In part 3 of this multi-part podcast, WealthForge CEO, Bill Robbins, talks with Damon Elder, Publisher at The DI Wire, and Louis Rogers, Founder & CEO at Capital Square 1031 about Altigo, WealthForge's straight through processing platform for alternative investments.
Find previous entries in this series here and subscribe to our blog to keep up with the upcoming entries:
DAMON ELDER: For some time. Now, many in the industry have talked about technological innovations to improve the process and make alternatives more accessible. Bill, WealthForge is one of the industry players that has actually introduced a solution. Why don't you tell us about it?
BILL ROBBINS: Damon, earlier this year, we launched Altigo. Altigo is a marketplace that connects sponsors and advisors and then facilitates transactions. We named the product Altigo because it's a bit of a play on words and it really represents alternative investments in good order. And so Altigo provides a, a platform that allows sponsors to invite their broker-dealer and RIA distribution partners to login to a dead simple point of sales subscription automation tool that allows the advisor to select from the available products that have been approved by his firm and then initiate a subscription request following an intelligent interview that ensures that all the required information is gathered and that it is in good order the first time. The advisor can then upload documents and submit a subscription request to the sponsor using our DocuSign electronic signature functionality and then follow the progress of every subscription as it works its way through the approval process on our dashboard.
LOUIS ROGERS: You make the evil NIGOs go away?
BILL ROBBINS: We can.
DAMON ELDER: The dreaded NIGO.
LOUIS ROGERS: The dreaded NIGO.
DAMON ELDER: I’m trying to brand “the dreaded NIGO.”
LOUIS ROGERS: Sounds like a virus.
DAMON ELDER: Well, I think it is, right, to the industry. Basically, what we're doing is we're introducing, at long last, automation to the process. What are some of those fundamental advantages that the industry will accrue from this automation process as it adopts it?
BILL ROBBINS: Yeah, so I think if we start with the big picture, this is really an opportunity to expand the pie for the entire alternative investment industry. I like to look back at the example of the mutual fund industry. The DTCC rolled out fund serve in 1986, and when they first rolled out fund serve, there were six firms participating processing approximately 15 mutual fund trades a day. And you fast forward to today, there are more mutual funds than there are individual equity securities and fund servers processing over a million trades per day. So, we've seen this movie before and we know how it ends. And the opportunity for this processing infrastructure to create a framework for alternative investments to really expand in the advisors use in their investors portfolio is the big picture opportunity.
It all starts with getting out of paper subscription processing, which then opens up all of the ongoing reporting, reconciliation, and other client benefits that that will accrue.
DAMON ELDER: Well, we know that really a small percentage of wealth advisors, whether they're registered representatives or RIAs, include alternative investments in their client's portfolios. But we know there's growing interest in alternatives. Do you think this archaic, paper heavy process is one of the impediments to advisers adopting more alternatives.
BILL ROBBINS: For sure. Just imagine if you were a fee based advisor working as a fiduciary for your clients. You are not paid anymore to do an alternative investment that could have a multiple week cycle time with three or four rework cycles required because of the dreaded NIGO. And you're not paid anymore for that time than you are for a 40 Act mutual fund that you can invest in 30 seconds and a couple of clicks of your mouse. So, it is for sure an obstacle to the growth of the alternative investment industry at large. And that's one of the big opportunities for us all as we adopt and embrace this subscription automation technology.
DAMON ELDER: Louis, what are you seeing out there? I mean, obviously you're out on the front lines working with advisors on a day to day basis. What do you hear from them on this subject?
LOUIS ROGERS: We hear a cry for a solution. Find a way to streamline the process. And we've, we've done that over the years with things like DocuSign. The documents are the documents. All we do is fill in the blanks -- the name, the date, the amount of the subscription. The investor has the document in the private placement memorandum. They've reviewed it with their advisor or their rep, and so we're simply filling in the blanks and speeding up the process of signing.
DAMON ELDER: Louis, You've been in the industry for decades, a very long time, as we all know. sSo you were back in the day when really paper was the only option. And now your firm I know, has broadly embraced working with WealthForge, some of these automation processes. So, what kind of difference has it made to your business and your ability to raise investor capital?
LOUIS ROGERS: It's made us more profitable. It's made us more efficient at getting things done. There was a day when selling agreements were mailed. The form of the selling agreement would go out in the mail. And then three, four, five days later it would arrive and then we went to FedEx and now we've gone to PDF. So, there's an instantaneous ability to sign the selling agreement to get the process started. The documents can go electronically. Of course, we want the investor to have a hard copy, we always send them a hard copy for their file, but they can look at the electronic documents as quickly as they want.
DAMON ELDER: And what kind of impact have you seen on the accuracy perspective?
LOUIS ROGERS: Much more accurate. The technology will prevent errors and that'll make everybody a lot happier. They're returning documents for lack of a signature goes away because the technology, Altigo won't let you make a mistake, right?
BILL ROBBINS: That's right.
LOUIS ROGERS: If there's a blank, what happens?
BILL ROBBINS: Yeah. You can't move forward. And so, just some practical experience. We've seen NIGO rates as high as 30, 40 percent and higher with manual paper-based subscription documents. But leveraging subscription automation technology like ours, we've seen low single digit NIGO rates. You can still have a fat finger, Someone can misspell someone's name, and occasionally you'll see an error like that. But you can go from 30, 40, 50 percent error rates down to 2, 3 percent error rates with the automated platform.
LOUIS ROGERS: Capital Squares is an early adopter. We like the efficiency, the speed. We like the fact that technology works 24/7/365, doesn't ask for overtime, never asked for a bonus, never wants to take a vacation. It just works like magic. And so we're an early adopter and we believe it's the it's the solution to the bog.
DAMON ELDER: Well, it sounds like the automation process has a tremendous impact on the actual process of placing some selling agreement, a subscription document, and getting the cash in place and facilitating the investment. But, obviously, one of the most significant aspects of the investment industry is compliance. You've got FINRA, you've got the SEC. It's probably the most heavily regulated industry in the world outside of a communist countries perhaps. But, from a compliance perspective and being able to stay compliant with all of the regulations and laws that impact the investment world, how does this automation process, how does Altigo help to improve that process?
BILL ROBBINS: it's a great leap forward for the broker-dealer and the RIA firms and for the sponsors as well. It's just the fact that paper-based manual processing does not lend itself to strong operational controls and risk management policies. So, the key is if we can break out of the document based processing and start working with the data, we then have the ability to enforce business rules, the data validation, and allow the firms to apply their compliance and operational controls to the process much more effectively than we can ever do with a paper based document process.
DAMON ELDER: So Louis, from a sponsor perspective, you've been working with WealthForge now for I think at least a couple of years.
LOUIS ROGERS: Good years.
DAMON ELDER: WealthForge is a FinTech firm. And obviously as we've discussed before, you know, you've been in the industry for decades and you've worked obviously with all kinds of different dealer managers and broker dealer firms. So, from the sponsor perspective, what are the advantages of working with a FinTech firm, like WealthForge, as opposed to the more traditional based.
LOUIS ROGERS: The efficiency, the speed, the quality control. When a set of paperwork is going down the assembly line, we all know where it is. We all know who signed off on it. We all know the status. We don't need to call, text or email each other because we know, sure. We can see where we stand.
And most of the alternatives are sold to accredited investors only. That can be easy if you're an individual. If you have $1 million net worth excluding your home or $200,000 of income, $300,000 with your spouse, that's easy. But when you get into entities becomes a very complicated. Are you a trust? Well, are you are a revocable trust? Because that's not really a trust. Are you a partnership LLC? Limited partnership? Are you a pass through? Single member? The technology gets the advisor and the investor into the right box. To ask the right questions so you don't go down the wrong path to get to being accredited. It saves a lot of time. It avoids a lot of mistakes. And it's a benefit for everyone in the industry.
DAMON ELDER: Bill, what have you heard? I know your firm obviously deals quite a bit with all types of wealth advisors. Are the RIAs champing at the bit to get into this space and is this paper process something that just turns a lot of them away?
BILL ROBBINS: Yes, and it's been really interesting as we've been working with Capital Square and other sponsors, particularly in the 1031 exchange DST market. What we have seen with the Altigo technology is strong interest from both the broker-dealer firms and the RIA firms. But what's been interesting is, we've noticed that with the independent RIA it moves much more quickly.
DAMON ELDER: So, they're adopting it much more aggressively?
BILL ROBBINS: I will note that our very first live transaction on the Altigo platform came from an independent RIA. That adviser had a 15-minute demo introduction to the platform and said, “That's better than the way we used to do it. Give me a log in and I'll use it.” The next day the advisor put an order in, no training, walked himself through it. And so, our very first transaction was from an independent RIA.
The broker-dealer firms are going to get there as well. They have a little bit more of a process to go through. And so, we are definitely seeing a strong interest from the advisors and, importantly, they're more willing and able to move quickly on adoption.
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