As the race to stay on the forefront of technology continues, ScratchWorks, the industry’s wealthtech accelerator, recently launched Season 3 of its “Shark Tank” style competition in a new virtual format.
Known as the place for emerging fintech and wealthtech companies to gather and gain instant fame and valuable investments from the industry’s leading RIA firms, ScratchWorks featured three hand-selected innovative companies this year.
Under normal circumstances, ScratchWorks is held in a live general session at an exclusive industry conference. However, due to the pandemic, it recently used video for its online debut in a four-episode streaming series that culminated in a record-setting level of investments.
The event was sponsored again by Fidelity Institutional and the University of Colorado’s Leeds School of Business, and finalists were judged by leaders of top RIAs from across the industry. The investor panel included Marty Bicknell, CEO of Mariner Wealth Advisors; John Eadie, founder and managing director of Covenant Multifamily Offices; Shannon Eusey, CEO of Beacon Pointe Advisors; Jon Jones, CEO of Brighton Jones; and Michael Nathanson, chairman and CEO of the Colony Group.
Collectively managing more than $80 billion in AUM, these five firms are leading the way for investing in the wealth management space via the ScratchWorks accelerator. In fine fashion, David Canter, head of the RIA and family office segments for Fidelity Institutional, returned to his role as host and chief deal negotiator.
First up was Lifeworks, a financial advisor platform that provides growth-minded advisors with proven systems, tools and templates to support and enable a scalable, fee-based subscription model for financial planning and wealth management.
Its platform also provides automated digital onboarding, clearing house and credit card processing, combined with a digital marketing solution to drive the growth of ideal prospects, all delivered through a modern, comprehensive and unified advisor and client technology experience.
Lifeworks founder and CEO Ron Bullis opened his pitch for $1.8 million, roughly a 6% stake of his company at a $30 million valuation, by saying, “Wealth management is broken.”
Bullis’ own experience in setting up his RIA firm as a breakaway advisor opened his eyes to how the industry has a value misalignment under the AUM model, as clients pay for commoditized investing while advisors are giving away what clients really want and will pay for — financial planning.
Also, advisor technology today is made up of disconnected systems that create an inefficient and disjointed advisor and client experience.
“To win the future, advisors will need to win the client experience,” Bullis said. His answer to this problem is a unified approach to technology, combined with digital marketing and the right combination of custody, trading, rebalancing, compliance and reporting tools that he and his team designed and integrated into one environment using the latest Cloud-native technologies and a unified data model.
Several ScratchWorks investors were skeptical of Bullis’ attempt to try and build the next “silver bullet” unified tech stack.
“This has been tried before, and you’ll be up against some major players such as Salesforce, Envestnet and others, so I am out,” said Jones. Nathanson and Eadie also bowed out of the negotiations due to similar concerns.
Bicknell, though, was intrigued. “I see the vision, I love the platform, but I’m stuck on the valuation,” he said, countering Bullis’ initial request for $1.8 million for 6% of the company with an offer of $1.8 million for 12% of Lifeworks, which brings its valuation down to $15 million from $30 million.
Eusey also countered with a similar but smaller offer, though she was willing to bring in additional investors.
After deliberating for a short minute, Bullis quickly accepted Bicknell’s offer. “Welcome to the Mariner family,” Bicknell said, smiling broadly as the first mega-deal for ScratchWorks Season 3 was struck.
Next up was Act Analytics, an analytics platform that provides insights on thousands of publicly-traded companies and funds across 200-plus environmental, social and governance factors to help advisors better align investment portfolios with their clients’ values.
CEO Mike Unwin began his pitch for $1 million, or 10% of the company at a $10 million valuation, by explaining, “We want to make sustainability mainstream.”