This content is from: Wealth Management

A Business Milestone at Advisor-Client Matchmaker Zoe Financial

The Softbank-backed startup has grown considerably in its first three years.

Zoe Financial, a startup that matches RIAs with prospective clients, has helped its network of wealth managers bring in more than $1 billion in new assets under management, founder and CEO Andres Garcia-Amaya told RIA Intel.

“That’s not normal within the industry,” the executive said about the growth of the venture-backed company founded in 2018. 

Zoe is a referral service for financial advisors. But unlike others, such as SmartAsset, Zoe doesn’t collect a fee unless an RIA and investor work together. RIAs share a slice of their fees with Zoe in one of two ways. Advisors who charge clients a flat annual fee pay Zoe a flat annual fee for five years. RIAs who charge clients a fee based on a percentage of the assets managed pay Zoe a slice of that revenue for as long as the investor is a client. 

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The company does not disclose how big a portion of revenue it takes in either scenario. But even a sliver of the fees that advisors are potentially charging could translate into material revenue for three-year-old Zoe. 

For example, if advisors were charging clients a 1% fee on the $1 billion under management Zoe helped them attract, that would equate to $10 million in revenue. Even if Zoe kept just 10% of that, the startup’s annual revenue could already be more than $1 million per year. RIAs that are part of custodian referral programs pay roughly 25% of their asset-based fees.

“This is what Softbank saw,” Garcia-Amaya said. “The business is compounding really nicely.”

In May, Softbank’s SB Opportunity Fund announced that it led a $10 million Series A round of funding for Zoe, bringing its total raised to $16.3 million. “Zoe Financial is disrupting the financial advisory market through the implementation of technology, data, and sector expertise,” SB Opportunity Fund managing partner Shu Nyatta said in a statement at the time.

The pandemic proved to accelerate trends in wealth management, including investors’ willingness to find and choose a financial advisor online. In 2019, Zoe said new assets under management by its advisors were growing between 15% and 20% month-over-month, as more RIAs — which must apply and go through a due diligence process — and investors joined the startup’s respective networks. 

In 2020, Zoe’s network of RIAs grew to more than 2,600 independent advisors managing an aggregate of $410 billion, up 1,477% from a year earlier. The client base is growing “double-digit, month-over-month,” Garcia-Amaya said last week.

But the founder says Zoe still has huge potential — to collect a slice of the fees charged to $100 billion or $500 billion in assets under management for its ability to bring investors and wealth managers together.

“Each step of the way we become more and more ambitious just from the precedent that we see that it's working so well. Then it's just a question of how well we can scale so that we’re helping millions of people, rather than thousands of people, find an advisor.” 

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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