Josh Brown's RIA keeps growing at $1 billion a year (on average) -- with a radically organic business model --and could supercharge its mass affluent pipeline by using Altruist to power revamped FutureAdvisor (aka Good Advice)

Josh Brown is reforming the back-end for the FutureAdvisor robo he bought from BlackRock two years ago – largely with Altruist – and he's given it a new mission.

 It's gathering up “hundreds” of prospects his firm was turning down for not being quite rich enough.

The founder and CEO of the New York City RIA, Ritholtz Wealth Management, with an estimated $6 billion of managed assets, is rewiring the robo, now branded Good Advice. He's moving assets – along with new “mass-affluent” business – to Altruist's custody.

Now, Ritholtz can stop turning away prospects. See: Josh Brown explains how his RIA, Ritholtz, got FutureAdvisor.

“We’ve been onboarding mass-affluent – $250,000 to $1,000,000 – to Altruist for a couple of months … with excellent feedback from our clients and advisors,” says a company spokesman, in an email exchange.

In the process, Brown, partner Barry Ritholtz, and a host of other bloggers are cracking a segment where RIAs traditionally struggle. See: Reformed Broker RIA makes hire to turn his $825-million-AUM firm into a blog incubator with a not-unneeded feminine touch

“We’re unique in that investors of all ages and sizes reach out and we’ve built our service model to reflect that,” the spokesman adds.

Ritholtz has also more than doubled its assets to $6 billion today from $2.8 billion in 2022. The firm posted $825 million in 2018.

Growing inquiries

Yet, despite its blog and social media following, Ritholtz has struggled because its RIA was set-up originally to serve high-net-worth (HNW) investors.

The classic RIA wasn't built with the machinery to process referrals generated by its outsized media presence. See: Josh Brown and Barry Ritholtz want rock-star culture and rocketing growth in one RIA.

“We were turning down hundreds of people who had emailed us for help, sending them out into the wild to be mauled by wolves … ‘Sorry, you don’t meet our minimum’ was a terrible answer, especially considering … these were our readers," Brown told RIABiz, last year. 

Today, "client inquiries have grown,” the firm's spokesman says. See: Reformed Broker RIA makes hire to turn firm into a blog incubator.

Enter Altruist; since its 2018-founding, it has promised the nearest thing to “one-click” retail investing and money management like Robinhood's or Betterment's snazzy RIA custody applications favored by millennial and Gen-Z investors.

"We talk to 18-year-olds opening their first accounts and 88-year-olds planning their legacies, and everyone in between ... That means meeting people where they are … Altruist gives us the ability to serve clients across generations seamlessly," says Brown, in the linked release.

Rethinking custody

Yet, Altruist founder and CEO Jason Wenk is confronted with his own conversion challenge -- parlaying the successful onboarding and servicing of unsophisticated Ritholtz mass-affluent clients into a bigtime RIA custody business like Schwab or Fidelity.

“I can't speak for Ritholtz, but my expectation is we have an opportunity to move into their larger segments as [Ritholtz clients] gain more experience and comfort using our platform," he says, via email.

“We are starting with these [mass affluent] segments, which is material … [but] most of our advisors use us for all of their clients, including UHNW clients. 

"Some firms just prefer to start relationships with a segment of their business and add more over time,” he adds.

To custody any portion of Ritholtz's high-net-worth assets, however, Wenk's firm will have to demonstrate there's merit to breaking up Ritholtz tiered approach to custody. 

Ritholtz also states that it has no intention of moving HNW assets to Altruist – at least not at the expense of its two biggest custody partners, Schwab and Fidelity.

“We’re a multi-custodial firm … adding clients to all of our custodial platforms every day … Schwab and Fidelity have been great partners and we don’t expect that to change in the future," says Ritholtz's spokesman.

Back-door custody

Schwab and Fidelity custody the lion's share of Ritholtz's HNW and ultra-high-net-worth (UHNW) assets. Prior to Ritholtz's acquisition, Good Advice custodied its assets with Fidelity, and the now Schwab-absorbed TD Ameritrade. See: Some TD Ameritrade RIAs are voicing misgivings.

Betterment custodies the assets of Ritholtz's largely automated robo, Liftoff, which provides access to both investment management and a call-center-based CFP for investors with less than $250,000. See: Josh Brown and Barry Ritholtz, masters of the financial Twitter/blogging universe, launch a robo effort to monetize their followers.

Meanwhile, Altruist's new role is to provide custody for Ritholtz mass-affluent assets – largely managed through Good Advice, né FutureAdvisor.

Yet, the start-up custodian could still end-up custodying a portion of Ritholtz' HNW assets, albeit through the back-door, as Good Advice clients accumulate sufficient assets to qualify as HNW accounts.

By beefing up Ritholtz' mass-affluent unit with Altruist's millennial- and gen-Z-approved custody systems, Ritholtz could improve on its already “surprising” success converting mass-affluent accounts into HNW business, after attracting more of their assets.

“Our advisors have consistently upgraded a surprising number of [Good Advice] clients to our HNW service tiers as they’ve learned about our capabilities and consolidated outside accounts,” the company's spokesman explains.

Roadmap option

Although Altruist's software is widely-praised for its slickness, the custodian still lacks some of Schwab's and Fidelity's capabilities around trading, account management, and software integrations, according to Wenk, who says full parity is just a year-and-a-half away.

“We are likely 90%-plus parity in terms of accounts, securities, integrations, and services to Schwab and Fidelity today. The last 10% will come over the next four-to-six quarters."

Altruist could still capture a portion of Ritholtz' higher-tier business, even without full service parity, largely because next-generation clients expect digital services on par with Robinhood, or SoFi. 

They won't “be okay moving from that to like, some DocuSign envelopes and a really clunky experience,” Wenk told InvestmentNews, earlier this month.

“A big part of [Ritholtz's] bet on Altruist is we have a huge appeal to those [younger investors]. We're [very] much built on par with the most modern consumer FinTech brands, but we're built for advisors,” he added.

Client preference

As a result, Altruist could represent a more natural transition for next-generation assets, if Schwab and Fidelity's ‘digital’ processes fail to measure-up in the medium-term.

The quality of Altruist's software makes it likely that some of the net-new HNW assets Ritholtz attracts will flow to Altruist, according to the firm.

"Based on Altruist's development roadmap and track-record of delivering on an exceptional client experience, we don’t see any reason Altruist can’t be an option for our HNW clients in the future,” Ritholtz's spokesman explains.

“It’s a decision based on client preference  and use cases for when Altruist will be the better match for a client based on expectations,” he adds.

Custody options

Brown and Wenk also boast a long established and cordial public relationship, and the pair has already discussed deepening the nascent partnership between their respective firms.

“[We] have spoken at length over the past few months and definitely plan to collaborate more," says Wenk, in an email interview.

Yet impressing the principal of an RIA does not mean new assets will flow in your direction.

In April 2023, Marty Bicknell, founder and CEO of the Overland Park, Kan., mega-RIA, Mariner Wealth Advisors, invested in Altruist’s $112 million “D” funding round. 

Although Bicknell questioned Altruist’s chances of disrupting Schwab or Fidelity – he declared real competition “years away, if ever” – he still lavished praise on Altruist's technology.  See: Altruist wins Marty Bicknell's capital as part of 'D' raise, but bigger challenge is winning his RIA's AUM.

He also stated that Mariner was already “working through” the possibility of adding Altruist to its list of custody options. 

Almost 30 months later, it's still a work in progress.

“I think their progress has been solid … We haven’t moved any further with this project at this time,” says Bicknell, in an email exchange.

“That doesn’t mean we won't at some point in the future, it just hasn’t been a priority for us right now,” he adds.