In 2018, one of the five largest asset managers was frustrated with its hiring process. Tracking down and verifying a new employee's registrations with regulatory agencies was cumbersome and fallible. It wished for a better solution.
On the receiving end of the asset manager’s complaint that day was Cameron Nordholm, the cofounder and CEO of Gainfully, a San Francisco-based software company that helps financial services professionals share information and communicate with clients and prospects within the confines of compliance. LPL Financial, the largest independent broker-dealer in the U.S. with over 15,000 financial advisors, became Gainfully’s first client in 2017. Since then, the number of professionals across organizations using Gainfully’s products has surged to over 400,000.
Nordholm, who started the venture-backed company in 2015, couldn’t help the enormous asset manager a few years ago. He declined to share the name of the company, citing non-disclosure agreements he’s signed.
But he wondered at the time: If a company that size was struggling to find or build a solution for those hiring woes, how many others are in the same circumstance?
The answer was almost all of them. Gainfully canvassed over 100 asset managers and the question turned quickly into the idea to build IdentiFi, a new verification and authentication product that begins beta testing in March and is set to launch this spring.
IdentiFi functions similarly to a password keychain and Google Authenticator, except it doesn’t just remember usernames and passwords or create one-time use login information. The product cross-checks and verifies the identity of securities, advisory, and insurance professionals with a variety of inputs, including their registrations with the Financial Industry Regulatory Authority, or FINRA, and the Securities and Exchange Commission. Companies then use the verified information to help users prefill documents and easily log into company software.
“In over 90% of cases, we’re able to take a really high-friction experience and turn it into an experience that takes only 15 seconds,” Nordholm said.
This spring, financial services professionals will be able to register with IdentiFi free of charge using only their work email and cell phone number. Employers pay a fee to Gainfully to access the IdentiFi network and leverage the service.
“Our goal is to make it very easy for many of the professionals out there to access the industry in a more efficient way so we feel very strongly that that's the right model,” Nordholm told RIA Intel.
Since Gainfully is providing digital pipework between unaffiliated companies, it has, according to Nordholm, been compared to Plaid, the software company that connects financial accounts across institutions that Visa purchased for $5.3 billion in January.
Employers and employees aren’t the only ones excited about IdentiFi. “Everyone understands the inherent benefit of what I would call network effects,” he said.
A simple example of a network effect in action can be found in payments and merchant services provider Square. Anyone who has transacted with a business that uses Square only has to enter their email address once to receive a digital receipt. Square’s network then remembers the account affiliated with that payment method, eliminating the need to enter it again – even at businesses using Square that someone has never shopped at before.
The ability to log into websites across the internet using a Google, Facebook, or some other account, is now ubiquitous and it’s made it easier for web surfers to move more freely to and from information and tools that require digital credentials. Gainfully saw an opportunity for IdentiFi to do the same within financial services and “unlock the value behind all of these gated resources inside the industry.”
Perhaps no one is as excited about that as the asset management industry, which is increasingly looking for ways to be a value-add to financial advisors.
BlackRock, for example, has been outspoken about its intentions to partner with other companies and make its model portfolios more accessible and top-of-mind for advisors. In December, when the company announced a partnership with 55ip, a platform financial advisors use to create their own model portfolios and investment strategies, Eve Cout, head of Model Portfolios at BlackRock, told RIA Intel it would “significantly accelerate the adoption of BlackRock models with advisors who are looking to scale their practice with models across both qualified and non-qualified accounts.”
That same week, Invesco, the asset manager with $1.2 trillion, announced it purchased RedBlack, a portfolio rebalancing and trading technology company with more than 150 clients and $350 billion assets. In a statement about the deal, Invesco said it “recognizes the critical role technology plays for advisors today and it is one of the reasons why it has been growing its global digital wealth capabilities.”
Nordholm declined to speak about any asset managers specifically. Generally, the adoption and use of information and tools from asset managers has disappointed. “This is a wave that is rising right now and what we see is all of the solutions that firms want to bring to market, they don't see the engagement that they hoped for,” Nordholm said.
But if advisors can effortlessly move from tool to tool outside of their own employer’s ecosystem using IdentiFi, they are more likely to use them, he argues.
In addition to asset managers, other stakeholders in wealth management are eager to improve their value proposition to advisors in hopes of winning their business.
“We have observed there are, whether on the custodian side or the [turnkey asset management platform] side, all of these firms smartly and very strategically working to become the hub to advisors,” Nordholm said.
Gainfully has 15 employees who work out of offices in San Francisco and New York. At its start in 2015, Nordholm and other employees funded Gainfully themselves. In 2017, the company counted LPL Financial, Stifel Nicolaus, MassMutual, and other firms as clients and raised a $2.5 million seed round of funding led by MassMutual Ventures.
Last year, IA Capital Group led a $5.5 million Series A round of funding for Gainfully, which the company said it’s using to grow the IdentiFi platform.