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What Happened at FinTech's 'Shark Tank 2'

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With millions of dollars at stake in venture capital money, ScratchWorks — Season 2 debuted in front of a standing-room-only crowd at the recently held Barron’s Top Independent Advisor Summit in Salt Lake City.

ScratchWorks, a fintech accelerator, connects innovative technology companies with wealth management luminaries to advance the digital transformation of the financial services industry.

In the form of a “shark tank” live event, three companies pitch their firms to the ScratchWorks’ investors for potential valuable investments on stage in front of the industry’s top independent advisors. Sponsored by Fidelity and the University of Colorado’s Leeds School of Business, ScratchWorks is rapidly becoming the face and venue for fintech innovation in wealth management.

Founded by five of the largest RIAs in the country, including Marty Bicknell of Mariner Wealth Advisors, Richard Burridge, Jr. of RMB Capital, John Eadie of Covenant, Jon Jones of Brighton Jones, and Michael Nathanson of The Colony Group, this collective group manages over $70 billion in AUM, making it one of the most powerful investing groups in wealth management.

Newcomer Shannon Eusey, CEO of Beacon Pointe Advisors, also joined the investor group as this collection of leaders considered investing in three of the industry’s most innovative fintech companies.

In the inaugural season of ScratchWorks held a year ago, the investors made substantial investments in marketing automation platform Snappy Kraken, as well as in investment management automation platform InvestmentPOD.

Led by entrepreneurs Robert Sofia and Jackie Matthews respectively, these fintech CEOs provided compelling pitches on stage to ink valuable deals, which has led to accelerating the success for both Snappy Kraken and InvestmentPOD.

SolidusLink First up on stage this year was SolidusLink from Zurich, Switzerland. SolidusLink is a multi-dealer precious metals trading platform capable of integrating with any custodian. With a business model similar to NASDAQ, SolidusLink enables investors, as well as their advisors, to access and hold gold as easily as stocks.

End investors benefit by holding physical gold alongside other portfolio assets through a fiduciary provider and avoid paying 30-70% of fees and taxes compared to commodity ETFs or other “paper gold” products. RIAs benefit by having a more complete suite of products to better engage with clients through the whole economic cycle and keep more assets under their control.

CEO Eliot Samuels and Chief Technology Officer Andrew Moedinger of SolidusLink faced the ScratchWorks investors with their funding ask of $1 million to help fuel further growth for the platform and to gain influence in getting large custodians to join forces with the group to further digitize the gold trading process.

The investors had many challenging questions for the entrepreneurs, particularly about the thorny problem of not having many, or really any, clients who want to own physical gold in their portfolios.

“We have hundreds of clients and I think only one has ever asked us about physical gold,” said Jones of Brighton Jones. The live poll of the 600-plus RIAs in the room concurred, and 40% said they would be interested in working with SolidusLink, which provided a compelling counterpoint to the investors’ concerns.

After an energetic back-and-forth, no deals were offered on stage for SolidusLink from the investors. Afterwards, however, Samuels and Moedinger were approached by many RIAs in attendance, and discussions are underway for potential partnerships.

280CapMarkets Next up was 280CapMarkets, which provides independent advisors with access to the fixed income markets through BondNav, a free cloud-based platform that aggregates the fixed-income market’s thousands of bond offerings and includes detailed information and direct access to a veteran trading team.

According to CEO Gurinder Ahluwalia, investment advisors using BondNav realize better pricing for their clients, save time and gain best execution support for their compliance reporting responsibilities.

Ahluwalia provided a compelling pitch for investment in 280CapMarkets, with an $8 million ask for 15% of the company, making it a roughly $54 million valuation. The investors were shocked at this valuation.

They had pointed questions for the CEO about how many advisors actually use individual bonds in client portfolios and how the business could scale quickly in the competitive fixed income ecosystem now dominated by the large Wall Street institutions and custodians.

The audience live poll provided strong support for 280CapMarkets, indicating that roughly 60% of the RIA audience would be interested in a technology platform like 280CapMarkets.

This, plus Ahluwalia’s presence and leadership — honed by growing his own RIA and TAMP, AssetMark, to more than $20 billion in his previous career as a wealth management executive — swayed a couple of the investors to engage in negotiations, making 280CapMarkets debut a success.

AdvicePay Last up was the most anticipated pitch of the ScratchWorks session — from famous advisors and industry gurus Michael Kitces and Alan Moore. Known for their wide reach in the industry with multiple business lines, publications, conferences and blogs, Kitces and Moore were pitching their fee-for-service platform, AdvicePay.

According to the duo, AdvicePay is the only billing and payment processing platform created specifically for fee-for-service financial planning. Advisors benefit from efficient invoicing and payment workflows designed exclusively to support their businesses, including up-to-date compliance and data security management.

Users can issue agreements for client e-signatures, accept ACH and credit cards, bill hourly or one-time fees, and establish recurring retainer or subscription billing compliantly — all through AdvicePay’s system.

With the recent huge client wins for AdvicePay from large independent broker-dealers, such as Cetera, the platform now has 17,000 advisors — a powerful result for the launch of their recent AdvicePay Enterprise strategy, which Kitces and Moore were pitching to the investors to further accelerate growth.

They asked for $1 million, or 5% of the company, on a $20 million valuation. All of the investors were keen to join in on this deal, as they saw the huge potential for fee-for-service advice and a customized payment platform that will turbocharge that growth.

In his inimitable fashion, Kitces provided a strong argument for why AdvicePay should be valued so highly. The audience also agreed, with the live poll showing that 80% of the top RIAs in the country would be interested in the innovative payments platform.

After a spirited back and forth, the drama on stage kicked up a notch as the ScratchWorks investors offered the duo $2 million for an $8 million valuation. Kitces and Moore countered at $2 million for a $15 million valuation, which was then counter-counter offered by the investors at a $12 million valuation.

Audible gasps from the audience were heard when Kitces and Moore turned down the $2 million offer in a tense, exciting final moment. Right afterwards, the two were swamped by audience members offering to fund AdvicePay at $15 million.

According to Kitces, “The demand from the rest of the room at a $15 million valuation — more than we wanted to raise in the first place — has led us to reconsider whether we may go back to a $20 million valuation.

Meanwhile, ScratchWorks investors are beginning [their] due diligence to try to come to a deal at a final valuation to be determined.” As the wealth management industry continues to be transformed by new and emerging technologies, it’s clear that fintech accelerators like ScratchWorks are in high demand.

Timothy D. Welsh, CFP, is president, CEO and founder of Nexus Strategy. He consults for firms in the wealth management industry and may occasionally mention them in his writing, which does not represent an endorsement or recommendation. Reach him at [email protected] or on Twitter @NexusStrategy.


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