could completely hand over retirement planning to an expert. Pontera offers something advisers have wanted for years, and it could quickly become a significant player on the adviser fintech scene.
Apex Advisor Solutions, a subsidiary of digital custody and clearing firm Apex Fintech Solutions, has partnered with fintech and TAMP provider Orion Advisor Solutions to deliver a fully digital account opening solution for independent advisers. After sending a link, a client or prospect is guided through a digital onboarding and simple financial planning workflow, and accounts can be opened and funded on Apex via Orion’s white-label client portal.
Updates like this are undoubtedly an improvement for advisers and investors alike, but it’s still shocking to me that digital account opening remains newsworthy in 2022. Robo-advisers have offered it for a decade, but many traditional RIAs remain behind the times.
BigPanda, a startup bringing artificial intelligence to IT operations, has attracted an investment from UBS Next, the venture capital arm of UBS Group. BigPanda uses machine learning to predict, detect and respond to incidents and automate the response to ensure IT systems stay up and running.
AI has long had practical applications in helping large banks and financial services firms identify potentially fraudulent behavior — think about when you get called by your bank when you use your card on vacation — so it’s interesting to see how machine learning can be applied to a firm’s internal systems.
Consulting firm Ezra Group has a new research metric that scores wealth fintech vendors on how well applications integrate with the rest of an adviser’s tech stack. The score aims to help firms make better decisions when evaluating technology by bringing more transparency to integration, said Ezra Group founder and CEO Craig Iskowitz.
Advisers throughout the industry still struggle with technology integration, according to InvestmentNews Research’s 2022 Adviser Technology Study. Too many vendors make clear information about integration hard to access, forcing advisers to just take their word for it in the sales pitch. Metrics like this that can improve transparency can be a significant benefit for the industry.
Wealth management fintech company Practifi rolled out a new application to help firms manage the entire acquisition cycle and track pipeline performance. The business development app includes tools to guide a firm through deal prospecting and pipeline management to onboarding and integrating a new firm.
The M&A market for RIAs continues to be red-hot and likely won’t cool off any time soon as an aging adviser workforce contemplates retirement. It’s a natural opportunity for fintech companies to provide more tools like this that help guide firms through the transition.
Carefull, a digital platform created to protect older adults’ finances and assist financial caregivers, announced two new products to directly serve financial advisers in aiding aging loved ones. Carefull’s new Vault creates a digital safety deposit box for passwords, sensitive documents and emergency contacts, while the Trust Contracts feature makes things more secure by providing read-only privileges to certain parties without giving them access to money.
Elder financial abuse cost victims $2.9 billion last year alone, and roughly two-thirds of abusers are family members. Advisers can play a critical role in keeping aging clients safe, and technologies like Carefull’s can go a long way.
iTrustCapital, a company that lets investors trade cryptocurrency in an IRA account, has signed a deal with the University of South California to have a “strong presence through banners, on-site activations and additional advertisements for the football and basketball seasons.” The crypto company also plans to host “fan-centric events and promotional activities” before and after college sports events. Since launching in 2018, iTrustCapital has attracted 38,000 accounts and surpassed $5.5 billion in transaction volume.
College students are already bombarded with credit card companies offering freebies to lure them as customers and they often have crushing amounts of student debt, especially if they're attending a private university like USC. Now the much-less-regulated cryptocurrency industry is stepping in to hook young people with a retirement account based around risky digital currencies that are currently getting hammered in markets. What could go wrong?
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Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.
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