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Technology > Marketing Technology

Robo Platform Provider NextCapital to Custody With Pershing

By James J. Green

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NextCapital, the digital advice platform provider, announced Tuesday that it has chosen Pershing Advisor Solutions as its custodian and will integrate with Pershing’s NetX360 technology platform as part of NextCapital’s professed strategy to allow institutions to deliver “scalable personal advice for large financial institutions.”

In a statement, PAS CEO Mark Tibergien said that the agreement is “consistent with our ongoing strategy to digitally enable advisors and institutions that custody” with Pershing and is “all about ushering financial institutions into the age of digital wealth management.”

In an interview Tuesday, Tibergien went on to say that NextCapital picked Pershing “over Schwab, Fidelity and TD Ameritrade as its custodian to leverage the Pershing platform to serve their marketplace” of institutions who deliver online and advisor-supported digital advice, particularly in the retirement plan marketplace. Tibergien said that how NextCapital works with institutions like the broker-dealers who clear with Pershing or the RIAs who custody with PAS is “entirely up to them,” though he also said that entrepreneurial digital advice providers “don’t want to tie up their capital building an infrastructure” for their offerings, but rather in maintaining their focus on “innovation and [building] client-facing” features for their customers.

“The way to think about” the NextCapital partnership, Tibergien said, was that like Pershing already does for “Motif or Personal Capital, we are the infrastructure support for those businesses.” That, he said, is “what we do for a living” as the “largest clearing firm in the U.S. and the largest custodian worldwide.” The deal, he said, is a “really good example of how we don’t compete with our customers, but rather enhance their experience.”

In a separate interview, Rob Foregger, co-founder of NextCapital, said the Pershing partnership fit into the company’s strategy to “digitally enable large institutions across multiple channels” to provide digital advice in 401(k) and retail markets, “including the IRA rollover and taxable” markets, with trillions of dollars in assets.  

A cofounder of EverBank and Personal Capital, Foregger said that digital or robo-advice doesn’t constitute “a binary debate of man versus machine,” but is rather “about the human-computer partnership: How does a financial services firm or advisor use technology to scale their business?”

NextCapital itself started life “almost two decades ago” as a company called Business Logic, which became NextCapital in late 2013. Its intent is to use “big data to personalize” digital and human advice, reflecting the shift “beyond packaged products,” like 40 ‘Act funds, to instead “manufacture scalable advice” through a technology platform that offers a broad spectrum of investing vehicles, including managed accounts.

In “Retirement 2.0,” Chicago-based NextCapital’s idea is to build a digital, “delegated professional advice model,” Foregger said, where “the employee is still in charge” but is provided to tools to “move away from the DIY model” in 401(k)s and IRAs. That, he said, is what the Department of Labor is hoping to encourage with its fiduciary redefinition under the Employee Retirement Income Security Act. Working with its institutional partners, which include Russell Investments, PIMCO, TransAmerica and AON Hewitt, NextCapital currently can “manage the in-plan advice,” but Foregger said perhaps the bigger opportunity comes from the “$380 billion rolling out of” 401(k)s and the “10,000 boomers retiring every day.”

Foregger sums up the challenge that NextCapital is trying to solve as “how do we provide real-time, personalized, scalable advice” to retail investors and retirees “at a very, very low cost, using technology to augment the human advisor.”

While due to their platform and business model, “we have to be multicustodian,” Foregger says, “Pershing is our preferred custodian. We were seeking a preferred custodian that provided us with the ability to do a deep integration — to help our partners lower the cost of custody — and Pershing is a great choice.”

In a statement, NextCapital CEO John Patterson said that “Our collaboration with Pershing Advisor Solutions allows institutions to be up and running with digital advice faster.” NextCapital’s institutional partners, he said, “appreciate this given the emergence of digital advice and urgency caused by the pending fiduciary rule.”

— Check out Lisa Dolly Named CEO of Pershing; Lori Hardwick of Envestnet Replaces Her as COO  on ThinkAdvisor.

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