Stone Ridge Asset Management, an alternative investment manager with more than $10 billion in assets, is selling its RIA-focused startup Flourish to MassMutual.
The companies announced the deal on Monday. Stone Ridge Securities, better known as Flourish, will be a wholly owned subsidiary of MassMutual and operate independently from the insurance company’s other businesses. Terms of the deal were not disclosed.
New York City-based Stone Ridge was founded in 2012 to cater to RIAs, a growing segment of financial services. It became intimately familiar with the wants and needs of financial advisors and in 2018 created Flourish, a fintech firm to develop services or “modules” specifically for RIAs. Its first module, a cash management solution called Flourish Cash, launched later that year. It is an invite-only service that RIAs offer to their clients. Investors who inquire about Flourish directly are referred to advisors in their local area.
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Flourish Cash partners with FDIC-member banks to offer cash accounts with higher interest rates than a typical savings account, currently as high as 0.70%. The accounts have no minimum balance or fees, users can make an unlimited number of transfers, and it takes less than five minutes to open one.
One RIA called Flourish Cash “phenomenal” and some of the largest use it, including Buckingham Strategic Wealth, a St. Louis-based Focus Financial Partners RIA that manages $16.1 billion. Flourish works with more than 350 RIAs together managing more than $600 billion, up from about 150 RIAs at the end of 2019.
In November of 2019, the startup was considering other modules including what it said might be called “Flourish Home” to help investors to unlock equity in real estate they own, and “Flourish Gift,” a tool to explore charitable causes and donate to them. Those modules, partly due to the Covid-19 pandemic, are now “on the back burner,” Benjamin Cruikshank, the head of Client Strategies at Flourish, told RIA Intel.
But the deal with MassMutual will boost the development of different modules, including one related to insurance, in the coming year.
“Backing Flourish with the resources of a Fortune 500 company, allows an opportunity to accelerate our growth,” Cruikshank said. He declined to share specific details about the new services or an exact timeline for the releases but said the company is already hiring more software developers and client relationship employees.
In Flourish, MassMutual adds to its growing list of technology and RIA-related investments. Most recently, it announced that its general investment fund purchased $100 million in bitcoin and acquired a $5 million minority stake in NYDIG, another subsidiary of Stone Ridge that provides cryptocurrency services to institutions.
In 2019, it led a pre-seed round of funding for FA Match, a startup company out to disrupt financial advisor recruiting that just raised another $1 million. The insurer’s venture capital subsidiary, MassMutual Ventures, is also an investor in wealth management startups; It previously led a $2.5 million seed round of funding for Gainfully, a San Francisco-based software company that helps financial services professionals share information and communicate with clients and prospects.
“MassMutual is focused on providing a simplified, digital, customer-centric user experience, and Flourish will help accelerate that strategy, ultimately supporting our vision of providing financial well-being for all Americans,” Gareth Ross, the head of Enterprise Technology and Experience at MassMutual, said in a statement about the acquisition.
“We are thrilled to have the exceptionally talented team from Flourish join MassMutual and add their digital expertise and track record of innovation to our efforts, and we look forward to delivering exciting new Flourish modules to advisors in the coming months.”
In addition to growing its cash management business this year, Flourish also created integrations with Envestnet’s Tamarac (portfolio management, performance reporting, and other services) and Orion Advisor Solutions, a technology company that in June merged with Brinker Capital, one of the biggest turnkey asset management platforms, or TAMPs.
Wealth managers are looking for ways to differentiate themselves by offering more comprehensive services, beyond just investment management and financial planning. Nearly half of all wealthy clients (49%) want a single financial institution to serve most of their needs but only one third of them are engaging a company that way, according to a report by Cerulli Associates.
The deal with MassMutual also gives Flourish another reason to re-engage hundreds of RIAs and ask them what they are looking for next.
“We’re starting a conversation with a number of our advisors that goes fairly broad...are we uniquely positioned to help?” Cruikshank said. The thinking is that if RIAs are molding Flourish for the future that's not just good for advisors, it's good for the startup.
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.