Derek Bruton joins Keith Gregg as Chalice Wealth Partners

Derek Bruton

Keith Gregg and Derek Bruton are taking a final flying leap at ending their RIA careers on a high note — and are shows signs of getting airborne.

The ex-CEO of First Allied Securities and the ex-senior vice president at LPL Financial, both based in San Diego, have already accomplished two big coups in the co-founding of Chalice Wealth Partners LLC — raising $4.5 million of outside capital and getting advisors aboard — and hope to add a third by the end of 2018. See: Derek Bruton brings aboard two advisors seeking big back office after founder of their RIA, UHNW Kinko’s founder, moves on.

“Present forecasts indicate year-end profitability,” says Gregg, of the umbrella firm of broker-dealer Chalice Capital Partners LLC and RIA Chalice Wealth Advisors LLC, “and we’ve added one of the largest private-client and wirehouse advisory groups that left another B-D to set up their own RIA with $16 billion in AUA, $2.5 million in AUM, and 26 advisors.”

Penney-wise playbook

The founders of the San Diego firm are taking page out Shirl Penney’s playbook in creating a whachamacallit platform offering reselling, proprietary dashboards and trouble-shooting to breakaway RIAs looking for a soft landing.

Another Chalice co-founder is former New York state senator Anthony Nanula. As the firm’s president, he heads up efforts to make loans to firms joining Chalice. See: Dynasty Financial toes roll-up model’s edge with new plan to buy revenue from its RIAs.

Penney co-founded Dynasty Financial Partners LLC and his New York-based firm is considered the runaway leader in the category of outsourcer-plus. Chicago-based HighTower Advisors LLC, Tampa, Fla.-based TruClarity Holdings LLC and Washington, D.C.-based Steward Partners Global Advisory LLC sell similar services.

HighTower CEO Elliot Weissbluth says his firm will remain in the infrastructure rental business as a means of incubating potential M&A targets for his firm’s core RIA roll-up business. See: HighTower Advisors lands $4.5-billion RIA with help from bigger, better checkbook.

TruClarity declined to comment for this story, citing a lack of familiarity with Chalice.

B-D of its own

Unlike Dynasty, Chalice enters the game with its own broker-dealer. Since it acquired Niagara International Capital in March 2017, the B-D’s revenues have jumped fourfold to $6.5 million. The firm’s elevator pitch includes an emphasis on alternative assets thanks to Gregg’s past experience in that arena (more on that later).

First-quarter 2018 revenues for Chalice stand at $2.55 million and Gregg expects its annual consolidated revenues to be between $12 million and $15 million. The broker-dealer currently has 91 advisors including a big firm that generates $24 million in revenue and chose Chalice’s broker-dealer. Commission splits, revenue shares, placement fees, membership fees of $250 per advisor and a mark-up on the resale of technology on its advisor portal drive revenues.

The already onboarded firm has $320 million in assets in the year-to-date. Collectively, Chalice’s RIA and B-D have $900 million in assets under management. Chalice began trading in the fourth quarter of 2017.

Tech assist

Yet despite these markings of success, some industry observers wonder whether this latecomer to the market can make a go of it. See: TruClarity — a ‘Dynasty-lite’ -come-lately with a Y Combinator-type twist — hires Dan Cronin and fellow Fidelity alum Shad Besikof to show its true growth intentions.

“It’s a tough business,” says Craig Iskowitz, founder and CEO of New York-based consultancy Ezra Group LLC. “There are a lot of very experienced competitors out there.”

Chalice would be a nonstarter without top-notch software. To that end, the firm turned to a proven expert, Aaron Schumm, co-founder of FolioDynamix and now CEO of Vestwell Holdings Inc., a 401(k) robo-TAMP.

“We gave him some guidance and we had some folks in-house at our shop he was leaning on, and he’s taken that advice and applied it to his own team,” says Schumm. See: Vestwell jets ahead and adds pilots on the fly to keep startup on course. “Keith knows where he’s strong and where he needs help … technology isn’t his strongest suit, so he’s sourced a team to do that.”

Chalice partnered with Vestwell to provide 401(k) services and Vestwell acts as named fiduciary, investment manager, trustee and/or administrator for plans. Schumm sits on Chalice’s board of directors but is not an investor.

Chalice technology has enough wrinkles to make it interesting, says Iskowitz.

“Chalice has some differentiators including an alternative investments platform and enterprise services such as HR, payroll and benefits management, [and that’s] all under one roof,” he says.

“[It] seems like a robust offering if they have a portal that allows advisors to manage everything in one place.” See: s Aaron Schumm’s 401(k) startup gets $8 million the FolioDynamix founder loves Vestwell’s odd juxtaposition to Fidelity.

One critic, who asked not to be identified, cites the track records of Chalice’s founders as the factor that makes its future uncertain, noting a patchwork quality in Bruton’s resume in recent years as well as well as Gregg’s vocationally peripatetic career.

Yet the two RIA-IBD veterans are quick to say that what hasn’t killed them has made them stronger. Asked if Bruton saw Chalice as a chance for career renewal, he emailed back: “Absolutely!”

Gregg expands on that theme.

“I want to give back one last time and this is my way of doing well by doing good for others,” he says. “The big companies will promise you the sun and the moon to get you … but you’ve got no real equity and no real say. I own this company and I don’t need anyone or anything else.”

Schumm was initially leery about the prospects of Gregg’s latest venture given his job-hopping track record, but is now a believer.

“Keith has an increased level of passion for this,” says Schumm. “He’s going 1,000 miles an hour, he’s definitely committed, and he looks at this as his last go. He’s going to do it properly.” See: The unbelievable series of missteps that sent Aequitas, its RIA clients and their investors, reeling.

Third time a charm?

Chalice is Gregg’s third run at bringing a technology-driven, shared-services network to market.

With Tampa, Fla.-based Innovation Equity Partners LLC, two separate fundraising opportunities broke down as a result of his partners’ reluctance to sign on the dotted line, he says. See: How a clique of industry vets plan to revive the swooning IBD space — and why industry watchers don’t like their chances.

“On both occasions, this was $4 million to $14 million in terms of equity to me that was stolen from me in terms of not taking that capital.”

Gregg attributes his failure with Lake Oswego, Ore.-based Aequitas Capital LLC to a lack of buy-in — although in retrospect, this looks fortunate.  Both firms are now shuttered. Aequitas collapsed in the midst of a debt crisis that rumbled through the courts until last August. Gregg was not involved with either firm when their difficulties arose, he says.

At Aequitas, the intention was to build-out an RIA network similar to the Chalice model. Thirty-seven firms signed-on in the eight months he was there, says Gregg.

“I don’t know what happened to them afterwards, but I don’t believe there was a Ponzi scheme, I believe they got in over their heads with too much concentration with one lender… but I was long gone.” See: Aequitas duped 1,500 investors in ‘Ponzi-like’ scheme as it jetted and golfed its way to insolvency, says SEC complaint.

Members only

Chalice’s private equity backing comes via Uinta Investment Partners LLC, a Pasadena, Calif. multifamily office. Gregg says it was his personal connections with founders Gavin James and Don Plotsky that led the Series A round that brought in $4.6 million.

“James was the former chairman and CEO of Western Asset Mortgage corporation, a $650 million shop, part of Western Asset Management. I did business with them as CEO of First Allied …. They heard what I was building and said they’d be our lead investor.”

Chalice’s resources include access to an all-in-one HR and financial software supermarket and dashboard, as well as the West Palm Beach, Fla.- based SMArtX, a TAMP administered by Windsor, Conn.-based SS&C Technologies. See: SS&C overlords culturally shock Black Diamond RIAs in Chicago with heaviness and wow them with well-funded competency.

The venture is penciled in for a June hard launch.

“Instead of doing this kind of shared economy of scale for the benefit of the firm, I’m now doing it for the advisors. It’s the same concept, but this will be member-owned,” says Gregg.

Members will have some form of equity stake in the Chalice Financial Network, says Gregg, but how this will work in practice remains up in the air.

“The equity plan is still in process,” says a Chalice spokesperson. “It will be unveiled later this year.”

Mystery CTO

A key driver behind Chalice’s latest fundraising round was the need for C-suite talent. Gregg is ebullient about his most recent hires: ex-Oppenheimer & Co. Inc. managing director Bruton who joined the firm in April as managing partner and chief operating officer of the RIA, and a chief technology officer whose name the firm has yet to disclose.

“We raised our growth capital to help bring in more quality people like Derek Bruton,” says Gregg. See: Derek Bruton brings aboard two advisors seeking big back office after founder of their RIA, UHNW Kinko’s founder, moves on.

“The new CTO is a wildly accomplished executive [too].”

Chalice Financial Network is set for a June Hard Launch along with the reveal of the new CTO.

Bruton was at Merrill Lynch & Co. between 2001 and 2004, TD Ameritrade Inc. between 2004 and 2007, and at LPL Financial LLC between 2007 and 2014.

“[There’s] a real opportunity to pursue the two biggest industry trends, the move to independence and the fintech revolution,” says Bruton. “I’ve found my partners at Chalice.”

Before moving to Chalice there were rumors Bruton was to head an Oppenheimer-linked IBD, but Bruton chose not to address this.

Chalice currently employs 15 people and the firm is targeting a medium-term headcount of between 25 and 45. Bruton is expected to hire a business development director and Chalice is recruiting an East Coast and a West Coast sales rep.

Growth capital

In addition to software and equity, The Chalice Financial Network will offer access to growth capital so that smaller RIAs and IBDs can grow through M&A, says Gregg.

“The big guys have no problem finding the private equity money but small guys have a real hard time,” he explains. “[We’ll help them] access capital to support the growth of the business in buying and selling other businesses.” See: As robos try to crash Envestnet’s platform party, CEO Jud Bergman explains pivot to ‘wellness’ and tells where FolioDynamix and Yodlee stand.

Uinta’s total contribution to Chalice’s recent funding round is undisclosed, but some of the capital was raised on the equity funding platform that Chalice plans to leverage in order to compete in the small-loan sector dominated by Wilmington, N.C.-based Live Oak Bank Inc. Support for acquisitions comprises more than 40% of Live Oak’s loan book, and the firm has extended more than $7 billion in credit since its 2008 inception.

The proof that Chalice can do this is in the recent funding round, says Gregg. “If we can raise $4.6 million for our little company, we can help others do the same thing … Now [that] Live Oak have backed away this gives us a big opportunity.”

Live Oak has not backed away from the independent advisory market, says firm spokesperson Claire Parker. “[We] continue to support advisors looking to initiate, expand, and transition their businesses.”

Chalice’s credit facility is yet to be finalized, but should be a broad offering including SBA 504 (small business administration) loans and shorter-term non-purpose lending, says Gregg. “We’re even talking to some banks willing to replicate Live Oak.”

He continues: “It’s in the underwriting process right now being formulated but it will be anywhere between three to five years of short-term money collateralized by the business and its cash-flow rather than true SBA loans including personal assets.”

Live Oak has no plans to follow suit in potentially decreasing creditor’s liabilities, says Parker. “[We] respect SBA guidelines, which has enabled us to become a preferred provider.”

Hired gun no more

Gregg says these kinds of decisions are a function of acting as co-captain of his own ship.

“Before [Chalice] I was a hired gun,” says Gregg. “[Now] we’ve burned the ships and we’ve got to the land. There’s no going back … This is my swan song.” See: How a clique of industry vets plan to revive the swooning IBD space — and why industry watchers don’t like their chances.

XY Planning Network Announces 3rd Annual Advisor FinTech Competition

XY Planning NetworkThe nomination window for the XY Planning Network 3rd annual Advisor FinTech Competition is now open! Crafted to support startup advisor tech firms, Vestwell is proud to have been named as 2017’s winner. Our founder and CEO, Aaron Schumm, noted the impact saying “The rapid growth stemming from this partnership is a clear testament of how XYPN is a champion for their partners – and it is an honor for Vestwell to be a part of their vision to serve the industry.” Learn more about the upcoming competition here.

 

 

Vestwell Recognized by RegTech 100

 

Vestwell is excited to be named one of 2018’s most innovative companies in regulatory technology by RegTech 100. The RegTech 100 recognizes companies that are transforming the regulatory technology industry and are quickly becoming important to financial institutions. Vestwell is proud to offer a solution that makes the complexity of regulating retirement planning a simple, streamlined process for financial advisors, companies, and participants.

RegTech
Global RegTech 100 list announced to recognize the FinTech companies changing the landscape for financial institutions

NYC Startup Vestwell Raised $8M

$8M

1/3 of Americans have nothing saved for retirement while half have less than $10K saved.  The outlook for retirement savings has been bleak but it doesn’t need to be.  Vestwell is a digital platform targeted towards financial advisors that can use the platform to ensure their clients can offer retirement plans for their employees.  Pensions have all about disappeared and employers need low cost ways to offer retirement investment options for their employees and employees need the help of their employers to achieve their retirement goals.  Vestwell facilitates this seamlessly and efficiently. No longer are employers forced to adopt out-of-the-box plans that do not meet their and their employees needs.

AlleyWatch spoke with founder Aaron Schumm about the startup, their Series A round of funding, and the state of the retirement industry.

Who were your investors and how much did you raise?

Thank you. We are very excited about closing our Series A. We raised $8M, led by F-Prime Capital. The round was entirely inside, with the same VC firms participating in our Series A. To us at Vestwell, it’s great to have such strong commitment from a highly talented team of investors around us.

Tell us about your product or service.

Vestwell is a turnkey solution for financial advisers providing them with the ability to offer clients a retirement plan without taking on the risk and costs typically associated with creating one. We remove the friction points of confusion, cost and compliance overhead that come with traditional retirement plans. Vestwell’s digital platform allows for seamless plan design, automated onboarding, and low-cost investment strategies, making it easier for employers to offer a retirement plan. Vestwell becomes an extension of the financial advisor’s services, acting in everyone’s best interest while scaling through technology and allowing financial advisors to focus on clients.

What inspired you to start the company?

My own experiences are what drove me to start Vestwell. Being a product person by trade, having cofounded a wealth management platform (FolioDynamix, now owned by Envestnet), I experienced first-hand, the difficulties in offering a retirement plan to our employees there. Being a huge advocate of advisors, with a deep understanding of how to build a scalable FinTech platform for the financial services landscape, I thought it was long overdue that we put a better solution in the hands of advisors to help their clients, the way they want to help them.

How is it different?

The 401k industry has been around for 40 years and sliced a million ways. Our differentiators are centered around how the platform is architected to scale an advisors practice while helping ease the pain, expense, and liability an advisor, plan sponsor and participant may be beholden.

Each user (advisor, company, and employee) has their own dashboard and interface that can sit across multiple record-keepers, custodians and executing brokers, without changing the user experience. Advisors no longer have to either shove a company in a box that doesn’t fit the company or customize a plan through various providers that won’t allow an advisor to scale his or her practice. We’ve figured out how to deliver a custom, white-labeled (e.g., ABC Advisors Retirement Platform), solution at a fraction of the cost, but still allow the advisor to do what s/he wants to do for their client while being compensated for it.

What market you are targeting and how big is it?

We work with RIA’s, independent broker-dealers, asset managers, and bank/trust custodians to equip them with a solution for advisors to services plan sponsors and employees at scale. The target plan sponsor size is $500K-$50M (2-2K employees). Upwards of 90% of this market is serviced through financial advisors, but they need a better solution to help their clients more effectively. The total asset breath in this space is upwards of $25T.

What’s your business model?

Primarily Vestwell charges basis points in an a-la-carte fashion based on the services provided. The solution is a full-service, unbundled turnkey suite. We become an extension of the advisory firm. They do what they do best, and we fill in the rest to compliment the advisor.   For example, if an advisor wants to be the 3(21) or 3(38) investment manager on the plan or hire a sub-advisor, they can do so, and we facilitate the technology, administration, trading, custody, and clearing, in a white-labeled capacity.

What should everyone know about retirement?

EVERY employee in America should have access to a 401k plan. It’s crucial for saving for retirement in one of the most effective ways possible, especially given company matching (free money) and tax deferrals. But, one should be mindful of the plan design, legal liability (as a fiduciary) and the cost, including the investment fees and ongoing administration. Paying too much or exposure to too much liability can be detrimental to a company or employee in the future. Fear or uncertainty shouldn’t stop one from setting up a plan or investing in one. It just needs to be clear, easily consumable and structured in a way that aligns everyone’s best interest.

What was the funding process like?

We were incredibly fortunate in our funding process. We hadn’t, officially decided to raise our Series A, with plenty of runway ahead of us. There was a lot of outside interest in Vestwell. But, our Series Seed investors said: “Listen, we are behind you 100% in whatever you feel is best for the company, and we are happy to do the round ourselves to help take Vestwell to the next level.” The group around the table have been a delight to work with, and added a significant amount of value beyond just capital. So the decision to keep the round internal was easy.

What are the biggest challenges that you faced while raising capital?

It’s a massive distraction from the business to raise capital. My focus was to keep the internal employees involved very small and contained, so the rest of the team could focus on funding while I finished up the funding.

What factors about your business led your investors to write the check?

Our investors are all there for specific reasons. We had an opportunity to be supported by teams that knew FinTech, the retirement industry, advisory practice, and B2B2C scaling better than anyone. They didn’t need much convincing. We all saw the fit and the strategic direction of the company. They were happy to support those efforts and take this to the next level.

What are the milestones you plan to achieve in the next six months?

We’ve already signed over 50+ advisory firms and are onboarding plan sponsors continuously. The next few months are focused on scaling faster and faster, while delivering on a few key strategic platform features we think will delight our users.

What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?

Listen, startup life is hard. There is zero glamor in it. I feel that many people have a skewed perception as to what it means to be an “entrepreneur.” But, I do stand by the notion that if you believe in what you are doing, you love it, and most importantly, you can add real value to this world and society, then it’s worth pursuing. One has to stay highly focused on how to add value a segment of the population with a more significant goal of sustainable benefit for all. If you can do that, while creating a clear path to a viable, sustainable business, you’ll find funding. In the meantime, ignore the fluff. Ignore the distractions. Stay focused.

Where do you see the company going now over the near term?

Generically, growing, scaling and providing value to advisors, companies, and employees. Specifically, I want to position ourselves to equip every financial services provider to create a more meaningful interaction with the American workforce through technology, while being a viable, scalable, profitable business.

Where is your favorite fall destination in the city?

These days, I feel my destinations only include our home, office, and an airport. But, my wife and I love taking our little 11-month old son to nearby Central Park or along Riverside, maximizing as much time together as we can, given our overly hectic schedules. People always say it, but it’s incredible how much joy and renewed perspective children give you.

Vestwell Raises $8 Million in Series A

As Vestwell’s Digital Retirement Platform Experiences Rapid Growth, Funding will be used for Market Expansion and Further Development of the Platform’s Technology


f-prime

NEW YORK, Oct. 2, 2017 /PRNewswire/ —  Vestwell, the industry’s first and only fiduciary-backed retirement platform for the financial advisor community, today announced $8 million in Series A Funding led by F-Prime Capital Partners, the venture capital group associated with the parent company of Fidelity Investments, with participation from Primary Venture Partners, FinTech Collective, and Commerce Ventures. Launched in late 2016, Vestwell received $4.5 million in its initial Series Seed of financing in September 2016.

Vestwell has grown rapidly this year with an exceptional market reception. As advisors look to better engage with their clients, while scaling their practice, Vestwell’s platform can be leveraged to facilitate every aspect of the advisor, company and employee’s needs. The unbundled, turnkey 401(k) and 403(b) platform becomes an extension of the financial services firm, helping to reshape how plan sponsors and employees are serviced. The multi-recordkeeper, multi-custodial technology can also incorporate 3(21), 3(38) and 3(16) investment and administrative services.

So far this year, the company has signed over 50 registered investment advisor (RIAs) firms, as well as independent broker-dealers, asset managers, and bank/trust custodians, with plans to onboard several thousand advisors this year.  The funding will be used to grow the team while further enhancing the technology.

In conjunction with this funding news, Vestwell also announces Ben Malka as a member to the Board of Directors. Malka is a partner at F-Prime Capital and also serves as co-chairman of the Financial Services Venture Capital Association.

“We’re excited to increase our reach in the financial advice industry and continue to develop better technology for our clients,” said Aaron Schumm, Founder and CEO of Vestwell. “Vestwell was founded to provide advisors and plan sponsors with an affordable, compliant, and easy-to-use retirement planning solution to help close the retirement savings gap in America, and F-Prime has supported that mission since our inception. This announcement, combined with the outstanding leadership that Ben brings to the Board of Directors, is instrumental to Vestwell’s success.”

“Vestwell’s white-labeled platform provides financial advisors with the ease of compliance and automation while maintaining the human interaction that makes their businesses succeed,” said Malka. “By giving advisors and plan sponsors access to low-cost plan options, Vestwell is providing employees across the country with the tools and plans that can help them to retire happily.”

Vestwell is the industry’s first and only fiduciary-backed retirement platform for the financial advisor community. For more information about Vestwell or to inquire about how financial advisors can leverage the platform, please visit: http://www.vestwell.com/.

About Vestwell Holdings, Inc.

Vestwell Advisors, LLC is a SEC registered investment advisor, a wholly owned subsidiary of Vestwell Holdings, Inc., specializing in 401(k), 403(b) and other defined contribution and benefit retirement investment management services. Built by an experienced team led by CEO Aaron Schumm, Vestwell assumes 3(38) investment management and ERISA3(16) fiduciary responsibility on the behalf of advisors and their plan sponsor clients. Learn more at Vestwell.com and on Twitter @Vestwell.

This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Vestwell Advisors is not registered. An investor should consider investment objectives, risks and expenses before investing. More information is available within Vestwell Advisors’ ADV.  There are risks involved with investing. Investors should consider all of their assets, income and investments. Portfolios are subject to change. All opinions and results included in this publication constitute Vestwell Advisors’ judgment as of the date of this publication and are subject to change without notice.

Source: Vestwell Holdings, Inc.

Related Links

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