GeoWealth, a turnkey asset management platform (TAMP) 10 years in the making and focused on independent RIAs, said Thursday it raised a $19 million Series B round of funding after a recent growth spurt.
Kayne Partners Fund, the growth private equity group of Kayne Anderson Capital Advisors, which focuses on middle-market software and technology companies, led the latest round of funding. J.P. Morgan Asset Management, a strategic investor in GeoWealth since 2018, also participated in the round of funding. GeoWealth President Colin Falls said the $19 million raised was “substantially” more than the previous round.
Falls did not disclose what stake each investor had in the company but said they both hold a small minority. He also declined to share what the company was valued at in the latest round or share details about its Series A round of funding.
Falls said they met with Kayne earlier this year but didn’t start seriously talking about the deal until this summer.
“[Kayne] had a great pulse on the RIA industry and they had scaled enterprise software companies before and we just felt like from a cultural standpoint, they were a great fit, but also, you know, it was just, it was obvious they were the right partner for this next phase of our growth,” Falls said.
Two new board members from Kayne and J.P. Morgan are joining GeoWealth: Ted Dimig, head of advisory and core beta solutions at JPMorgan Chase, and Robert Shilton, managing director at Kayne Anderson Capital Advisors. Dimig had an observer seat on the board after the Series A round of funding but is now a full board member.
In August, Falls told RIA Intel his company was poised for growth and raising a Series B round of funding. He declined to share specific details at the time.
In 2012, a family office (that Falls did not identify but said is the majority owner of GeoWealth) had the idea to create a TAMP specifically for RIAs. It acquired an RIA willing to serve as an incubator for the software, which was effectively in beta for nearly a decade. It might seem like a slow burn but Falls said he and the company have been “extremely methodical about what we've built and why we've built it.”
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In 2018, GeoWealth had no sales team and was growing through word of mouth. Since then, assets on the GeoWealth platform have increased more than 300 percent to $16.7 billion, and assets managed by GeoWealth have increased over 700 percent to $7.3 billion, according to the company. It now has a small salesforce and is working with more 60 RIAs and roughly 1,000 advisors tending to 100,000 client accounts.
The company plans to use about half its new capital to hire more employees and the rest to continue developing products for its platform, Falls said. In August, GeoWealth revealed it planned to launch Manager Portal, a place where third-party asset managers can update and manage their product suites on the GeoWealth platform. Falls said this product is still in beta testing and has not been released to advisors.
“Our digital product and engineering team is about 30 people right now, we're going to take that likely 60 in the next year,” Falls said. “So that will allow us to kind of pursue new initiatives on the development side. We're also building out some of our investment capabilities.”
The company has hired a new head of asset management, plans to increase the sales team from three to nine people, and will likely increase the company’s marketing budget. It is also adding a new independent director and a new head of asset management both of whom will be announced in the coming weeks, Falls said.
GeoWealth’s mix of TAMP and software as a service (SaaS) fee models — the company only charges a percentage fee on assets it manages and, separately, a subscription for its software — is a big reason RIAs are choosing it, according to Falls.
Falls said the distinction between the two numbers is unique to their company because advisors use GeoWealth in two ways. The platform assets reflect the number of dollars on the platform from advisors who are using GeoWealth for aggregation, reporting, billing, the advisor portal, and client portal. The AUM number is from advisors who use either use third-party investment programs or use their own model portfolio, in this case, Falls said, GeoWealth acts as a sub-advisor on behalf of those portfolios and those accounts.
“GeoWealth stands apart from legacy providers by combining the best of SaaS and an outsourced investment platform. We believe GeoWealth is at the cusp of what could be explosive growth, and Kayne is committed to bringing our firm’s full suite of capabilities and expertise to support GeoWealth in the coming years,” Shilton said in a statement.
TAMP is a broad term, but generally they are platforms that provides outsourced investment to financial advisors, and or software services, for fees based on a percentage of assets an advisor is leveraging their help for. In 2020, a Cerulli Associates report said TAMPs managed an estimated $524 billion on behalf of advisors, a small portion of the $7.4 trillion managed account market in the U.S.
Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City.