SmartAsset, a website and software company that more than 65 million consumers look to each month for help making personal finance decisions, recently became a registered investment advisor.
The company’s registration with the Securities and Exchange Commission went into effect April 3. It last updated its Form ADV March 15.
In 2018, SmartAsset launched SmartAdvisor, a platform that matches financial advisors with local prospective clients. Since the end of 2018, the platform has grown roughly 300% and it expects to help advisors add an aggregate of $10 billion under management in 2020, co-founder and CEO Michael Carvin told RIA Intel.
But the company has no intention of siphoning any of those assets for itself.
“We absolutely do not intend to manage money or provide investment advice. We registered really out of an abundance of caution around the guidance that came out of the SEC recently on marketing rules,” Carvin said.
In November of last year, the SEC proposed overhauling rules governing advisors and advertisements. The changes would allow advisors to use testimonials (a practice currently illegal), as well as their investment performance and third-party ratings in advertisements, under certain conditions.
The last time any substantial changes to the Investment Advisers Act of 1940 were made related to those rules was 1961, according to the SEC. Use of third-party ratings and reviews in ads could upend the internet as advisors know it, but other changes regarding cash solicitations led SmartAsset to consider registering as an RIA.
“We sat down with our counsel and just came to the conclusion that, based on the updated guidance, the best path for us was to register and basically position ourselves as a solicitor,” Carvin said.
The CEO said that SmartAsset has always operated within compliance of the existing rules. “What we’re trying to do is skate to where the puck is going and get ahead of the rules" expected to go into effect next year.
Some broker-dealers explored using the SmartAdvisor platform but opted not to, at least partly because SmartAsset was unregistered at the time, according to Max Schatzow, an attorney at Stark & Stark who represented some of the broker-dealers.
“Moving forward, [the registration] definitely reduces any concerns, for our clients that had any concerns, and I think it will reduce the concerns of everyone doing business with them,” Schatzow said.
Any worry over whether SmartAsset needed to be registered before was not a factor in the company’s decision to create the RIA, Carvin said.
Late last year, the SmartAdvisor platform launched a pilot program in which a concierge team would introduce advisors to prospective clients over the phone. The program, called “Live Connections,” officially launched in April and has been growing “really quickly,” helping make April the best-ever month for advisor sales, or assets SmartAdvisor users brought under their management using the service. “It’s a great consumer experience. In this on-demand world the client is getting exactly what they want, when they want it, which is to speak to an advisor,” Carvin said.
About 20% of “Live Connections” result in a client relationship, which Carvin said he understands is comparable to the success rates of referral programs of RIA custodians.
The Covid-19 pandemic, which has confined advisors to working remotely, has also decisively affirmed interest in the so-called hybrid model of advice (a digital or robo-advisor service that can also connect clients with human advisors). More advisors and clients are warming to the idea that the entirety of an advisory relationship can be remote, to the benefit of SmartAsset.
“The interesting thing about growth in the middle of the coronavirus is that most consumers want to be within driving distance of their advisor and a lot of our advisors target consumers locally” but that might change in the future now, Carvin said.
SmartAsset, a private company, does not disclose how many advisors or investors are currently using the platform.
Focus Financial Partners, the serial RIA acquirer, led a $28 million fundraising round for SmartAsset in 2019. SmartAsset has raised a total of $47.6 million in funding since it was founded in 2011, according to PitchBook.