Altruist, the venture-backed custodian for RIAs, has created a platform that gives financial advisors access to model portfolios by Vanguard and Dimensional Fund Advisors, in addition to its own in-house strategies.
The custodian announced the launch of the so-called model marketplace on Tuesday. To start, portfolios designed by Vanguard and Dimensional Fund Advisors will be available, as well as in-house models by Altruist called the Simplicity Series. Strategies by other companies will be added in the future. RIAs could already build custom portfolios for clients through Altruist.
“Advisors we work with have touted Altruist as a platform that can help their firms offer more efficient service and investment delivery,” Bryce Skaff, co-head of DFA’s Global Client Group, said in a statement.
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“Investors benefit from additional industry participants offering low-cost, tax-efficient, and highly-diversified investment solutions. We are excited that advisors working with Dimensional will have another option in their toolkit.”
The number, and use, of model portfolios continues to rise, probably for the better. Against recommendations, only 12% of advisors outsource investment management entirely and just 38% use third-party model portfolios at all. Most wealth management practices lack the personnel to effectively create their own custom portfolios for clients. Only an estimated 7% are capable of doing it effectively, according to Cerulli Associates, a Boston-based research and consulting firm.
Advisors who use model portfolios can save money, potentially deliver better investment performance for clients, and save themselves time. Meanwhile, providing models gives asset managers another means to distribute their products, and other companies another value-added service to advisors.
Other RIA custodians have model marketplaces, as well as a growing list of other companies. In addition to asset managers like BlackRock acquiring or building their strategies, other service providers like Orion Advisor Solutions and Riskalyze have their own versions. In 2019, there was an estimated nearly $1 trillion in assets managed using model portfolios and 21% was managed by third-party strategies (not created by an advisor or their home office), according to Broadridge.
“Many outsourced portfolio management platforms are hard to use and expensive. We recognize the tremendous value we can offer by seamlessly integrating portfolio management from the top brands into our existing brokerage and portfolio accounting software,” Altruist CEO Jason Wenk said in a statement.
Wenk has meaningful experience building portfolios for advisors. He founded FormulaFolios in 2011, a $3.64 billion turnkey asset management platform that merged with Brookstone Capital Management last year to create a $6.5 billion TAMP.
Founded in 2019, Altruist — a digital, commission-free custodian that can trade fractional shares — says it can save advisors up to 90% on technology and custody costs. That year, it raised a $8.5 million seed round of funding led by the Palo Alto venture capital firm Venrock.
In January, Altruist told RIA Intel the former chief executive and chairman of Vanguard Group, F. William McNabb III, had invested in the company and joined its board. McNabb was part of a short list of high-profile investors who participated in the new round led again by Venrock. Wenk declined to share how much money Altruist raised, at the request of one of the investors.
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.