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Challenging The Titans of Asset Management with Jason Wenk · Masters in Business

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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  Speaker 2: This week on the podcast, yet another extra special guest.
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  Speaker 2: Jason Wenk is founder and CEO of Altruists, a new
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  Speaker 2: artificial intelligence driven custodian challenging a lot of the legacy
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  Speaker 2: entities like Fidelity and Schwab that are stuck with all
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  Speaker 2: of their old hardware and software. I thought the conversation
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  Speaker 2: was fascinating and I think you will also. With no
• 0:34
  Speaker 2: further ado, my interview of Jason Wenck. Welcome to Bloomberg.
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  Speaker 1: My pleasure. Such a great intro.
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  Speaker 2: Full disclosure. My firm Adults Wealth Management, uses Altruist, and
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  Speaker 2: both myself and my firm are investors in the firm.
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  Speaker 2: So I'm fascinated by the through line of your career.
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  Speaker 2: You were constantly focusing on creating lower cost, tech enabled
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  Speaker 2: financial advice. But I'm going to put a pin in
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  Speaker 2: that and come back. I got to start with your background.
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  Speaker 2: You study computer science at Grand Valley State University. What
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  Speaker 2: was the original career plan? Was it technology and computers
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  Speaker 2: or finance?
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  Speaker 1: Yeah?
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  Speaker 3: Yeah, no, So I'd never taken a finance class. I
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  Speaker 3: never met anybody who had money. My family never owned
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  Speaker 3: any stocks or mutual funds. I didn't know what an
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  Speaker 3: IRA was, or even a four one K for that matter.
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  Speaker 3: But I grew up in the eighties and nineties, so
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  Speaker 3: I remember getting our first personal computer.
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  Speaker 1: In the mid nineties.
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  Speaker 3: You know, Internet started to pick up a little bit
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  Speaker 3: of speed in the late nineties, and that was my dream,
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  Speaker 3: was to go to Silicon Valley work at a dot com.
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  Speaker 1: Yeah, you probably recall the market peaked.
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  Speaker 3: Out around nineteen ninety nine and then you know, a
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  Speaker 3: pretty major crash ensued. So you know, very accidentally did
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  Speaker 3: an internship at Morgan Stanley at nineteen years old as
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  Speaker 3: a bit of an odd duck in that I took
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  Speaker 3: a lot of college classes when I was in high school,
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  Speaker 3: so I was already taking doing internships, you know, my
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  Speaker 3: first year of.
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  Speaker 1: University, and.
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  Speaker 3: Yeah, I was presented an opportunity to move here to
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  Speaker 3: New York and to join Morgan Stanley and that was
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  Speaker 3: really my crash course in finance.
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  Speaker 2: And you were nineteen or twenty.
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  Speaker 1: Nineteen as an intern and officially joined at age twenty hal.
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  Speaker 2: So what drew you to financial services instead of technology
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  Speaker 2: was simply, you know, the dot com implosion and there
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  Speaker 2: was no jobs we had in technology.
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  Speaker 3: Yeah, I was still I was still working in technology,
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  Speaker 3: so my my role, you know, the internship was like
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  Speaker 3: productivity software, but again just happened before for a big
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  Speaker 3: investment bank. And then I spent about two years building
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  Speaker 3: different types of technology, like within the Morgan Stanley ecosystem.
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  Speaker 1: By the time I.
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  Speaker 3: Joined, they were Morgan State only Dean Witters, so they
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  Speaker 3: had this kind of big retail wealth business. They also
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  Speaker 3: had like prop trading in a number of other divisions too,
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  Speaker 3: So I didn't really get too involved into personal wealth
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  Speaker 3: until kind of the latter maybe the last six months
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  Speaker 3: I was there.
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  Speaker 1: I was put on a project.
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  Speaker 3: We're doing a lot of work with morning Star, which
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  Speaker 3: back then they were still sending out cd ROMs to
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  Speaker 3: branches around the country and so you know, if you
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  Speaker 3: had a big branch, that'd be hard who had the
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  Speaker 3: cd romya. So we were just building networked versions of
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  Speaker 3: essentially the morning Star database. But I remember around that time,
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  Speaker 3: you know, I was I was doing some like pre
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  Speaker 3: built prompts inside of these like research platforms, and you know,
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  Speaker 3: again my uh, the way my mind worked, which was
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  Speaker 3: more around math, physics, computer science. I looked at these
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  Speaker 3: prompts and I thought these are terrible prompts. In other words,
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  Speaker 3: like the prompt would be, let's build a screen so
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  Speaker 3: that financial advisors can easily build a portfolio, and the
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  Speaker 3: screen will be something like find funds have been around
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  Speaker 3: for five years with turnover under one hundred percent with
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  Speaker 3: the same manager for you know, for the five years
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  Speaker 3: or longer.
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  Speaker 1: That's in the top core tile of their peer group.
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  Speaker 3: And it was when you, like on the surface, you go, well, yeah,
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  Speaker 3: it seems like pretty reasonable and fair. But that's as
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  Speaker 3: like that is no prediction of the future result. Like
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  Speaker 3: I mean, there's like that is a terrible predictor of
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  Speaker 3: future outcomes. But it was sort of built as as
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  Speaker 3: though it was a good.
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  Speaker 2: Pret Well, you have the data past performances right there,
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  Speaker 2: exactly something with it. I give Morning Star credit. They
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  Speaker 2: had an internal survey that more or less said, hey,
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  Speaker 2: don't worry about the stars. The data shows if you
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  Speaker 2: just buy the least expensive fun that's the one most
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  Speaker 2: likely to give you the highest level of performance. And
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  Speaker 2: to their credit, they published that I want to say
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  Speaker 2: that was like twenty eleven. Yeah, well, really fascinating. So
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  Speaker 2: you never really worked rotated through the departments where you're
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  Speaker 2: smiling and dialing. Did you ever work as a broker?
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  Speaker 1: So I got license.
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  Speaker 3: I took the series seven, series eight, series twenty fours
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  Speaker 3: here like all the classic.
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  Speaker 2: Life twenty four you want to be super.
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  Speaker 3: Yeah, yeah, I'm not sure why. I also like a
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  Speaker 3: registered options principle.
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  Speaker 1: I did that. I have no idea manage futures.
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  Speaker 3: Like again, not sure why I did that, but yeah,
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  Speaker 3: I did all of this, the the did all of.
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  Speaker 1: The research.
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  Speaker 3: To understand the space, and I did go through the
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  Speaker 3: broker training program sort of twenty twenty one.
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  Speaker 1: And part of it was because I wanted to move.
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  Speaker 3: Back to the Midwest twenty one actually two thousand and one. Yeah, yeah,
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  Speaker 3: little Dutch mistake there. Yeah, and you know, I think, yeah,
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  Speaker 3: I had this like romantic notion of like going back
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  Speaker 3: home and you know, helping people that I knew. The
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  Speaker 3: real is nobody knew any money, you know, So like
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  Speaker 3: that wasn't really going.
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  Speaker 1: To work anyway.
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  Speaker 3: And really before I even got started, I made the
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  Speaker 3: decision to leave and go start another business. I'm kind
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  Speaker 3: of in the space, but adjacent didn't do direct work
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  Speaker 3: with clients.
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  Speaker 2: So let's talk about that. What was the first thing
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  Speaker 2: that you noticed in financial advice that led you to say, hey,
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  Speaker 2: this is broken, and I think I could use technology
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  Speaker 2: to build something better. Yeah.
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  Speaker 1: I mean so two things in particular.
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  Speaker 3: I mean one was the around that time there was
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  Speaker 3: a transition from commission bake based you know, sort of
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  Speaker 3: sales brokers, if you will, and there was a transition
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  Speaker 3: to more fee oriented financial planners.
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  Speaker 1: And for me that really resonated.
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  Speaker 3: So I think this notion of hey, can you give
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  Speaker 3: people more comprehensive planning advice and.
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  Speaker 2: Be a fiduciary?
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  Speaker 1: Yeah.
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  Speaker 3: And also I mean I look, I looked realistically at
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  Speaker 3: the way asset management worked, and I thought that, you know,
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  Speaker 3: I've very much agreed with the morning Star study that
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  Speaker 3: you know, they published he said some ten years later.
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  Speaker 3: You know a lot of this uh, you know, I'd
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  Speaker 3: say goes all the way back to Jack Bogel's work.
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  Speaker 3: But I just, you know, looking at a couple of
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  Speaker 3: years worth of research around asset management, I didn't see
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  Speaker 3: a discernible benefit to stock picking or market timinging. You
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  Speaker 3: know again, high cost, high turnover, high taxes, like these
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  Speaker 3: things all eroded wealth.
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  Speaker 1: So part of me, well, is there a.
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  Speaker 3: Way that you can just get more people access to
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  Speaker 3: empirically sort of evidence based investing. Maybe that's what helped
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  Speaker 3: people do better. The other part was accessibility. And I
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  Speaker 3: grew up like in a farming town. Really there were
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  Speaker 3: no brokers, there were no bank advisors, there were no
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  Speaker 3: Edward Jones offices, like, there was really no access to advice.
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  Speaker 3: And I could see the direction the Internet was taking
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  Speaker 3: us to really flattening the world, like everybody should be
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  Speaker 3: able to find advice.
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  Speaker 1: And help, you know, through through the internet.
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  Speaker 3: So really the first business was from accessibility perspective is
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  Speaker 3: going to be internet based. It was a subscription service
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  Speaker 3: and it was designed for people with four one ks
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  Speaker 3: because when I looked at the people, I knew that
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  Speaker 3: was about the closest thing they had to Wall Street
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  Speaker 3: to a brokerage account was their defined contribution plan. So
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  Speaker 3: the idea was, let's make it easy for people that
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  Speaker 3: have a four one K plan to get the absolute
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  Speaker 3: best results they can from their four one K and
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  Speaker 3: H and I spent about almost three years building that business.
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  Speaker 2: It's like not an environment wealth advisors.
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  Speaker 3: This this is the one that doesn't exist on my
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  Speaker 3: LinkedIn profiles, you know.
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  Speaker 1: This is before that.
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  Speaker 3: Oh yeah, yeah, yeah, So I spent you know, from
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  Speaker 3: twenty twenty one until twenty twenty four, effectively building a
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  Speaker 3: four to one K subscription business.
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  Speaker 2: Two thousand and one to two two thousand and one.
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  Speaker 1: Gosh, you're shows how old I am?
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  Speaker 2: Very my vision only my decades and the just trends
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  Speaker 2: in one yeah.
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  Speaker 3: Yeah, yeah, so two thousand and one until two thousand
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  Speaker 3: and four, and yeah, it was honestly, like when I
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  Speaker 3: look back at it, it was just kind of like
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  Speaker 3: maybe a little bit too early. This is like pre
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  Speaker 3: robo Advisor, pre blogging, like pre a lot of things
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  Speaker 3: that you know, just got more people connected, but.
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  Speaker 2: Those just starting. Yeah, we went from GeoCities.
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  Speaker 1: Yeah, you're a real trailblazer in that.
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  Speaker 2: Yeah, it was compulsion. I had no choice.
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  Speaker 3: Ye, So I look the the pay per click advertising
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  Speaker 3: was just coming out. So you had things like overture,
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  Speaker 3: which is like kind of pre Yahoo, pre Google. But
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  Speaker 3: you could buy the keyword for something like a phrase
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  Speaker 3: like how to manage my four one K for a penny, right,
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  Speaker 3: and you could be the top ranked you know, search
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  Speaker 3: people then land on my website, which is called smarter
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  Speaker 3: than Wall Street back then, and yeah, and it would
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  Speaker 3: allow you to say I work at General Motors, answer
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  Speaker 3: a few questions and it would say, here's how to
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  Speaker 3: allocate your four one k. They'd get an email once
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  Speaker 3: a month if there was anything they should differently. Of course,
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  Speaker 3: the email never said that I should ever do anything differently.
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  Speaker 3: And after about a year, you know, I started I
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  Speaker 3: built a pretty good size subscription business. But I started
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  Speaker 3: to have some churn because people are like, why am
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  Speaker 3: I paying you every month to just send an email
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  Speaker 3: that says the same thing as the email the month was.
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  Speaker 3: And eventually I started asking people what would be more valuable,
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  Speaker 3: sort of like a churn survey, if you will, And
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  Speaker 3: people would say, look, if you would just do this
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  Speaker 3: for me, I'd pay you a lot more than twenty
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  Speaker 3: bucks a month. I think that was really the genesis
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  Speaker 3: to retirement wealth. You know, that's even why it was
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  Speaker 3: called retirement wealth, because a lot of these four and
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  Speaker 3: k folks were retirement folks.
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  Speaker 2: And that scaled up pretty rapidly. That when was that
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  Speaker 2: the four billion dollar advisory shop or that? Where did
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  Speaker 2: that go?
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  Speaker 3: And so I ended up going to about one point
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  Speaker 3: one or one point two billion in assets, Yeah, greoulely fast.
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  Speaker 3: I started it in November December of two thousand and
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  Speaker 3: four was when I got my registration.
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  Speaker 1: Ran that for about six years.
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  Speaker 2: Roughly a billion in AUM is not in substantial. It
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  Speaker 2: put you into a.
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  Speaker 1: Category, especially back then.
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  Speaker 2: Yeah, No, there's inflation adjusted, we're probably talking about three
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  Speaker 2: billion today, but that's real revenue, that's real clients. What
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  Speaker 2: made you say, all right, I've kind of done this,
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  Speaker 2: now let's look good formula folios.
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  Speaker 3: Yes, so I was always I was always driven probably
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  Speaker 3: more by impact than by like the size of assets
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  Speaker 3: or a revenue. You know, that company was bootstrapped. I
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  Speaker 3: built every single thing myself, wrote all of the code.
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  Speaker 2: You know.
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  Speaker 3: It was although the name was Retirement Wealth, it was
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  Speaker 3: a fairly tech forward platform. I built my own proposal
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  Speaker 3: systems to help, you know, really analyze the portfolio and
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  Speaker 3: then propose a new solution. Uh, digitize, a lot of
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  Speaker 3: onboarding to really automate getting new clients on boarded.
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  Speaker 1: And it was mostly virtual.
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  Speaker 3: So it was also before its time in the sense
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  Speaker 3: that it was built mostly from blogging, you know, back
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  Speaker 3: in like the two thousand and six to ten era.
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  Speaker 3: So you know, it was a lot of things that
• 11:42
  Speaker 3: was doing well before it's time, and what ended up happening.
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  Speaker 3: Really the catalyst to moving into the next business was
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  Speaker 3: I was invited to speak at TDM Error Trades National Conference.
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  Speaker 3: They were my custodian at the time. I loved, loved
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  Speaker 3: the people there. They saw the unusual growth and also
• 12:02
  Speaker 3: that I was still in my twenties and and they thought, hey,
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  Speaker 3: we'd love to have you come speak and share a
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  Speaker 3: bit how you're doing what you're doing. So I went
• 12:09
  Speaker 3: to San Diego. You know, I gave a session where
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  Speaker 3: I just said, hey, here's how I'm get you know,
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  Speaker 3: getting new clients.
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  Speaker 1: I'm writing these blog posts. Here's the framework how I
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  Speaker 1: do it.
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  Speaker 3: Here's how I take these people then through you know,
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  Speaker 3: from a you know stranger from the internet, you know,
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  Speaker 3: into a defined financial planning process and then a defined
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  Speaker 3: you know portfolio. And it was so you know, structured
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  Speaker 3: that I could then train other advisors, and so I
• 12:34
  Speaker 3: hired a few other advisors. They came out and they
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  Speaker 3: could then run the process. And so that was the content,
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  Speaker 3: and at that time, a bunch of other advisors, you know,
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  Speaker 3: I'd say hundreds of other advisors started to reach out inbound,
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  Speaker 3: Hey how can I get access to your system? They
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  Speaker 3: would kind of call it, And the reality was, like,
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  Speaker 3: I didn't want to hire fifty financial planners. I I've
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  Speaker 3: always been a bit reclusive, so I didn't you know,
• 13:01
  Speaker 3: I didn't want.
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  Speaker 2: To you don't want to manage fifty Yeah, but selling
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  Speaker 2: them the software as a fair relationship.
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  Speaker 3: That seemed a lot better, right, So yeah, so just
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  Speaker 3: the idea of responded, Hey, maybe it makes more sense
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  Speaker 3: to license the software, make it easier for people to
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  Speaker 3: run their own business, but leveraging a lot of our technology.
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  Speaker 3: And that was the was that formula folios?
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  Speaker 1: Correct? Yeah?
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  Speaker 2: All right? And how big did that scale up to?
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  Speaker 3: Someone went zero to four billion in five years and
• 13:30
  Speaker 3: today it's I think fourteen billion or something like that.
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  Speaker 2: So I know that you were a programmer in college.
• 13:35
  Speaker 2: You describe yourself as a developer and a math geek.
• 13:39
  Speaker 2: You very much have a little bit of a hacker mentality.
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  Speaker 2: How did that technical I don't want to use the
• 13:47
  Speaker 2: word self identity, but just your self perception. How did
• 13:51
  Speaker 2: that affect your view of here are the services that
• 13:54
  Speaker 2: make sense for investors, for advisors, for this whole ecosystem
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  Speaker 2: that has been especially in the two thousands, mostly ignored
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  Speaker 2: by Wall Street. Like it took twenty five years before
• 14:06
  Speaker 2: the fiduciary side to pass the commission based brokeward side.
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  Speaker 2: So how did the technology background affect just your perception
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  Speaker 2: of that market?
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  Speaker 3: Sure, I mean, look, I think I've always been a
• 14:20
  Speaker 3: little bit idyllic. You know, you name your company, altruist,
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  Speaker 3: you probably have a probably have some like generally, yeah,
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  Speaker 3: I like tendencies, but you know, I think, you know,
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  Speaker 3: I think people know me well, they would say I'm
• 14:35
  Speaker 3: I'm a bit of a macro thinker, but I don't
• 14:38
  Speaker 3: like working in the day to day weeds of most things.
• 14:41
  Speaker 3: So for me, I've always thought in decades, and it
• 14:45
  Speaker 3: wasn't hard to look at the market in the early
• 14:47
  Speaker 3: two thousands and say, well, this is the future. Even
• 14:50
  Speaker 3: though to your point, like the RIA fiduciary channel, back
• 14:54
  Speaker 3: in two thousand and four when I started my first firm,
• 14:57
  Speaker 3: I mean, it was maybe six to eight hundred billion
• 14:59
  Speaker 3: an hour sets. You know, today it's probably ten trillion.
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  Speaker 3: So today it seems very obvious, but back then it
• 15:06
  Speaker 3: was a releve relatively small part of the market. It
• 15:10
  Speaker 3: was was not obvious maybe to everybody, but I look
• 15:13
  Speaker 3: at the demographics of the country and just there'll be
• 15:16
  Speaker 3: such a huge number of people who are going to
• 15:18
  Speaker 3: need good quality advice and planning, and that just again,
• 15:22
  Speaker 3: if you if you think in first principles, which is
• 15:25
  Speaker 3: a very common technology metaphor, and you you have no
• 15:29
  Speaker 3: bias of like the way things had been done historically,
• 15:31
  Speaker 3: to say, well, what is the right way to do things?
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  Speaker 1: That just seemed like the obvious.
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  Speaker 3: And only an objective, you know, future for this industry,
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  Speaker 3: and I wanted to be, you know, on the forefront
• 15:40
  Speaker 3: of that. So yeah, so now you know, some twenty
• 15:44
  Speaker 3: plus years later, you know, the market is you know,
• 15:49
  Speaker 3: very obvious to a lot of people. They want to
• 15:50
  Speaker 3: build in the space, and it's the place that seems
• 15:52
  Speaker 3: to be growing the fastest.
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  Speaker 1: That was crystal clear to me twenty years ago.
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  Speaker 3: I think a lot of it comes from just again
• 15:58
  Speaker 3: that more first principle, you know, sort of Silicon Valley
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  Speaker 3: way of seeing the world.
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  Speaker 2: Coming up, we continue our conversation with Jason Wenk, founder
• 16:06
  Speaker 2: and CEO of Altruist, discussing how we built the firm
• 16:10
  Speaker 2: to compete with the big guys. I'm Barry Ridults. You're
• 16:14
  Speaker 2: listening to Masters in Business on Bloomberg Radio. I'm Barry
• 16:18
  Speaker 2: rid Haults. You're listening to Masters in Business on Bloomberg Radio.
• 16:22
  Speaker 2: My guest this week is Jason Wenk, founder and CEO
• 16:26
  Speaker 2: of The New Custodian Altruist. So Altruist describes itself as
• 16:32
  Speaker 2: a modern custodian emphasis on modern for independent financial advisors.
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  Speaker 2: What does that mean in the real world?
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  Speaker 1: And this has.
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  Speaker 2: Always been such like a boring, you know, plumbing type
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  Speaker 2: of industry. What was broken that required your attention?
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  Speaker 3: Yeah, well, I guess you know, the the the opposite
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  Speaker 3: of modern is not modern, you know, so that the
• 16:59
  Speaker 3: whole the rest of the industry is pretty old. If
• 17:01
  Speaker 3: you think about most of the infrastructure that's used by
• 17:05
  Speaker 3: financial professionals, the majority of it's fifty to.
• 17:08
  Speaker 1: Seventy years old.
• 17:09
  Speaker 2: That's amazing.
• 17:10
  Speaker 3: And it operates on mainframes, not you know, cloud native platforms.
• 17:13
  Speaker 3: So I think, like starting point is and with no disrepect,
• 17:17
  Speaker 3: these were innovative companies fifty years ago.
• 17:19
  Speaker 1: You know, they're just not that innovative today. So as
• 17:22
  Speaker 1: far as I get.
• 17:23
  Speaker 2: You're saying the electric type right or edge anymore.
• 17:26
  Speaker 1: I mean they're still fun to use, you know, the click.
• 17:28
  Speaker 2: And they make a nice noise.
• 17:29
  Speaker 3: Yeah, it's like it feels very uh, you know, reminds
• 17:32
  Speaker 3: me of like my grandparents' house in the nineties or something.
• 17:34
  Speaker 1: You know.
• 17:35
  Speaker 3: So look the I think getting to the problem statements.
• 17:40
  Speaker 3: Having been in the space a long time, for the
• 17:43
  Speaker 3: longest time, I would look at the industry and go,
• 17:46
  Speaker 3: that just doesn't make any sense.
• 17:47
  Speaker 1: You know, why do we why do we do it
• 17:48
  Speaker 1: this way? Right?
• 17:49
  Speaker 2: So you've aways done it that way.
• 17:51
  Speaker 3: Yeah, exactly right, It doesn't mean it's the right way.
• 17:53
  Speaker 3: And so some examples of that. I think it's a
• 17:56
  Speaker 3: bit crazy that if you use if you're a financial advisor,
• 18:00
  Speaker 3: a wealth manager, and I think if someone's listening to
• 18:02
  Speaker 3: this and they're not one of those who they'll think
• 18:04
  Speaker 3: this is literally crazy.
• 18:05
  Speaker 1: This is what works.
• 18:06
  Speaker 3: But so first you have to have a custodian right
• 18:08
  Speaker 3: and this is a place where you'll open accounts for
• 18:09
  Speaker 3: your clients. They'll safeguard your client assets to all your
• 18:12
  Speaker 3: record keep being processed.
• 18:13
  Speaker 2: Frustrated's third party who is not managing the money, and
• 18:16
  Speaker 2: that creates a built in checks.
• 18:19
  Speaker 3: And balance somewhat I mean, or it could be a
• 18:21
  Speaker 3: built in limitation keeping that advisor from doing high quality
• 18:25
  Speaker 3: work right, which is I think what I sort of
• 18:27
  Speaker 3: discover is I kind of peel back the layers of
• 18:29
  Speaker 3: the onion. But so these custodians, one would think a
• 18:33
  Speaker 3: very simple thing they should be able to do is,
• 18:34
  Speaker 3: let's say you have three accounts with your financial planner.
• 18:37
  Speaker 3: You've got an IRA, maybe a roth IRA, a joint
• 18:40
  Speaker 3: account with your partner, and you want to know how
• 18:43
  Speaker 3: am I doing over the past twelve months. You'd think
• 18:46
  Speaker 3: you could just log on to Schwab or Fidelity or
• 18:50
  Speaker 3: Pershing or whatever and just click a button or something
• 18:53
  Speaker 3: and it would tell you that. But the reality is
• 18:54
  Speaker 3: that you cannot get that information from your custodian. The
• 18:57
  Speaker 3: custodian will only be able to tell you what you
• 18:59
  Speaker 3: have today. It will give you access to your statements.
• 19:02
  Speaker 3: The statements are not bundled at the household level. And
• 19:05
  Speaker 3: what the custodian will tell you is that if you
• 19:07
  Speaker 3: want that type of information, you need to buy a
• 19:08
  Speaker 3: third party portfolio accounting software. We'll send them a daily
• 19:13
  Speaker 3: file of all of your positions and transactions. That third
• 19:16
  Speaker 3: party will reconcile all of that data and it will
• 19:19
  Speaker 3: then allow you to run reports for your clients. And
• 19:21
  Speaker 3: you're gonna have to pay, you know, depending on the
• 19:23
  Speaker 3: size your firm, anywhere from tens of thousands to millions
• 19:25
  Speaker 3: of dollars for this third party software, and.
• 19:27
  Speaker 1: Like this just fundamentally makes no sense at all.
• 19:30
  Speaker 3: The custodian has all of the data, it should easily
• 19:33
  Speaker 3: be able to reconcile that and run reports for advisors.
• 19:35
  Speaker 3: But they can't and they won't, and you could go
• 19:38
  Speaker 3: down this long list of things that they should be
• 19:41
  Speaker 3: able to do again, just like the logic would tell you.
• 19:43
  Speaker 3: For example, if you want to bill a fee to
• 19:46
  Speaker 3: your client, client signs of fee agreement says, I'm willing
• 19:49
  Speaker 3: to pay my advisor one percent hypothetically, and I'm willing
• 19:53
  Speaker 3: to pay them that every quarter, you know, by calculating
• 19:56
  Speaker 3: the average daily balance and build me in arrears, right
• 19:58
  Speaker 3: something simple. Custodian will say, that's cool. What you need
• 20:02
  Speaker 3: to do is we'll send you the data to a
• 20:04
  Speaker 3: third party. They can reconcile the data. You can then
• 20:07
  Speaker 3: run a billing schema. It'll create a CSV file. You
• 20:11
  Speaker 3: can then upload that to our system. Will then debit
• 20:14
  Speaker 3: those fees from the accounts. But this whole process can
• 20:16
  Speaker 3: take days, and by the time you go to debit
• 20:19
  Speaker 3: those fees, sometimes a client will have had a distribution
• 20:21
  Speaker 3: in their account or a trade or something, and the
• 20:24
  Speaker 3: fees get busted. It creates an account, it's overdrawn, and
• 20:27
  Speaker 3: like just fundamentally again, there's hundreds of these things, and
• 20:32
  Speaker 3: you go, this makes no sense, Like why is this
• 20:35
  Speaker 3: the way things operate? This is largely the genesis to
• 20:38
  Speaker 3: why would you build a brand new custodian from scratch?
• 20:40
  Speaker 3: And if you are going to build it in a
• 20:42
  Speaker 3: modern way, you would probably make sure all of these
• 20:45
  Speaker 3: things are just built in automatically.
• 20:46
  Speaker 2: So that raise is really a fascinating observation. Altruist first
• 20:51
  Speaker 2: came to market twenty twenty, was it twenty.
• 20:55
  Speaker 3: We wrote the first lines of code in January of
• 20:57
  Speaker 3: twenty nineteen, and I think we went into beta in
• 21:01
  Speaker 3: early twenty twenty and then launched the product right in
• 21:03
  Speaker 3: the heart of the pandemic and twenty twenty twelve.
• 21:05
  Speaker 2: So I remember when the firm first launched and I
• 21:09
  Speaker 2: remember hearing about it and the initial reaction was, I
• 21:13
  Speaker 2: don't want to say crickets, but kind of low key, yeah,
• 21:17
  Speaker 2: someone's going to disrupt these ten we got ten trillion dollars.
• 21:21
  Speaker 2: We know what we're doing custody wise, and what started
• 21:25
  Speaker 2: out is sort of a shrug. It didn't take very
• 21:28
  Speaker 2: long before there was a little bit of a freak out, like,
• 21:31
  Speaker 2: wait a second, what's going on here? They're actually winning clients?
• 21:35
  Speaker 2: How is this a thing from your preceipt within building
• 21:40
  Speaker 2: the company? How did you see the rest of the
• 21:44
  Speaker 2: custodian market react to Altruis launch and so just rolling
• 21:50
  Speaker 2: out one new capability after another.
• 21:55
  Speaker 3: So there's I wish I could remember where to properly
• 21:58
  Speaker 3: attribute this to. But there's a great saying that is
• 22:02
  Speaker 3: that first they ignore you, then they laugh at you,
• 22:05
  Speaker 3: then then you win. So it's not surprising that somebody
• 22:09
  Speaker 3: has a big bowl declaration they're going to change in
• 22:11
  Speaker 3: industry and make it better if you're you know, effectively
• 22:17
  Speaker 3: like a duopoly or oligopoly, as our industry was. You know,
• 22:20
  Speaker 3: almost all the assets were held by at the time
• 22:22
  Speaker 3: three custodians. Back then it was Schwab Fidelity and td
• 22:26
  Speaker 3: AM Error Trade. Td amer Trade shortly after we launched,
• 22:29
  Speaker 3: was acquired by by Schwab, really making the the the
• 22:33
  Speaker 3: power dynamic, like two companies that have eighty plus percent
• 22:36
  Speaker 3: market share, So you know, respectfully, I think, yeah, like
• 22:42
  Speaker 3: there's going to be a natural rent seeking, you know
• 22:44
  Speaker 3: sort of mentality from those people who are the dominant players.
• 22:47
  Speaker 3: Why would they ever want there to be any change,
• 22:50
  Speaker 3: you know, why would they want to change their cost structure,
• 22:53
  Speaker 3: Why would they want to modernize their systems? Like things
• 22:55
  Speaker 3: were great, you know for those companies, So you're not
• 22:58
  Speaker 3: surprised that some folks may have been dismissive, but advisors
• 23:02
  Speaker 3: never were. Like when we first sort of putting prototypes
• 23:05
  Speaker 3: out into the public and you know, sharing our vision,
• 23:09
  Speaker 3: we had thousands of advisors that signed up for our
• 23:12
  Speaker 3: wait list, hundreds that decided to become design partners, like
• 23:15
  Speaker 3: very early kind of design partners help us build you know,
• 23:18
  Speaker 3: the platform, and you know, we have this sort of
• 23:22
  Speaker 3: very loyal base of users that are very loud about
• 23:26
  Speaker 3: you know, how happy they are with the product. And
• 23:27
  Speaker 3: we've we've done this by co creating it with the advisors.
• 23:32
  Speaker 3: So you know, it's not lost on me that there
• 23:36
  Speaker 3: are literally thousands of features that you have to build
• 23:39
  Speaker 3: to support you know, the wealth management industry. We can't
• 23:42
  Speaker 3: possibly know all thousand internally, so you need to have
• 23:45
  Speaker 3: some awesome partners that can help, you know, tryd to
• 23:46
  Speaker 3: line on like what are the most important things. So yeah,
• 23:49
  Speaker 3: in the end, I think we have more than caught
• 23:54
  Speaker 3: their attention. I think now you know, there's a fairly
• 23:57
  Speaker 3: deep rooted fear actually from a lot of the bigger blass.
• 23:59
  Speaker 2: So you have the three big incumbents, it's a little
• 24:01
  Speaker 2: bit of an oligopoly of Schwab which is now Schwap
• 24:04
  Speaker 2: TD combined Fidelity Pershing Bank in New York. Everybody kind
• 24:11
  Speaker 2: of looked at them and said, there's no way we're
• 24:13
  Speaker 2: going up against those behemoths. You're one of the first
• 24:18
  Speaker 2: companies to say we're going to take on the custodians
• 24:22
  Speaker 2: because their legacy platforms just can't do the things that
• 24:25
  Speaker 2: we can do at scale. How do you think about
• 24:31
  Speaker 2: the challenges of going up against what is Fidelity eighteen
• 24:35
  Speaker 2: trillion and Schwab is twelve trillion? Like these are monster
• 24:40
  Speaker 2: bank of New York. Pershing is the oldest bank, It's
• 24:43
  Speaker 2: Hamilton's Bank, literally, Like these are not Oh, I think
• 24:48
  Speaker 2: I could disrupt Nochia with a better product. These are
• 24:51
  Speaker 2: just the most entrenched, well thought of partners for advisors.
• 25:01
  Speaker 2: What gave you the confidence to say we could beat
• 25:03
  Speaker 2: them at their own game?
• 25:05
  Speaker 1: Yeah, I think.
• 25:08
  Speaker 2: So.
• 25:08
  Speaker 3: A big part of the confidence came from that early
• 25:12
  Speaker 3: advisor reaction. But you know the truth is that these
• 25:17
  Speaker 3: companies don't have high nps like these aren't like loved
• 25:19
  Speaker 3: by the net promoter set promoter.
• 25:22
  Speaker 2: Okay, yeah, we do one of the surveys every year.
• 25:26
  Speaker 2: I know, that's become super popular everywhere the past twenty years.
• 25:30
  Speaker 3: You're gonna have to look very far and wide or
• 25:32
  Speaker 3: have too many conversations to hear wealth managers gripe about
• 25:36
  Speaker 3: their custodians. I mean again, I was running one of
• 25:38
  Speaker 3: the largest I think when I stepped down from formal flows.
• 25:41
  Speaker 3: At the time, it was the fastest growing RA in
• 25:43
  Speaker 3: the history of the entire industry.
• 25:45
  Speaker 1: You know, we were growing at.
• 25:46
  Speaker 3: Sixteen thousand percent. You know, had a three year growth rate.
• 25:51
  Speaker 3: So it was a true rocket ship, you know in
• 25:53
  Speaker 3: this in sense of like you know, the RA space.
• 25:56
  Speaker 3: And I felt tremendous pain. My biggest pain point was
• 26:00
  Speaker 3: my custodian onboarding new clients. Again, they were making you
• 26:03
  Speaker 3: download forms from a form library, populate the forms byhand,
• 26:08
  Speaker 3: send them out via DocuSign at best, sometimes requiring wedding
• 26:12
  Speaker 3: signatures or medallion stamp signature guarantees like it was literally
• 26:16
  Speaker 3: like going backwards in time twenty years. Meanwhile, you had
• 26:19
  Speaker 3: companies like Robinhood that you could download an app on
• 26:22
  Speaker 3: your phone at eighteen years old, have your count open
• 26:25
  Speaker 3: in thirty seconds, fund it with one hundred dollars and
• 26:27
  Speaker 3: buy fractional shares of Berkshire Hathway stock commission free. I mean,
• 26:31
  Speaker 3: it was so obvious to me that the old way
• 26:34
  Speaker 3: that Custodian has been operating, they were still charging commissions
• 26:36
  Speaker 3: using paper. This was definitely not the right way to
• 26:40
  Speaker 3: do things. And if you started looking at the impact
• 26:42
  Speaker 3: to clients, So what is the impact of forcing people
• 26:46
  Speaker 3: to use whole shares, Like, why would the big custodians
• 26:48
  Speaker 3: force you to use whole shares versus fractional shares? Fractional
• 26:51
  Speaker 3: share trading had been around for over twenty years. Well,
• 26:54
  Speaker 3: just math, it's not that difficult to correct.
• 26:57
  Speaker 2: And this is even like hard you know, right about
• 27:01
  Speaker 2: exponential algos or anything like that.
• 27:03
  Speaker 3: Precisely, but you know a lot of it is you
• 27:06
  Speaker 3: just start kind of going okay, like, you know, maybe
• 27:08
  Speaker 3: this is a good tinfoil hat you know theory here,
• 27:09
  Speaker 3: But I'd say, what would the benefit to them be
• 27:13
  Speaker 3: by not enabling fractional shares. Maybe that means more cash
• 27:17
  Speaker 3: will be in client accounts. Maybe may make half of
• 27:19
  Speaker 3: their revenue from the cash spread, right, the net interest
• 27:22
  Speaker 3: income on cash that sits idle in client accounts. Maybe
• 27:25
  Speaker 3: the it also forces you, if you do want to
• 27:29
  Speaker 3: use fractional shares, the only vehicle you can use that
• 27:31
  Speaker 3: trades and fractional shares. You know, there's a you can
• 27:33
  Speaker 3: do notional dollar base buying our mutual funds, and these
• 27:37
  Speaker 3: mutual funds pay tremendous fees for distribution through these brokerage platforms.
• 27:42
  Speaker 3: What if they are not allowing fractional shares because they
• 27:48
  Speaker 3: really don't want to disintermediate packaged products in general, Right,
• 27:52
  Speaker 3: so make things like direct securities more accessible to more people.
• 27:56
  Speaker 3: I mean, I just went down this rabbit hole. But
• 27:57
  Speaker 3: the end result is it costs investors a time of money.
• 28:01
  Speaker 3: You end up limiting the amount of tax benefits, you
• 28:04
  Speaker 3: end up increasing the average client account side. So if
• 28:07
  Speaker 3: you really want to have great efficacy kind of investment outcomes,
• 28:10
  Speaker 3: you'd have to have tens of millions of dollars.
• 28:13
  Speaker 1: And if you had fractional shares as.
• 28:14
  Speaker 3: Just one example, all of a sudden, you know, a
• 28:18
  Speaker 3: ton of that entrenched you know kind of history goes
• 28:20
  Speaker 3: away completely. Everybody can get access to the same type
• 28:23
  Speaker 3: of investment strategies individually, you know, managed accounts, you know
• 28:28
  Speaker 3: lot level tax trading, so you can get the best
• 28:31
  Speaker 3: possible after tax outcomes. You can compress cash down to
• 28:34
  Speaker 3: the lowest amount, so you're reducing cash drag. This increases outcomes.
• 28:38
  Speaker 3: So you know, I think in the end, if you
• 28:40
  Speaker 3: if you put yourself on the right side of the
• 28:43
  Speaker 3: client and you have time on your side, like you
• 28:47
  Speaker 3: will absolutely win. I think one of the best examples
• 28:49
  Speaker 3: of that in our industry is Vanguard.
• 28:52
  Speaker 1: Like what they did, they were laughed at and long time, you.
• 28:56
  Speaker 3: Know, and they didn't even really reach massive scale for
• 28:59
  Speaker 3: twenty five thirty years into their journey. But I think again,
• 29:02
  Speaker 3: if you just put yourself on the right side of
• 29:04
  Speaker 3: the client the end, client, hey, we're going to do
• 29:06
  Speaker 3: things that objectively and obviously produce better outcomes on an
• 29:10
  Speaker 3: after fee, after tax, after cash trag basis. We're going
• 29:14
  Speaker 3: to provide delightful experiences with the true partnership with our
• 29:17
  Speaker 3: advisor clients. These things will work. And again, I think
• 29:23
  Speaker 3: you have to have a certain amount of craziness. One
• 29:25
  Speaker 3: of our early investors you might know Omani Carson, formerly
• 29:29
  Speaker 3: known as Ron.
• 29:29
  Speaker 2: Carson, let's say, is his new newness retirement name.
• 29:34
  Speaker 3: And I love him dearly, but I remember I met
• 29:36
  Speaker 3: him very early in building Altruists and we met for
• 29:39
  Speaker 3: coffee in Venice, California, where the company was started, and Omani, uh,
• 29:45
  Speaker 3: you looks at me after I explain the company and
• 29:46
  Speaker 3: he's like, that's the and you know, pardon my friends.
• 29:50
  Speaker 1: Everybody's like, you know, this is the craziest efen idea
• 29:53
  Speaker 1: I've ever heard.
• 29:54
  Speaker 3: I'm in, like, how do I give you part of it?
• 29:55
  Speaker 3: I think there's a certain number of people who just like,
• 29:57
  Speaker 3: we've been doing this a long time. You eventually become
• 30:01
  Speaker 3: numb to the status quo. The status quo was totally right.
• 30:04
  Speaker 3: It was not good for anybody.
• 30:06
  Speaker 2: And so except for the custodians, yeah.
• 30:08
  Speaker 3: There was one party that really was happy with the
• 30:10
  Speaker 3: status quo, right, and so I think as soon as
• 30:13
  Speaker 3: we shed a little bit of light, now there's a
• 30:15
  Speaker 3: ton of challenges you have to overcome. But again, there's
• 30:17
  Speaker 3: no doubt in my mind this is going to work.
• 30:18
  Speaker 2: When I started, you mentioned Robin hon and zero commission,
• 30:21
  Speaker 2: which I want to say was twenty fourteen or twenty fifteen.
• 30:24
  Speaker 2: Then Schwab rolled out, you know, commission free trading in
• 30:28
  Speaker 2: twenty nineteen. What did that shift in cost structure due
• 30:33
  Speaker 2: to the relationship between investors and custodians, advisors and custodians.
• 30:40
  Speaker 2: Did that change the way everybody looked at this or
• 30:45
  Speaker 2: was this just okay, I guess this is an even
• 30:47
  Speaker 2: lower margin business.
• 30:49
  Speaker 3: Yeah, so I think that's a I think it's a
• 30:51
  Speaker 3: huge misconception, you know. So what's interesting is that I
• 30:55
  Speaker 3: wrote this piece in twenty eighteen, and you know, we
• 30:59
  Speaker 3: had one of our designers kind of draw a infographic
• 31:02
  Speaker 3: kind of behind it, and it was the classic sort
• 31:04
  Speaker 3: of tip of the iceberg where we showed the you know,
• 31:07
  Speaker 3: what you see above the water line and then what
• 31:09
  Speaker 3: exists below the water line.
• 31:11
  Speaker 2: I just did one of those two weeks ago and
• 31:14
  Speaker 2: create metaphor you know, it really is just so perfect
• 31:17
  Speaker 2: to like, hey, here's what you're focusing on, but you
• 31:20
  Speaker 2: got to look at the things that matter even more.
• 31:22
  Speaker 3: So, we did this for custodians, right, and the thing
• 31:27
  Speaker 3: people saw was the commission. So there was this belief
• 31:30
  Speaker 3: and advisors even didn't know, you know the facts. They
• 31:34
  Speaker 3: would go to clients and say, hey, when you work
• 31:36
  Speaker 3: with us in our independent third party custodian, here's how
• 31:39
  Speaker 3: they get paid. They get paid seven dollars if you
• 31:42
  Speaker 3: do a trade. It's a pretty cheap water price. You know,
• 31:44
  Speaker 3: it's waterflow, correct.
• 31:46
  Speaker 2: I mean the big money is the commission is just.
• 31:48
  Speaker 1: To break even one hundred percent.
• 31:50
  Speaker 3: Right If if you look at the big public companies
• 31:52
  Speaker 3: that were in the space, they were making maybe five
• 31:55
  Speaker 3: to ten percent of the revenue is from from transactions,
• 31:59
  Speaker 3: and commission were maybe half of the transaction revenue.
• 32:02
  Speaker 2: Right. The trends like well we get to the float,
• 32:04
  Speaker 2: which everything I love.
• 32:05
  Speaker 3: So there's there's a ton of like un things that
• 32:08
  Speaker 3: it's a historically.
• 32:09
  Speaker 1: Been ignored or unknown.
• 32:12
  Speaker 3: The biggest revelation when everybody went commission free was people
• 32:15
  Speaker 3: start asking question, well, how the heck do you make money? Like,
• 32:18
  Speaker 3: how does this business actually work if you're giving away
• 32:21
  Speaker 3: everything for free. Only then did people start to go, oh,
• 32:25
  Speaker 3: wait a minute, like that wasn't even how you made money.
• 32:27
  Speaker 3: That was literally like just a complete smoke in mirror's
• 32:31
  Speaker 3: way to fool me into believing you only made seven
• 32:33
  Speaker 3: dollars a trade, when the reality was all of the
• 32:36
  Speaker 3: real money was made by paying me zero point zero
• 32:38
  Speaker 3: one percent interest on my idle cash, making me trade
• 32:42
  Speaker 3: whole shares, which makes me have more cash my account
• 32:44
  Speaker 3: than I really should, making me buy these different funds
• 32:47
  Speaker 3: that all have bunch of conflicts of interest through all
• 32:49
  Speaker 3: of their various you know forms of twelve B one
• 32:53
  Speaker 3: and fifteen C three revenue sharing agreements. I mean, like
• 32:57
  Speaker 3: just like very esoteric stuff that very few people ever
• 32:59
  Speaker 3: talked talk about, and to your point on float and
• 33:02
  Speaker 3: liquidity through pef off payment for order flow, I mean,
• 33:06
  Speaker 3: it just it really opened everyone's eyes into the fact
• 33:09
  Speaker 3: that the clearing and custody business turns out it wasn't
• 33:12
  Speaker 3: a high scale, low margin business at all. In fact,
• 33:16
  Speaker 3: it was a very high you know margin business, and
• 33:21
  Speaker 3: that was just one kind of irrelevant piece that you know,
• 33:24
  Speaker 3: confused people into believing that was the full full price admission.
• 33:27
  Speaker 2: I recall a couple of years ago, it was after
• 33:31
  Speaker 2: Schwab went free commission zero commission free trading. I don't
• 33:37
  Speaker 2: remember if it was TD or Schwab, that one of
• 33:41
  Speaker 2: the public companies in a poorly earnings fifty seven percent
• 33:47
  Speaker 2: of their gross.
• 33:49
  Speaker 1: Came from.
• 33:51
  Speaker 2: The float came from what they got paid, the difference
• 33:54
  Speaker 2: between what they were paying investors point oh whatever and
• 34:00
  Speaker 2: the actual rate that they could generate internally. How does
• 34:05
  Speaker 2: how does altruist deal with that?
• 34:07
  Speaker 3: So I think the key is doing whatever you're doing transparently,
• 34:10
  Speaker 3: uh and whenever you can, giving as much of the
• 34:14
  Speaker 3: economics to the client.
• 34:15
  Speaker 1: So I'm a big.
• 34:17
  Speaker 3: Believer in uh, you know the flywheel kind of made
• 34:20
  Speaker 3: popular by Good to Great, one of my favorite books.
• 34:24
  Speaker 3: And you know, our flywheel is that the first spoke
• 34:27
  Speaker 3: is uh, invest in innovation that drives better outcomes for advisors.
• 34:32
  Speaker 3: The second is invest innovation that drives better outcomes for
• 34:35
  Speaker 3: end consumers, the end client. If we do those two things,
• 34:37
  Speaker 3: it will drive the highest satisfaction amongst our user base.
• 34:41
  Speaker 3: This will increase amount assets on our platform, which gives
• 34:44
  Speaker 3: us a scale to invest more in innovation, right, so,
• 34:46
  Speaker 3: which drives better outcomes for advisors, better outcomes for clients.
• 34:50
  Speaker 3: You if you're going to do that, there's uh there.
• 34:54
  Speaker 3: You have to earn revenue like of course, but in
• 34:57
  Speaker 3: our case, we built a very integrated wealth plat. So yes,
• 35:00
  Speaker 3: we have custody and clearing revenue. We make money on
• 35:03
  Speaker 3: net interest income the float, if you will. We make
• 35:06
  Speaker 3: some revenue on payment for order flow, but we built
• 35:09
  Speaker 3: what's called the wheel order routing system. It's one hundred
• 35:13
  Speaker 3: percent optimized to drive the best postble execution for every
• 35:16
  Speaker 3: single client transaction. If we happen to get a better
• 35:19
  Speaker 3: execution through us Aitadel or Jane Street to whoever, we
• 35:24
  Speaker 3: might make a tiny amount, like literally measured in fractions
• 35:27
  Speaker 3: of bases, points and mills. It's the lowest amount of
• 35:29
  Speaker 3: revenue we earn, but like there is something there. We
• 35:34
  Speaker 3: do earn money again on float, but we offer fractional shares,
• 35:37
  Speaker 3: so we have the lowest cash holdings of the entire industry.
• 35:39
  Speaker 3: People can hold virtually nothing. We also have some earnings
• 35:43
  Speaker 3: from things like mutual funds, but we have the lowest
• 35:45
  Speaker 3: amount of mutual funds in the entire industry because we
• 35:47
  Speaker 3: offer fractional shares, so people can buy ETFs, they can
• 35:50
  Speaker 3: buy individual securities. So we have very very little in
• 35:54
  Speaker 3: way of revshare through fun companies, but there's definitely money
• 35:57
  Speaker 3: that is made at that clearing layer. Where we've really
• 36:00
  Speaker 3: innovated is that we also do all of the software layer.
• 36:03
  Speaker 1: You know, for advisors.
• 36:04
  Speaker 3: We offer an asset management layer for advisors, So each
• 36:07
  Speaker 3: kind of component of the ULTRAS business is generally going
• 36:10
  Speaker 3: to be sixty to eighty percent cheaper than if these
• 36:13
  Speaker 3: things were bought individually. So you may recall, you know,
• 36:16
  Speaker 3: when I shared the story about how you go to
• 36:17
  Speaker 3: a custodian and say, why can't you do my fee billing?
• 36:19
  Speaker 3: That makes no sense? You have to buy a third
• 36:21
  Speaker 3: party software. We built all of these things natively, and
• 36:24
  Speaker 3: most of them are either free or very low cost
• 36:27
  Speaker 3: because we have this sort of benefit, if you will,
• 36:29
  Speaker 3: of stacking the various forms of services that advisors and their.
• 36:32
  Speaker 1: Clients need on a modern platform.
• 36:35
  Speaker 3: Correct, and we do it with i'd say fair the
• 36:38
  Speaker 3: insane amounts of automation, so you know, the the the
• 36:42
  Speaker 3: kind of knock I made on using PDFs like there's
• 36:45
  Speaker 3: no PDFs necessary at ULTRAS so.
• 36:48
  Speaker 2: You're not you're not exupporting csvs and then having to
• 36:50
  Speaker 2: upload it to PLAD to get a literally ridiculous order or.
• 36:54
  Speaker 1: A year one hundred percent.
• 36:56
  Speaker 3: Yeah, you can open an entire families accounts, do all
• 36:59
  Speaker 3: of their acount transfers, link all their bank accounts, new
• 37:01
  Speaker 3: the whole thing in under two minutes, the accounts are
• 37:04
  Speaker 3: being real time validated, the transfers are being real time validated.
• 37:08
  Speaker 3: Ninety eight plus percent of these workflows there's no human
• 37:11
  Speaker 3: being ever involved in them. So every time we build
• 37:14
  Speaker 3: a new innovation or automation, we're able to operate with
• 37:17
  Speaker 3: a much higher amount of operating leverage than anyone else
• 37:19
  Speaker 3: in the industry. This allows us to invest back into
• 37:22
  Speaker 3: more innovation, which allows us to offer more services at
• 37:26
  Speaker 3: lower price points. So, look, we earn revenue just like
• 37:29
  Speaker 3: everyone else does. I think one interesting tidbit we don't
• 37:32
  Speaker 3: talk a lot about, but is the fact that on
• 37:34
  Speaker 3: the aggregate, ultrast earns more revenue than I believe any
• 37:37
  Speaker 3: other ri custodian on a per dollar basis means per
• 37:41
  Speaker 3: dollar in our platform, we earn more revenue than the
• 37:43
  Speaker 3: big players, and it's not because we charge more. In fact,
• 37:46
  Speaker 3: we have the lowest fee schedule in the entire industry.
• 37:49
  Speaker 3: But it's because we do more for those advisors than
• 37:53
  Speaker 3: just provide custody and clearing. We're offering software and services,
• 37:56
  Speaker 3: AI products, asset management services, automations around things like tax
• 38:01
  Speaker 3: management and tax loss harvesting. So because people use more
• 38:04
  Speaker 3: surface area. We end up having in more and more
• 38:07
  Speaker 3: diverse revenue as a business, and we have much better
• 38:10
  Speaker 3: operating leverage because we have so much automation that we
• 38:13
  Speaker 3: don't have to hire a lot of people to actually
• 38:16
  Speaker 3: offer this at scale. So these are a lot of
• 38:18
  Speaker 3: the benefits to modern Right, you do it this way
• 38:21
  Speaker 3: in this day and age, you're not going to build
• 38:23
  Speaker 3: the same way you would if you did it fifty
• 38:24
  Speaker 3: years ago.
• 38:25
  Speaker 2: You're earning more revenue as the custodian per dollar on
• 38:29
  Speaker 2: the platform, yet at the same time the advisor is
• 38:33
  Speaker 2: paying less costs per dollar on the platform. Of course
• 38:36
  Speaker 2: they're not working with five or ten third party add ons.
• 38:41
  Speaker 2: It's just one turnkey solution.
• 38:43
  Speaker 3: Correct, Yeah, it's material and consumers. You know, consumers if
• 38:48
  Speaker 3: using the platform correctly, are getting better results as well,
• 38:51
  Speaker 3: so because they don't have things like cash drag, because
• 38:54
  Speaker 3: they can be more fully invested, because they can reduce
• 38:57
  Speaker 3: the need for third party investment products, can hold securities
• 39:01
  Speaker 3: directly on the platform, reducing expense ratios. Because we have
• 39:05
  Speaker 3: automation on tax management, they can drive down the tax
• 39:08
  Speaker 3: consequences of investing materially. So again it's one of these
• 39:12
  Speaker 3: things where it almost sounds too good to be true, right,
• 39:14
  Speaker 3: But like, yes, advisors should be able to run more efficient,
• 39:17
  Speaker 3: better businesses. We can have a great business and consumers
• 39:21
  Speaker 3: can win too. Like that is very much a real possibility.
• 39:24
  Speaker 3: There doesn't have to be a loser. It's a winning system.
• 39:28
  Speaker 2: Let's talk about AI and automation and your platform, Hazel.
• 39:33
  Speaker 2: I know my team loves it. Everybody is super super
• 39:37
  Speaker 2: positive about it. Is Hazel a standalone AI bed? Is
• 39:42
  Speaker 2: it part of the long term vision? Is it planning
• 39:45
  Speaker 2: and custody, custody, ship and other services as one seamless
• 39:49
  Speaker 2: workflow on a single platform. Tell us all about Hazel.
• 39:54
  Speaker 3: Yeah, so the basic thought so first to answer your question,
• 39:59
  Speaker 3: it's very tightly integrated with Altrus, but it's available totally separate,
• 40:03
  Speaker 3: so really any wealth manager can use it. We have
• 40:05
  Speaker 3: people using it all over the world in many different industries.
• 40:10
  Speaker 3: So we have large CPA firms that are using Hazel,
• 40:13
  Speaker 3: and obviously large financial advisory firms. So part of the
• 40:17
  Speaker 3: thinking here is that the altruist business will eventually be
• 40:22
  Speaker 3: a very large scaled business with trillions of dollars in assets,
• 40:26
  Speaker 3: But the total size of our industry is going to
• 40:29
  Speaker 3: be tenfold that right, So we don't want to limit
• 40:32
  Speaker 3: the power of AI to just the whatever percentage of
• 40:36
  Speaker 3: market share that Altrus has. We want everybody to benefit
• 40:38
  Speaker 3: from these innovations, and so the things that are really
• 40:42
  Speaker 3: cool with Hazel's that again, it can be used by
• 40:45
  Speaker 3: any financial advisor or really a lot of different segments
• 40:48
  Speaker 3: of financial services.
• 40:50
  Speaker 1: It's been a ton of fun to.
• 40:51
  Speaker 3: Build, and a lot of what we're doing is just
• 40:54
  Speaker 3: taking the hardest, most like laborious, non glamorous, but you know,
• 41:00
  Speaker 3: important work that used to really be hard to get
• 41:04
  Speaker 3: if you didn't have tens of millions of dollars, and
• 41:07
  Speaker 3: we're just bringing the unit costs down to like three
• 41:09
  Speaker 3: to five dollars so you can do like incredibly complex
• 41:12
  Speaker 3: tax planning and do it for again, effectively like a
• 41:15
  Speaker 3: dollar to five dollars. This makes it accessible to everybody
• 41:19
  Speaker 3: and AI. You know, people have their fears about you know,
• 41:22
  Speaker 3: what could go wrong, but we like to think this
• 41:24
  Speaker 3: is a lot of the wok can go right.
• 41:26
  Speaker 2: Coming up, we continue our conversation with Jason Wenk, founder
• 41:30
  Speaker 2: and CEO of Altruist, discussing how we built the firm
• 41:34
  Speaker 2: to compete with the big guys I'm Barry Ridults. You're
• 41:38
  Speaker 2: listening to Masters in Business on Bloomberg Radio. I'm Barry Ridults.
• 41:43
  Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My
• 41:46
  Speaker 2: guest this week is Jason Wenk, founder and CEO of
• 41:51
  Speaker 2: the New Custodian Altruist. I've seen some crazy numbers as
• 41:56
  Speaker 2: to what advisors manage. I don't want to talk about
• 42:00
  Speaker 2: mutual funds. I want to talk about straight up orias.
• 42:03
  Speaker 2: Who are your prime clients as a custodian, Ten twelve,
• 42:08
  Speaker 2: twenty trillion dollars just crazy numbers out there. What is
• 42:14
  Speaker 2: the total addressable market there? And how much do you
• 42:18
  Speaker 2: know the does the oligopoly the big three have of
• 42:22
  Speaker 2: that total market?
• 42:24
  Speaker 3: So the approximate number is ten trillion today it's about
• 42:28
  Speaker 3: thirty five thousand firms. These firms are roughly half our
• 42:32
  Speaker 3: SEC registered investment advisors as meaning more than one hundred
• 42:35
  Speaker 3: million or more than a hundred million, and then the
• 42:37
  Speaker 3: other half are state registered firms that are a sub
• 42:39
  Speaker 3: one hundred million. Some of those are just new entrants,
• 42:42
  Speaker 3: Like there are just firms that are first registration. They
• 42:45
  Speaker 3: they'll probably mature into the SEC within a year or
• 42:47
  Speaker 3: two and others just you know, they operate small, independent,
• 42:50
  Speaker 3: you know businesses serving a loyal but small group of clients.
• 42:55
  Speaker 3: The uh yeah, the the top of the market, you know,
• 42:58
  Speaker 3: I think it's Persian gets oftentimes lumped into the big three.
• 43:03
  Speaker 3: They don't have much market share of the RIA segment.
• 43:07
  Speaker 3: It gets it's a bit muddy, but the reason is
• 43:09
  Speaker 3: they support all of the big broker dealers that usually
• 43:12
  Speaker 3: they have a companion corporate RIA, and so that's kind
• 43:15
  Speaker 3: of how they get in here. But true standalone rias,
• 43:18
  Speaker 3: I mean eighty five percent of the assets are with
• 43:20
  Speaker 3: just two companies, Schwab being the largest they're north of
• 43:23
  Speaker 3: fifty percent market share, and then Fidelity being the second largest.
• 43:27
  Speaker 1: So it's your very classic you know disruption.
• 43:31
  Speaker 3: Like if you were to just kind of say, hey,
• 43:33
  Speaker 3: what would be the recipe for disruption, you'd say, big,
• 43:35
  Speaker 3: fast growing market dominated by old companies using old infrastructure
• 43:40
  Speaker 3: with generally low NPS like low customer satisfaction.
• 43:44
  Speaker 1: That is exactly the market that we are in today.
• 43:46
  Speaker 2: Huh. Really really fascinating. So given the fact that you
• 43:51
  Speaker 2: got to build a clean sheet custodian you're not built
• 43:55
  Speaker 2: on this legacy hardware that can't do all these things
• 43:58
  Speaker 2: fast and easy. What's the biggest take up from advisors?
• 44:03
  Speaker 2: Where are they still inefficient? Is it just paperwork and
• 44:07
  Speaker 2: portfolio management? Is it tax is it compliance? Is it
• 44:11
  Speaker 2: client service and disbursements? Like, where are the biggest advantages
• 44:15
  Speaker 2: or is it just the whole thing?
• 44:18
  Speaker 1: Yeah?
• 44:18
  Speaker 3: I mean, so we break this down into like two elements.
• 44:21
  Speaker 3: So you know, with Altrist, we have our core wealth business.
• 44:24
  Speaker 3: This is like the custody and related software to custody
• 44:28
  Speaker 3: we started there. It's a super big, hairy build, like
• 44:31
  Speaker 3: it just takes a long time, you know, just hundreds
• 44:33
  Speaker 3: of thousands of engineering hours. You know, there's no shortcuts,
• 44:36
  Speaker 3: very expensive, time consuming.
• 44:39
  Speaker 2: But that was that a B. Hag reference?
• 44:40
  Speaker 1: Oh? Absolutely? Yeah.
• 44:42
  Speaker 3: I mean like this is like as big and hairy
• 44:44
  Speaker 3: as they get, right, and there's just again there's no shortcuts.
• 44:47
  Speaker 1: But that infrastructure is so critical.
• 44:50
  Speaker 3: Because what it allows you to do, if it's done
• 44:52
  Speaker 3: the right way, is it allows you to tackle all
• 44:54
  Speaker 3: the other work. Right, So I'll start with this work right,
• 44:57
  Speaker 3: the custody part. You can open accounts super fast, you know,
• 45:01
  Speaker 3: do all of the automation around onboarding clients. This is great,
• 45:05
  Speaker 3: but you're only onboard a client once, you know, ideally
• 45:08
  Speaker 3: and so if you serve a client for thirty years,
• 45:11
  Speaker 3: the custody part is really a pretty small part of
• 45:13
  Speaker 3: the picture. It was a huge, you know, kind of
• 45:16
  Speaker 3: friction point because it was oftentimes one of the first
• 45:19
  Speaker 3: experiences that a client would have with their advisor, and
• 45:21
  Speaker 3: if it was a bad experience, like yeah, it's usually
• 45:25
  Speaker 3: not fast like it's it's you don't have a lot
• 45:28
  Speaker 3: of clarity like hey, when is my transfer going to
• 45:31
  Speaker 3: be done? Like why did this thing get rejected? Why
• 45:33
  Speaker 3: am I redoing this paperwork? So we solved a lot
• 45:36
  Speaker 3: of the infrastructure now with our AI products Hazel or
• 45:40
  Speaker 3: tackling like the rest of the thirty years, right, So
• 45:43
  Speaker 3: maybe there's again a five percent or less of a
• 45:47
  Speaker 3: client relationship that's really connected the custodian. You know, you're
• 45:50
  Speaker 3: onboarding the client, you're setting up rules around trading and
• 45:52
  Speaker 3: rebalancing and tax management. But a lot of the work
• 45:55
  Speaker 3: really is all of the the one to one, hard
• 45:59
  Speaker 3: to scale world. So you meet a new client, they're
• 46:01
  Speaker 3: a prospect at this point, you need to you know,
• 46:04
  Speaker 3: uncover a bunch of data that they have. You need
• 46:07
  Speaker 3: to then analyze that build a financial plan, create a proposal,
• 46:12
  Speaker 3: once they agree to it, then you do that onboarding,
• 46:14
  Speaker 3: and now you have to serve that client for decades.
• 46:16
  Speaker 3: And there's going to be all of these life events
• 46:18
  Speaker 3: that happen, all of these emotions that kind of these
• 46:22
  Speaker 3: folks will live through with you. So it could be
• 46:24
  Speaker 3: massive changes in you know, macro conditions. It could be
• 46:28
  Speaker 3: you know, changes to their family, whether it's you know, death, divorce,
• 46:33
  Speaker 3: new children. I mean, there's so many things that happen,
• 46:36
  Speaker 3: and advisors have to be able to react. Ideally, be proactive,
• 46:40
  Speaker 3: but react to all these things and make sure your
• 46:42
  Speaker 3: money's aligned at all times. And this is where AI
• 46:45
  Speaker 3: is like incredibly powerful, where you can take a ton
• 46:48
  Speaker 3: of that work that used to be heavily compromised and
• 46:51
  Speaker 3: you compromise is interesting because every advisor, whether they want
• 46:55
  Speaker 3: to admit it or not, historically has been making compromises
• 46:59
  Speaker 3: for the clients. And so kind of one of two directions,
• 47:01
  Speaker 3: like one compromise is I want to save the world.
• 47:03
  Speaker 3: I've got a hero complex. I'm going to take every
• 47:05
  Speaker 3: client under the sun. If I do that, the compromises,
• 47:09
  Speaker 3: I can't possibly give the highest level of quality care
• 47:12
  Speaker 3: and service to every client. It's it's not possible you
• 47:14
  Speaker 3: can't earn enough money and revenue from the lower end
• 47:17
  Speaker 3: of your client client base. The other compromise might be
• 47:21
  Speaker 3: I am not willing to compromise in the quality and
• 47:23
  Speaker 3: service and attention, but as a result, I can only
• 47:26
  Speaker 3: serve fifty families, and so my minimum is going to
• 47:28
  Speaker 3: have to be ten million dollars or something like that.
• 47:30
  Speaker 3: Where it's the compromise is I can't actually give my
• 47:33
  Speaker 3: advice to as many people as i'd like to. AI
• 47:37
  Speaker 3: is this great equalizer where we think about all the
• 47:40
  Speaker 3: infrastructure we built on altruists, and you then layer all
• 47:43
  Speaker 3: of the agents that can do things like gather data
• 47:46
  Speaker 3: for you, build financial plans, build tax plans, help you
• 47:50
  Speaker 3: be incredibly responsive to client emails and questions, to build
• 47:55
  Speaker 3: a level of intelligence across your client base that no
• 47:58
  Speaker 3: human being could ever possibly attain. So it's very easy
• 48:02
  Speaker 3: to have you know, incredibly precise you know UH and
• 48:07
  Speaker 3: highly personalized UH you know, perspective on every unique client
• 48:11
  Speaker 3: that you serve.
• 48:12
  Speaker 1: So these are the things that we're building.
• 48:13
  Speaker 3: I mean, I think in the end, you know, the
• 48:15
  Speaker 3: clearing and custody business UH will end up becoming very
• 48:18
  Speaker 3: edgentic like, these agents will be the ones who are
• 48:20
  Speaker 3: probably you know, logging on if you will, and they'll
• 48:23
  Speaker 3: be performing functions you know that today humans have to
• 48:26
  Speaker 3: log in into.
• 48:27
  Speaker 1: But it's a pretty exciting, uh, you know, time of
• 48:28
  Speaker 1: field really interesting.
• 48:30
  Speaker 2: I recall a couple of years ago, and I don't
• 48:35
  Speaker 2: want to put words into anyone's mouth, but it was
• 48:37
  Speaker 2: the CEO of either Black Rock or Vanguard or somebody
• 48:43
  Speaker 2: that size was asked what keeps you up at night?
• 48:46
  Speaker 2: And the answer was cybersecurity and fraud? How do you
• 48:51
  Speaker 2: make sure And I totally understand no one wants to
• 48:54
  Speaker 2: wake up one day and a billion dollars is missing.
• 48:58
  Speaker 2: How do you integrate that into altruist? How do you
• 49:02
  Speaker 2: think about the human element? You know, deep fakes and
• 49:07
  Speaker 2: synthetic identity and voice fraud and cloning and all that stuff.
• 49:13
  Speaker 2: What can the modern custodial platforms do that? Hey, some
• 49:17
  Speaker 2: of the big guys don't have the integration with technology
• 49:21
  Speaker 2: to engage in this arms race against the bad guys.
• 49:26
  Speaker 3: I mean, I think the biggest reason they'd have that
• 49:28
  Speaker 3: that that you know, paranoia, is that if you're working
• 49:32
  Speaker 3: on a you know, fifty year old tech stack, and
• 49:35
  Speaker 3: we see this with like the latest anthropic model, these
• 49:39
  Speaker 3: kind of methos you know, connected models, where you know,
• 49:42
  Speaker 3: they sit it on top of some you know, legacy
• 49:45
  Speaker 3: infrastructure and they'll find, you know, hundreds of critical vulnerabilities
• 49:49
  Speaker 3: that no human being could have ever identified because the
• 49:51
  Speaker 3: code base essentially one giant, monolithic code based So like
• 49:55
  Speaker 3: it's just like this huge albatross that these companies have
• 49:58
  Speaker 3: been dealing with for decades. And replatforming is really hard.
• 50:02
  Speaker 3: If you're already big in your scale and you've got
• 50:04
  Speaker 3: tens of trillions of dollars, it is nearly impossible to
• 50:07
  Speaker 3: replatform and go from you know, physical mainframe based technology
• 50:12
  Speaker 3: into a cloud based infrastructure using you know, smaller, more
• 50:16
  Speaker 3: manageable micro services.
• 50:18
  Speaker 1: So yeah, it's a huge risk.
• 50:20
  Speaker 3: If I was running a giant old bank or brokerage,
• 50:22
  Speaker 3: I would have the same probably primary paranoia. If you're
• 50:26
  Speaker 3: building today, you know the best defense is oftentimes a
• 50:30
  Speaker 3: strong offense, So why not just build again in first
• 50:33
  Speaker 3: principles a bunch of protocols to make it much harder
• 50:36
  Speaker 3: for bad actors to even get in the door. And
• 50:38
  Speaker 3: this is like overstating the obvious, but just having like
• 50:41
  Speaker 3: modern multi factor authentication and requirement of security keys, even
• 50:47
  Speaker 3: eliminating some of the highest risk like for example, like
• 50:51
  Speaker 3: phone calls are a lot easier to dupe, ironically than
• 50:55
  Speaker 3: is a properly built multi factor authentication programs. So, you know,
• 51:00
  Speaker 3: I think there's a lot that will change. We don't,
• 51:04
  Speaker 3: you know, rest on the fact that we're a tech company,
• 51:07
  Speaker 3: therefore we're impenetrable. Like, of course, we get it. You know,
• 51:09
  Speaker 3: we have bad actors trying to come after our clients
• 51:11
  Speaker 3: all the time. And I think that if you're not
• 51:15
  Speaker 3: building especially AI that can help identify other AI and
• 51:21
  Speaker 3: other bad actors, you're in a bit of a quandary,
• 51:24
  Speaker 3: and it's really hard to do that. If your core
• 51:26
  Speaker 3: platform again has tens of millions of lines of code
• 51:29
  Speaker 3: written in languages that you know, honestly nobody uses and
• 51:32
  Speaker 3: hasn't used for decades. That is a major problem with
• 51:35
  Speaker 3: financial services.
• 51:36
  Speaker 2: So you've raised the decent amount of venture capital money.
• 51:40
  Speaker 2: I want to say, the twenty twenty five Series F
• 51:43
  Speaker 2: gave you just under two billion dollar valuation. I think
• 51:46
  Speaker 2: I'm in the Series F E.
• 51:48
  Speaker 1: I don't remember that correct.
• 51:49
  Speaker 2: Last year discuss the need for capital to build out
• 51:55
  Speaker 2: and and we're not talking about the hyperscalers that are
• 51:58
  Speaker 2: spending you know, ungodly amounts of hundreds of billions dollars.
• 52:02
  Speaker 2: This is just a nice little startup that's taking a
• 52:04
  Speaker 2: couple of big entrenched companies and working off a clean sheet.
• 52:09
  Speaker 2: What has the capital spend been like on the technology side.
• 52:15
  Speaker 3: Yeah, so we've raised a little over six hundred million
• 52:18
  Speaker 3: in capital over the last seven years. Yeah, I don't
• 52:22
  Speaker 3: think we'll need any additional capital going forward, Like, we
• 52:25
  Speaker 3: still have a lot of you know, cash on balance sheet.
• 52:28
  Speaker 2: You're cash flow positive now, you're you're actually.
• 52:31
  Speaker 3: Our broker dealer has been profitable for about three years profitable.
• 52:34
  Speaker 2: I was even going profitably and just like at least
• 52:37
  Speaker 2: holding your head.
• 52:38
  Speaker 1: Yeah, we'll look on our industry.
• 52:40
  Speaker 3: Every broker dealer's financial records are public, so you know,
• 52:43
  Speaker 3: you're can go look up our balance sheet.
• 52:45
  Speaker 1: It's not hard to find, you know.
• 52:47
  Speaker 3: And then but we still we still use cash on
• 52:49
  Speaker 3: balance sheet for R and D investments to keep building
• 52:51
  Speaker 3: you know, more more tools. But you can imagine if
• 52:54
  Speaker 3: we backed off from you know, our aggressive building of
• 52:57
  Speaker 3: products and features. Yeah, it wouldn't be a hard business
• 53:00
  Speaker 3: to run standalone. For decades. But yeah, there's a serious
• 53:06
  Speaker 3: cost to start a custodian. So beyond the cost of
• 53:10
  Speaker 3: building all of the technology, there's also the regulatory requirements
• 53:15
  Speaker 3: and the capital requirements. So when you run brokerage business,
• 53:18
  Speaker 3: every time you add a new client a new dollars
• 53:20
  Speaker 3: to your platform, you have to have reserve capital on
• 53:23
  Speaker 3: your broker dealer. And so there's no shortcut. Like this
• 53:27
  Speaker 3: is something where I tell people every now and again.
• 53:29
  Speaker 3: The last be like, hey, you know what would it
• 53:31
  Speaker 3: take for someone to compete? And I said, we'll take
• 53:33
  Speaker 3: about five years and at least two hundred and fifty
• 53:35
  Speaker 3: million dollars just to have a shot, just to have
• 53:37
  Speaker 3: any shot in the dark of making it. That assumes,
• 53:40
  Speaker 3: of course, you do it right and what you build
• 53:42
  Speaker 3: is somehow substantially better than anything else in the market,
• 53:45
  Speaker 3: and you can get enough clients to run it on.
• 53:47
  Speaker 3: But just to give yourself a shot, it's like again,
• 53:50
  Speaker 3: non trivial, and just to pick up because you made
• 53:53
  Speaker 3: a coment about these these sort of hyper scalers building
• 53:55
  Speaker 3: these foundation models.
• 53:57
  Speaker 1: I'm not so.
• 53:59
  Speaker 3: Sure that when we look back in twenty years and say, okay,
• 54:02
  Speaker 3: well maybe thirty or four years, fift years, but some
• 54:04
  Speaker 3: amount of time in the future we look back at
• 54:06
  Speaker 3: what were the most impactful companies that made the biggest
• 54:09
  Speaker 3: difference on society. I'm not so sure those are the
• 54:12
  Speaker 3: ones that we'll be talking about, really. I think we'll
• 54:14
  Speaker 3: be businesses like Altruists that we'll be talking about and
• 54:16
  Speaker 3: going wow, Like they have managed to unlock trillions of
• 54:20
  Speaker 3: dollars for consumers, and that is not something that any
• 54:25
  Speaker 3: of us can be convinced as possible with foundation models.
• 54:27
  Speaker 3: Yet at this point, all they are are money guzzling
• 54:31
  Speaker 3: machines that have yet to figure out how to turn
• 54:33
  Speaker 3: you know, sort of inference into profits. It's their costs
• 54:36
  Speaker 3: or higher than what they're reselling their products and services for.
• 54:40
  Speaker 3: I'm as big a fan and believer and user of
• 54:42
  Speaker 3: AI products as anybody. But when we really start measuring impact,
• 54:47
  Speaker 3: like what changes the world, you know, that's very possible,
• 54:51
  Speaker 3: but there's nothing proven about it. What we're doing is
• 54:54
  Speaker 3: very proven, Like you can very objectively say, if we
• 54:57
  Speaker 3: give every single client I don't know one sent back
• 55:00
  Speaker 3: an economic advantage, and you scale that across trillions of
• 55:03
  Speaker 3: dollars for decades, you can start measuring your impact in
• 55:06
  Speaker 3: hundreds of billions of dollars. That's to me more than
• 55:10
  Speaker 3: like a small startup like that's incredibly ambitious, but it's
• 55:13
  Speaker 3: like incredibly good for humanity. I hope more people do
• 55:16
  Speaker 3: this type of stuff.
• 55:18
  Speaker 2: That's Eric Belchiunas's column, which became a book, The Vanguard Effect.
• 55:23
  Speaker 2: I want to say it was like twenty sixteen twenty eighteen,
• 55:26
  Speaker 2: Vanguard has saved two trillion dollars in fees for clients.
• 55:29
  Speaker 2: I mean, that's an insane, insane number. And you guys
• 55:33
  Speaker 2: are are looking to push into the same space. I
• 55:36
  Speaker 2: want to be respectful of your time. Before I jump
• 55:38
  Speaker 2: to my favorite questions, I just have to ask one
• 55:42
  Speaker 2: other question. You've built multiple businesses in the wealth management
• 55:48
  Speaker 2: and fintech space. What's the repeatable lesson that carries over
• 55:52
  Speaker 2: from one to another or is each one a completely
• 55:56
  Speaker 2: different animal.
• 55:58
  Speaker 3: I mean, these are all pretty connected businesses. If someone
• 56:00
  Speaker 3: looks at like the evolution arc of my career, it's
• 56:02
  Speaker 3: sort of like each time I find a problem, uh
• 56:06
  Speaker 3: you know again metaphorlity, Yeah you gotta go, okay, well
• 56:10
  Speaker 3: that was an interesting problem, but this isn't even bigger problem.
• 56:13
  Speaker 3: And this is even bigger problem. Yeah, I'm curious now,
• 56:16
  Speaker 3: I think there's going to be you know, reasonably good
• 56:18
  Speaker 3: need for a highly specialized l M, specifically narrowly trained
• 56:23
  Speaker 3: for our industry. I'm not sure the big LF, so
• 56:25
  Speaker 3: maybe we'll do that at some point in the future.
• 56:27
  Speaker 3: But the point is like, there's always something that has
• 56:30
  Speaker 3: the potential to make a bigger impact. And you know,
• 56:34
  Speaker 3: one thing that I'll say this is for me Again,
• 56:37
  Speaker 3: I don't spend a ton of time, you know, trying
• 56:40
  Speaker 3: to compare what I do compared to other entrepreneurs, so
• 56:42
  Speaker 3: I can't really say, like, if there's a lesson to
• 56:45
  Speaker 3: be learned, you know, broadly. But with with each venture
• 56:50
  Speaker 3: that I've been involved with, I've started with a pretty
• 56:52
  Speaker 3: simple north star, which is I want to help people.
• 56:54
  Speaker 3: These are all mission driven organizations. I'm very passionate about that.
• 56:58
  Speaker 3: This allows you to attract other people that are also
• 57:01
  Speaker 3: mission driven. These are your more missionaries versus mercenaries. And
• 57:05
  Speaker 3: we have some of the most incredible people that I
• 57:08
  Speaker 3: could never even dream of assembling a team like what
• 57:11
  Speaker 3: we have at Altrus, But it's because they share that
• 57:14
  Speaker 3: same kind of core ethos of serving clients, driving better
• 57:20
  Speaker 3: outcomes against we're being on the right side of the customer,
• 57:22
  Speaker 3: doing things that really matter.
• 57:25
  Speaker 1: So given that it's a.
• 57:26
  Speaker 2: Huge get out, I was going to say, so, given that,
• 57:28
  Speaker 2: look out five to ten years, where's Altrus, what are
• 57:32
  Speaker 2: you doing? How big is altruis at that point.
• 57:35
  Speaker 3: Yeah, it's hard to predict with precision just how big,
• 57:39
  Speaker 3: but I suspect we'll be very large. You know, if
• 57:42
  Speaker 3: we look at the trajectory of the business today. Again,
• 57:44
  Speaker 3: we don't talk a lot about our numbers publicly, so
• 57:46
  Speaker 3: people have to sort of sort of like a well,
• 57:48
  Speaker 3: take Jason's word for it, you know, but in our
• 57:50
  Speaker 3: first five years of operating, from when we opened our
• 57:53
  Speaker 3: first account, you know, through five years, we had more
• 57:55
  Speaker 3: assets on our platform than Robinhood, Betterment, Wealth Front, Public Stash,
• 58:01
  Speaker 3: m one, Acorns combined. Right, So when people wonder like
• 58:05
  Speaker 3: is this working, it's scaling very, very rapidly, and it's growing.
• 58:09
  Speaker 1: At a really really fast pace.
• 58:11
  Speaker 3: People, I think sometimes don't understand that this sort of
• 58:15
  Speaker 3: network effect you get when you serve advisors and those
• 58:17
  Speaker 3: advisors are growing fast. Firms like yours are growing super fast,
• 58:21
  Speaker 3: the clients are adding deposits to their existing accounts. That
• 58:24
  Speaker 3: market taalwind is pretty material.
• 58:26
  Speaker 2: And it's team percent fift and it's better.
• 58:28
  Speaker 3: For advisor clients, and it is for self directed clients,
• 58:30
  Speaker 3: you know. So these are all things that create enormous
• 58:33
  Speaker 3: tailwinds for businesses like ours. So I think even ten
• 58:35
  Speaker 3: years out will be multiple trillions in assets serving you know,
• 58:38
  Speaker 3: many millions of end.
• 58:40
  Speaker 1: Clients, and likely we'll be doing them.
• 58:43
  Speaker 3: Has kind of capped out at one hundred, one hundred
• 58:45
  Speaker 3: and twenty five or one fifty, like those things, these
• 58:47
  Speaker 3: laws of physics will sort of be removed, and I
• 58:50
  Speaker 3: think that's a net great thing. All Right.
• 58:52
  Speaker 2: I want to be respectful for you of your time,
• 58:54
  Speaker 2: and I'm going to jump to our speed round when
• 58:56
  Speaker 2: we do these really quickly. Sure, starting with who mentors?
• 59:00
  Speaker 2: Who helped shape your career? Yeah?
• 59:03
  Speaker 3: So Nick Baim was our first investor at Altrubus, who
• 59:05
  Speaker 3: was also a big supporter my last company.
• 59:07
  Speaker 1: He's a partner at ven Rock and he's just awesome.
• 59:12
  Speaker 2: What are your favorite books? What are you reading currently?
• 59:15
  Speaker 3: So right now I'm reading Life three point oh by
• 59:18
  Speaker 3: Max tech Mark. It's like a book from twenty sixteen,
• 59:21
  Speaker 3: twenty seventeen. He's one of the he's a professor at
• 59:24
  Speaker 3: MIT and one of the like real four like early
• 59:30
  Speaker 3: thought leaders in AI, and so he kind of like, yeah,
• 59:32
  Speaker 3: there's three phases of AI, and I'd say, we're in
• 59:35
  Speaker 3: like life two point zero right now, so human powered
• 59:37
  Speaker 3: and like, get to read the book, you'll find out
• 59:39
  Speaker 3: a three point Oh it's a good one.
• 59:41
  Speaker 2: That's that's interesting. You mentioned good to great? Anything else you.
• 59:43
  Speaker 1: Want to mention?
• 59:44
  Speaker 3: Yeah, I mean, look, these are a little bit cornier,
• 59:46
  Speaker 3: but some of the most important books for me. I'm
• 59:48
  Speaker 3: a total math nerd. So I can live in a
• 59:50
  Speaker 3: Max Tegmark you know, book for you know.
• 59:52
  Speaker 1: Uh, forever.
• 59:53
  Speaker 3: I had to learn a lot of soft skills, you know,
• 59:55
  Speaker 3: to be a better entrepreneur. I learned a lot of
• 59:57
  Speaker 3: those from reading Seth Godin's books, like one of my
• 59:59
  Speaker 3: favorite amazing books.
• 1:00:01
  Speaker 1: Great blog as well.
• 1:00:02
  Speaker 2: Let's talk about what you're listening to, streaming or watching.
• 1:00:06
  Speaker 2: What's keeping you entertained on these gross country flights?
• 1:00:09
  Speaker 3: Yeah, so I don't watch much TV, although I did
• 1:00:12
  Speaker 3: watch your Nicks congratulations.
• 1:00:14
  Speaker 2: I was talking about perfect timing and a fairly easy path.
• 1:00:19
  Speaker 3: Yeah, perfect storm avoided my Pistons. You know, I'm a
• 1:00:23
  Speaker 3: Detroit Pistons fan. But so, yeah, I don't watch a
• 1:00:26
  Speaker 3: lot of TV. I do listen to a lot of podcasts,
• 1:00:28
  Speaker 3: So listen to yours. I listened to a big fan
• 1:00:31
  Speaker 3: of Henry Stebbings so twenty VCS and I listened to
• 1:00:37
  Speaker 3: you quite a bit, and then I listened to Lenny's podcast.
• 1:00:41
  Speaker 3: If you're a tech person, everyone who Lenny is a
• 1:00:43
  Speaker 3: product person that goes into deep I'm like how different
• 1:00:45
  Speaker 3: tech companies are being built, especially kind of product led companies.
• 1:00:48
  Speaker 1: So those are some things I listened to a lot
• 1:00:50
  Speaker 1: really interesting.
• 1:00:50
  Speaker 2: Final two questions, what sort of advice would you give
• 1:00:53
  Speaker 2: to a recent college grad interest in the career in
• 1:00:57
  Speaker 2: fill in the blank, entrepreneurship, fintech, or even financial services.
• 1:01:02
  Speaker 3: Yeah, I think in any career, I would become the
• 1:01:05
  Speaker 3: most ai forward person in your field that you could
• 1:01:09
  Speaker 3: possibly be. So it does not matter if you're working
• 1:01:12
  Speaker 3: in sales, if you're working in tech, if you're working
• 1:01:14
  Speaker 3: in financial services, I mean there, if you can become
• 1:01:18
  Speaker 3: the person when you walk into the room you are
• 1:01:21
  Speaker 3: the absolute master of claude for your you know, kind
• 1:01:24
  Speaker 3: of job function, I think that's one of the most
• 1:01:27
  Speaker 3: important things for any person. I think young people have
• 1:01:29
  Speaker 3: an actual advantage there, and it's when they should definitely
• 1:01:31
  Speaker 3: be leveraging.
• 1:01:32
  Speaker 2: You're not gonna be replaced by AI. You're gonna be
• 1:01:34
  Speaker 2: replaced by someone who uses AI better than you do.
• 1:01:37
  Speaker 1: And that's it's getting cliche, but it's very true.
• 1:01:41
  Speaker 2: And our final question, what do you know about the
• 1:01:43
  Speaker 2: world of technology, entrepreneurship or financial technology today that would
• 1:01:50
  Speaker 2: have been helpful back in the two thousands when you
• 1:01:53
  Speaker 2: were first ramping, right?
• 1:01:54
  Speaker 3: I mean, I don't know that there's necessarily some innovation
• 1:01:57
  Speaker 3: that I wish I knew. I just I wish I
• 1:01:59
  Speaker 3: would I've spent more time getting proximate to really high
• 1:02:04
  Speaker 3: caliber people. Now that I'm older and I've done a
• 1:02:07
  Speaker 3: few things, I've got the chance to meet some just
• 1:02:10
  Speaker 3: outstanding people. If you can get close to those people
• 1:02:14
  Speaker 3: early in your career, it's just going to be such
• 1:02:16
  Speaker 3: a massive accelerant because your way of thinking is going
• 1:02:20
  Speaker 3: to be so much better and sharper and inspired.
• 1:02:22
  Speaker 1: That's what I do.
• 1:02:23
  Speaker 2: Thank you, Jason for being so generous with your time.
• 1:02:26
  Speaker 2: We have been speaking with Jason Weanks. He is founder
• 1:02:29
  Speaker 2: and CEO of Fast Rising Custodian Altruist. If you enjoy
• 1:02:35
  Speaker 2: this conversation, Well, check out any of the previous six
• 1:02:38
  Speaker 2: hundred and forty eight we've done over the past twelve years.
• 1:02:43
  Speaker 2: You can find those at iTunes, Spotify, Bloomberg YouTube, wherever
• 1:02:48
  Speaker 2: you get your favorite podcasts. I would be a remiss
• 1:02:51
  Speaker 2: fund and thank the correct team that helps with these
• 1:02:53
  Speaker 2: conversations together each week. Alexis Noriega is my video producer
• 1:02:59
  Speaker 2: and A Luke is my podcast producer. Jean Russo is
• 1:03:02
  Speaker 2: my head of research. I'm Barry Retorts. You've been listening
• 1:03:06
  Speaker 2: to Master's in Business on Bloomberg Radio