Challenging The Titans of Asset Management with Jason Wenk

Barry speaks with Jason Wenk, founder and CEO of Altruist, a modern custodian for independent financial advisors. They discuss how Jason started the company and his plans to change asset management. Jason also weighs in on the state of RIAs, and AI. CORRECTION: Adds disclaimer: Ritholtz Wealth Management (RWM) uses Altrruist as one of their client custodians; both RWM and Barry Ritholtz are investors in Altruist Corp. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity, and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value, and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

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• 1:53Speaker 04

  This week on the podcast, yet another extra special guest. Jason Wenk is founder and CEO of Altruist, a new artificial intelligence-driven custodian challenging a lot of the legacy entities like Fidelity and Schwab that are stuck with all of their old hardware and software. I thought the conversation was fascinating, and I think you will also. With no further ado, my interview of Jason Wenk. Welcome to Bloomberg.

• 2:34Speaker 05

  My pleasure. Such a great intro.

• 2:36Speaker 04

  Full disclosure, my firm, Ritholtz Wealth Management, uses Altruist, and both myself and my firm are investors in the firm. So I'm fascinated by the through line of your career. You are constantly focusing on creating lower-cost, tech-enabled financial advice, but I'm going to put a pin in that and come back. I got to start with your background. You studied computer science at Grand Valley State University. What was the original career plan? Was it technology and computers or finance?

• 3:11Speaker 05

  Yeah, yeah. So I'd never taken a finance class. I'd never met anybody who had money. My family never owned any stocks or mutual funds. I didn't know what an IRA was, or even a 401K for that matter. But I grew up in the 80s and 90s, so I remember getting our first personal computer in the mid 90s. Internet started to pick up a little bit of speed in the late 90s, and that was my dream, was to go to Silicon Valley, work at a dot com. You probably recall, the market peaked out around 1999, and then a pretty major crash ensued. So very accidentally, did an internship at Morgan Stanley at 19 years old.

• 3:53Speaker 05

  I was a bit of an odd duck in that I took a lot of college classes when I was in high school, so I was already doing internships my first year of university. And yeah, I was presented an opportunity to move here to New York and to join Morgan Stanley, and that was really my crash course in finance.

• 4:13Speaker 04

  And you were 19 or 20?

• 4:14Speaker 05

  19 as an intern and officially joined at age 20.

• 4:18Speaker 04

  So what drew you to financial services instead of technology? Was it simply the dot com implosion and there was no jobs to be had in technology?

• 4:27Speaker 05

  Yeah, I was still working in technology, so my role, the internship was like productivity software, but again, just happened before a big investment bank. And then I spent about two years building different types of technology, like within the Morgan Stanley ecosystem. By the time I joined, they were Morgan Stanley Dean Witter, so they had this kind of big retail wealth business. They also had like prop trading and a number of other divisions, too. So I didn't really get too involved into personal wealth until kind of the latter, maybe the last six months I was there. I was put on a project, we're doing a lot of work with Morningstar, which back then, they were still sending out CD-ROMs to branches around the country.

• 5:10Speaker 05

  And so if you had a big branch, it'd be hard, who had the CD-ROM? So we were just building networked versions of essentially the Morningstar database. But I remember around that time, I was doing some pre-built prompts inside of these research platforms. And again, the way my mind worked, which was more around math, physics, computer science, I looked at these prompts and I thought, these are terrible prompts. In other words, the prompt would be, let's build a screen so that financial advisors can easily build a portfolio. And the screen will be something like, find funds that have been around for five years with turnover under 100% with the same manager for the five years or longer, that's in the top quartile of their peer group.

• 5:55Speaker 05

  And it was, when you, like, on the surface, you go, well, that seems like pretty reasonable and fair, but that is no prediction of the future result. Like, I mean, that is a terrible predictor of future outcomes, but it was sort of built as though it was a good prediction.

• 6:11Speaker 04

  Well, you have the data, past performance is right there. We have to do something with it. I give Morningstar credit. They had an internal survey that more or less said, hey, don't worry about the stars. The data shows if you just buy the least expensive fund, that's the one most likely to give you the highest level of performance. And to their credit, they published that. I want to say that was like 2011 or 2012. Really fascinating. So you never really worked, rotated through the departments where you're smiling and dialing? Did you ever work as a broker?

• 6:43Speaker 05

  So I got licensed. I took the Series 7, Series 8, Series 24, Series 30, like all the classic licenses.

• 6:50Speaker 04

  24? You want to be supervised?

• 6:52Speaker 05

  Yeah, I'm not sure why I also, like, a registered options principal, like, why I did that, I have no idea. Managed futures, like, again, not sure why I did that. But yeah, I did all of the research to understand the space. And I did go through the broker training program, sort of 2021. And part of it was because I wanted to move back to the Midwest.

• 7:19Speaker 04

  21?

• 7:20Speaker 05

  Oh, excuse me, 2001. Yeah, a little bit of a mistake there, yeah. I think I had this romantic notion of like going back home and helping people that I knew, there really was nobody I knew had any money, so that wasn't really going to work anyway. And really, before I even got started, I made the decision to leave and go start another business. I'm kind of in the space, but adjacent, didn't do direct work with clients.

• 7:45Speaker 04

  So let's talk about that. What was the first thing that you noticed in financial advice that led you to say, hey, this is broken, and I think I could use technology to build something better?

• 7:56Speaker 05

  Yeah, I mean, so two things in particular. I mean, one was, around that time, there was a transition from commission-based, sort of, sales brokers, if you will, and there was a transition to more fee-oriented financial planners. And for me, that really resonated, so I think this notion of, hey, can you give people more comprehensive planning advice?

• 8:18Speaker 04

  And be a fiduciary.

• 8:21Speaker 05

  Yeah, and also, I mean, I looked realistically at the way asset management worked, and I thought, I very much agreed with the Morningstar study that they published, he said, some 10 years later. A lot of this, I'd say, goes all the way back to Jack Bogle's work, but I just, looking at a couple of years' worth of research around asset management, I didn't see a discernible benefit to stock picking or market timing. Again, high costs, high turnover, high taxes, like, these things all eroded wealth. So part of me thought, well, is there a way that you can just get more people access to empirically, sort of evidence-based investing? Maybe that'll also help people do better. The other part was accessibility.

• 9:05Speaker 05

  Again, I grew up in a farming town. Really, there were no brokers, there were no bank advisors, there were no Edward Jones offices, like, there was really no access to advice. And I could see the direction the internet was taking us to really flattening the world, like, everybody should be able to find advice and help through the internet. So really, the first business was, I'm an accessibility perspective, it was going to be internet-based, it was a subscription service, and it was designed for people with 401Ks, because when I looked at the people I knew, that was about the closest thing they had to Wall Street, to a brokerage account, was their defined contribution plan. So the idea was, let's make it easy for people that have a 401K plan to get the absolute

• 9:50Speaker 05

  best results they can from their 401K. And I spent about, almost three years building that business.

• 9:59Speaker 04

  This is retirement wealth advisors?

• 10:01Speaker 05

  This is the one that doesn't exist on my LinkedIn profile.

• 10:04Speaker 04

  This is before that?

• 10:06Speaker 05

  Oh, yeah, yeah, yeah. So I spent from 2021 until 2024, effectively building a 401K subscription business.

• 10:16Speaker 04

  2001 to 2004.

• 10:18Speaker 05

  2001, yeah. Gosh, it shows how old I am, very young.

• 10:20Speaker 04

  Dude, it only gets worse. The dates, the names, it's just trends and wonders.

• 10:25Speaker 05

  Yeah, yeah, so 2001 until 2004. And it was honestly, like, when I look back at it, it was just kind of like, maybe a little bit too early. This was like pre-robot advisor, pre-blogging, like, pre a lot of things that just got more people connected.

• 10:42Speaker 04

  Blogging was just starting around then. We went from GeoCities to things like TypePad.

• 10:47Speaker 05

  Yeah, you were a real trailblazer in that.

• 10:51Speaker 04

  Yeah, it was compulsion, I had no choice.

• 10:55Speaker 05

  So I look, the pay per click advertising was just coming out. So you had things like overture, which is like kind of pre Yahoo, pre Google. But you could buy the keyword for something like a phrase like how to manage my 401k for a penny, right? And you could be the top ranked, you know, search. People then land on my website, which is called Smarter Than Wall Street back then. And yeah, and it would allow you to say, I work at General Motors, answer a few questions, and it would say, here's how to allocate your 401k. They'd get an email once a month if there was anything they should do differently. Of course, the emails never said they should ever do anything differently. And after about a year, you know, I started, I built a pretty good sized subscription business. But I started

• 11:38Speaker 05

  to have some churn because people are like, why am I paying you every month to just send an email that says the same thing as the email the month before? And eventually, I started asking people, well, what would be more valuable, sort of like a churn survey, if you will. And people would say, look, if you would just do this for me, I'd pay you a lot more than 20 bucks a month. And like, that was really the genesis to Retirement Wealth. You know, that's even why it was called Retirement Wealth, because a lot of these 401k folks were retirement folks.

• 12:03Speaker 04

  And that scaled up pretty rapidly. That one, was that the $4 billion advisory shop? Or where did that, where did that go?

• 12:10Speaker 05

  Yeah, so I ended up going to about 1.1 or 1.2 billion in assets. Yeah, it grew really fast. I started it in November, December of 2004 was when I got my registration. Ran that for about six years, roughly.

• 12:26Speaker 04

  A billion in AUM is not insubstantial. That puts you into a category of

• 12:32Speaker 05

  Especially back then.

• 12:33Speaker 04

  Yeah, no, inflation adjusted, we're probably talking about 3 billion today. But that's real revenue, that's real clients. What made you say, all right, I've kind of done this, now let's look at Formula Folios?

• 12:46Speaker 05

  Yeah, so I was always, I was always driven probably more by impact than by like the size of assets or a revenue. Yeah, that company was bootstrapped. I built every single thing myself, wrote all of the code. You know, it was, although the name was Retirement Wealth, it was a fairly tech forward platform. I built my own proposal systems to help, you know, really analyze a portfolio and then propose a new solution. Digitized a lot of onboarding to really automate, you know, getting new clients on boarded. And it was mostly virtual. So it was also before its time in the sense that it was built mostly from blogging, you know, back in like the 2006 to 10 era. So, you know, it was a lot

• 13:27Speaker 05

  of things that was doing well before its time. And what ended up happening, really the catalyst to moving into the next business was, I was invited to speak at TD Ameritrades National Conference. They were my custodian at the time. I loved, loved the people there. They saw the unusual growth and also that I was still in my twenties and they thought, hey, we'd love to have you come speak and share a bit how you're doing what you're doing. So I went to San Diego, you know, I gave a session where I just said, hey, here's how I'm getting, you know, getting new clients. I'm writing these blog posts. Here's the framework, how I do it. Here's how I take these people then through, you know, from a, you know, stranger from the internet, you know, into a defined financial planning

• 14:11Speaker 05

  process and then a defined, you know, portfolio. And it was so, you know, structured that I could then train other advisors. And so I hired a few other advisors. They came out and they could then run the process. And so that was the, the content. And at that time, a bunch of other advisors, and I'd say hundreds of other advisors started to reach out inbound, hey, how can I get access to your system, they would kind of call it? And the reality was like, I didn't want to hire 50 financial planners. I, I've always been a bit reclusive, so I didn't, you know, I didn't want to

• 14:47Speaker 04

  You don't want to manage 50 people, but selling them the software is a fair relationship.

• 14:54Speaker 05

  That seemed a lot better, right? So, yeah, so, so just the idea was spawn, hey, maybe it makes more sense to license the software, make it easier for people to, to run their own business, but leveraging a lot of our technology. And that was the

• 15:06Speaker 04

  Was that Formula Folios?

• 15:08Speaker 05

  Correct, yeah.

• 15:09Speaker 04

  All right. And how big did that scale up to?

• 15:11Speaker 05

  Yeah, so I went 0 to 4 billion in five years. And, you know, today it's, I think, 14 billion or something like that.

• 15:17Speaker 04

  So, so I know that you were a programmer in college. You describe yourself as a developer and a math geek. You very much have a little bit of a hacker mentality. How did that technical, I don't want to use the word self identity, but just your self perception, how did that affect your view of, here are the services that make sense for investors, for advisors, for this whole ecosystem that has been, especially in the 2000s, mostly ignored by Wall Street? Like, it took 25 years for the fiduciary side to pass the, the commission based brokerage side. So how did the technology background affect just your, your perception of that

• 16:02Speaker 04

  market?

• 16:03Speaker 05

  Sure. I mean, look, I think I've always been a little bit idyllic. You know, you name your company Altruist, you probably have a, you probably have some like generally, yeah, idyllic tendencies. But, you know, I think, you know, my, I think people know me well. They would, they would say I'm, I'm a bit of a macro thinker, but I don't like working in the data day weeds of most things. So for me, I've always thought in decades. And it wasn't hard to look at the market in the early 2000s and say, well, this is the future. Even though, to your point, like the RIA fiduciary channel back in 2004, when I started my first firm, I mean, it was maybe 600 to 800 billion in

• 16:45Speaker 05

  assets. You know, today it's probably 10 trillion. So today it seems very obvious, but back then it was a relatively small part of the market. It was, was not obvious maybe to everybody. But I looked at like the demographics of the country and just there'd be such a huge number of people who are going to need good quality advice and planning. And that just, again, if you, if you think in first principles, which is a very common technology metaphor, and you, you have no bias of like the way things had been, been done historically, to say, well, what is the right way to do things? That just seemed like the obvious and only and objective, you know, future for this industry. And I wanted to be, you know, on the forefront of that. So, yeah, so, so now, you know, some 20 plus years

• 17:30Speaker 05

  later, you know, the, the market is, you know, very obvious to a lot of people. They want to build in the space and it's the, the place that seems to be growing the fastest. That was crystal clear to me 20 years ago. I think a lot of that comes from just, again, that more first principle, you know, sort of Silicon Valley way of seeing the world.

• 17:47Speaker 04

  Coming up, we continue our conversation with Jason Wenck, founder and CEO of Altruist, discussing how he built the firm to compete with the big guys. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 18:03Speaker 00

  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

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  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful, can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting work mode. Available on Plus and Pro plans.

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• 20:19Speaker 04

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My guest this week is Jason Wenk, founder and CEO of the new custodian, Altruist. So Altruist describes itself as a modern custodian, emphasis on modern, for independent financial advisors. What does that mean in the real world? And this has always been such like a boring, you know, plumbing type of industry. What was broken that required your attention?

• 20:54Speaker 05

  Yeah, well, I guess, you know, the, the, the opposite of modern is not modern, you know? So that the whole rest of the industry is pretty old. If you think about most of the infrastructure that's used by financial professionals, the majority of it's 50 to 70 years old.

• 21:10Speaker 04

  That's amazing.

• 21:10Speaker 05

  And it operates on mainframes, not, you know, cloud native platforms. So I think like starting point is, and with no disrespect, these were innovative companies 50 years ago. You know, they're just not that innovative today. So as far as I get.

• 21:24Speaker 04

  You're saying the electric typewriter isn't cutting edge anymore?

• 21:27Speaker 05

  I mean, they're still fun to use, you know, the click and.

• 21:29Speaker 04

  They make a nice noise, right?

• 21:31Speaker 05

  It feels very, you know, reminds me of like my grandparents' house in the 90s or something, you know?

• 21:37Speaker 05

  So I think getting to the problem statements, having been in the space a long time, for the longest time, I, I would look at the industry and go, that just doesn't make any sense, you know? Why do we, why do we do it this way, right?

• 21:50Speaker 04

  We've always done it that way.

• 21:52Speaker 05

  Yeah, exactly. All right. Doesn't mean it's the right way. And so some examples of that, I think it's a bit crazy that if you use, if you're a financial advisor or wealth manager, and I think if someone's listening to this and they're not one of those who they'll, they'll think this is literally crazy. This is the way it works. But so first you have to have a custodian, right? And this is a place where you'll open accounts for your clients, they'll safeguard your client assets, do all your record keeping, process your trades.

• 22:14Speaker 04

  Trusted third party who is not managing the money and that creates a built in checks and balance.

• 22:21Speaker 05

  Somewhat. I mean, or it could be a built in limitation, keeping that advisor from doing high quality work, right? Which is, I think, what I sort of discovered as I kind of peeled back the layers of the onion. But so these custodians, one would think a very simple thing they should be able to do is let's say you have three accounts with your, your financial planner. You've got an IRA, maybe a Roth IRA, a joint account with your partner. And you want to know, how am I doing over the past 12 months? You'd think you could just log on to Schwab and, or Fidelity or Pershing or whatever, and just click a button or something and it would tell you that. But the reality is that you cannot get that information from your custodian. The custodian will only be able to tell you what you have today. It will give you access to your statements. The statements are not bundled at the household level.

• 23:06Speaker 05

  And what the custodian will tell you is that if you want that type of information, you need to buy a third party portfolio accounting software. We'll send them a daily file of all of your positions and transactions. That third party will reconcile all of that data and it will then allow you to run reports for your clients. And you're going to have to pay, you know, depending on the size of your firm, anywhere from tens of thousands to millions of dollars for this third party software. And like this just fundamentally makes no sense at all. The custodian has all of the data. It should easily be able to reconcile that and run reports for advisors, but they can't and they won't. And you could go down this long list of things that they should be able to do. Again, just like the logic would tell you, for example, if you want to bill a fee to your client,

• 23:48Speaker 05

  client signs a fee agreement says, I'm willing to pay my advisor 1% hypothetically. And I'm willing to pay them that every quarter, you know, by calculating the average daily balance and bill me in arrears, right? Something simple. Custodian will say, that's cool. What you need to do is we'll send you the data to a third party. They can reconcile the data. You can then run a billing schema. It'll create a CSV file. You can then upload that to our system. We'll then debit those fees from the accounts, but this whole process can take days. And by the time you go to debit those fees, sometimes a client will have had a distribution in their account or a trade or something. And the fees get busted. It creates an account that gets overdrawn. And like just fundamentally, again, there's hundreds of these things.

• 24:32Speaker 05

  And you go, this makes no sense. Like, why is this the way things operate? This is largely the genesis to, why would you build a brand new custodian from scratch? And if you were going to build it in a modern way, you would probably make sure all of these things are just built in automatically.

• 24:47Speaker 04

  So, so that raises really a fascinating observation. Altruist first came to market, 2020, was it?

• 24:56Speaker 05

  Uh, we wrote the first lines of code in January of 2019. And I think we went into beta in early 2020 and then launched the product right in the heart of the pandemic in, yeah, in 2020.

• 25:06Speaker 04

  So I remember when the firm first launched and I remember hearing about it. And the initial reaction was, I don't want to say crickets, but kind of low key, yes, someone's going to disrupt these 10. We got $10 trillion. We know what we're doing custody wise. And what started out as sort of a shrug, it didn't take very long before there was a little bit of a freak out. Like, wait a second, what's going on here? They're actually winning clients? How, how is this a thing? From your per seat within building the company, how did you see the rest of the custodian market react

• 25:48Speaker 04

  to, to Altruist's launch and to just rolling out one new capability after another?

• 25:56Speaker 05

  So there's, I wish I could remember where to properly attribute this to, but there's a great saying that is that first they ignore you, then they laugh at you, then, then you win. So it's not surprising when somebody has a big, bold declaration, they're going to change an industry and make it better.

• 26:15Speaker 05

  If you're, you know, effectively like a duopoly or oligopoly, as our industry was, you know, almost all the assets were held by, at the time, three custodians. Back then it was Schwab, Fidelity and TD Ameritrade. TD Ameritrade shortly after we launched was acquired by, by Schwab, really making the, the, the power dynamic like two companies that have 80 plus percent market share. So, you know, respectfully, I think, yeah, like there's going to be a natural rent seeking, you know, sort of mentality from those people who are the dominant players. Why would they ever want there to be any change? Why would they want to change their cost structure? Why would they want to modernize their systems? Like, things were great, you know, for, for those companies.

• 26:59Speaker 05

  So I'm not surprised that some folks may have been dismissive, but advisors never were. Like when we first started putting prototypes out into the public and, you know, sharing our vision, we had thousands of advisors that signed up for our waitlist, hundreds that decided to become design partners, like very early kind of design partners, help us build, you know, the platform.

• 27:21Speaker 05

  And, you know, we have this sort of very loyal base of users that are very loud about, you know, how happy they are with the product. And we've, we've done this by co-creating it with the advisors. So, you know, it's not lost on me that there are literally thousands of features that you have to build to support, you know, the wealth management industry. We can't possibly know all 1,000 internally, so you need to have some awesome partners that can help, you know, shine a light on like what are the most important things? So, yeah, in, in the end, I think we have more than caught their attention. I think now, you know, there's a fairly deep rooted fear actually from a lot of the bigger players.

• 28:00Speaker 04

  Yeah. So, so you have the three big incumbents. It's a little bit of an oligopoly of Schwab, which is now Schwab TD combined, Fidelity, Pershing, Bank of New York.

• 28:11Speaker 04

  Everybody kind of looked at them and said, there's no way we're going up against those behemoths. You're one of the first companies to say, we're going to take on the custodians because their legacy platforms just can't do the things that we can do at scale.

• 28:30Speaker 04

  How do you think about the challenges of going up against, what is Fidelity? 18 trillion and Schwab is 12 trillion? Like, these are monster, my Bank of New York, Pershing is the oldest bank. It's Hamilton's bank, literally. Like, these are not, oh, I think I could disrupt Nokia with a better product. These are just the most entrenched, well thought of, of partners for advisors. What gave you the confidence to say, we could beat them at their own game?

• 29:06Speaker 05

  Yeah, I think.

• 29:09Speaker 05

  So a big part of the confidence came from that early advisor reaction, but you know, the truth is that the, these companies don't have high NPS, like these aren't like loved by their customers.

• 29:21Speaker 04

  Net promoter score. Net promoter, okay. Yeah, we do one of the surveys every year and it's, I know that's become super popular everywhere the past 20 years.

• 29:31Speaker 05

  You don't have to look very far and wide or have too many conversations to hear wealth managers gripe about their custodians. I mean, again, I was running one of the largest, I think when I stepped down from Formula Flows, at the time, it was the fastest growing RIA in the history of the entire industry. You know, we were growing at 16,000%, you know, had a three-year growth rate. So it was a true rocket ship, you know, in this, in the sense of like, you know, the RIA space. And I felt tremendous pain. My biggest pain point was my custodian onboarding new clients. Again, they were making you download forms from a form library, populate the forms by hand, send them out via DocuSign at best, sometimes requiring wet ink signatures or medallion stamped signature guarantees.

• 30:15Speaker 05

  Like, it was literally like going backwards in time 20 years. Meanwhile, you had companies like Robinhood that you could download an app on your phone at 18 years old, have your account open in 30 seconds, fund it with a hundred dollars and buy fractional shares of Berkshire Hathaway stock, commission free. I mean, it was so obvious to me that the old way that custodians been operating, they were still charging commissions using paper. This was definitely not the right way to do things. And if you started looking at the impact to clients, so what is the impact of forcing people to use whole shares? Like, why would the big custodians force you to use whole shares versus fractional shares? Fractional share trading had been around for over 20 years.

• 30:54Speaker 04

  Well, it's just math. It's not that difficult to execute.

• 30:58Speaker 05

  Correct. And this isn't even like a hard, you know, geometric algebra, right?

• 31:01Speaker 04

  It's arithmetic. We're not even talking about exponential algos or anything like that.

• 31:04Speaker 05

  Precisely. But, you know, a lot of it is you just start kind of going, okay, like, you know, maybe this is a good tinfoil hat, you know, theory here, but I'd say, what would the benefit to them be by not enabling fractional shares? Maybe that means more cash will be in client accounts. Maybe they make half of their revenue from the cash spread, right? The net interest income on cash that sits idle in client accounts. Maybe the, it also forces you, if you do want to use fractional shares, the only vehicle you can use that trades in fractional shares, in other words, you can do notional dollar based buying, are mutual funds. And these mutual funds pay tremendous fees for distribution through these brokerage platforms.

• 31:43Speaker 05

  What if they are not allowing fractional shares because they really don't want to disintermediate packaged products in general, right? So make things like direct securities more accessible to more people. I mean, I just went down this rabbit hole, but the end result is it costs investors a ton of money. You end up limiting the amount of tax benefits, you end up increasing the average client account size. So if you really want to have great efficacy kind of in investment outcomes, you'd have to have tens of millions of dollars. And if you had fractional shares, as just one example, all of a sudden, you know, a ton of that entrenched, you know, kind of history goes away completely. Everybody can get access to the same type of investment strategies, individually, you

• 32:27Speaker 05

  know, managed accounts, you know, lot level tax trading, so you can get the best possible after-tax outcomes. You can compress cash down to the lowest amount, so you're reducing cash drag, this increases outcomes. So, you know, I think in the end, if you, if you put yourself on the right side of the client and you have time on your side, like you will absolutely win. I think one of the best examples of that in our industry is Vanguard. Like what they did, they were laughed at.

• 32:54Speaker 04

  For decades.

• 32:56Speaker 05

  A long time, you know, and, and they didn't even really reach massive scale for 25, 30 years into their journey. But I think, again, if you just put yourself on the right side of the client, the end client, hey, we're going to do things that objectively and obviously produce better outcomes on an after fee, after tax, after cash drag basis. We're going to provide delightful experiences with a true partnership with our advisor, you know, clients. And these things will work. And again, I think you have to have a certain amount of craziness. One of our, our early investors, you might know, Omani Carson, formerly known as Ron Carson.

• 33:31Speaker 04

  I was gonna say, Omani is his, uh, his post-retirement name.

• 33:35Speaker 05

  And I love him dearly, but I remember I met him very early in building Altrus and I, we met for coffee in Venice, California, where the company was started. And Omani, you know, looked at me after I explained the company and he's like, that's the, and, you know, pardon my French, everybody's like, you know, this is the craziest effing idea I've ever heard. I'm in. Like, how do I give you part of it? I think there's a certain number of people who just, like, we've been doing this a long time. You eventually become numb to the status quo. The status quo was totally [BLEEP], right? It was not good for anybody.

• 34:06Speaker 04

  Right.

• 34:07Speaker 05

  And so...

• 34:08Speaker 04

  Except for the custodians themselves.

• 34:09Speaker 05

  Yeah. There was one party that really was happy with the status quo, right? And so I think as soon as we shed a little bit of light, now, there's a ton of challenges you have to overcome, but again, there's no doubt in my mind, this was gonna work when I started.

• 34:20Speaker 04

  You mentioned Robinhood and zero commission, which I want to say was 2014 or 2015. Then Schwab rolled out, you know, commission-free trading in 2019. What did that shift in cost structure do to the relationship between investors and custodians, advisors and custodians? Did that change the way everybody looked at this? Or was this just, okay, I guess this is an even lower margin business?

• 34:50Speaker 05

  Yes, I think that's it. I think it's a huge misconception, you know? So what's interesting is that I wrote this piece in 2018 and, you know, we had one of our designers kind of draw an infographic kind of behind it and it was the classic sort of tip of the iceberg where we showed the, you know, what you see above the water line and then what exists below the water line.

• 35:12Speaker 04

  I just did one of those two weeks ago and...

• 35:14Speaker 05

  Great metaphor, you know?

• 35:16Speaker 04

  It, it really is just so perfect to like, hey, here's what you're focusing on, but you gotta look at the things that matter even more.

• 35:23Speaker 05

  So we did this for custodians, right? And, and the, the thing people saw was the commission. So there was this belief and advisors even didn't know, you know, the facts. They would go to clients and say, hey, when you work with us and our independent third-party custodian, here's how they get paid. They get paid $7 if you do a trade. It's a pretty cheap price.

• 35:44Speaker 04

  What about spreads? What about payment for order flow?

• 35:46Speaker 05

  Correct.

• 35:47Speaker 04

  I mean, the big money is, the commission is just a break even.

• 35:50Speaker 05

  A hundred percent, right? The, if you look at the big public companies that were in the space, they were making maybe 5 to 10% of the revenue is from, from transactions and commissions were maybe half of the transaction revenue, right?

• 36:03Speaker 04

  And that's before we get to the float, which everybody loves.

• 36:06Speaker 05

  Correct. So there's, there's a ton of like, you know, things that had, I'd say historically been ignored or unknown. The biggest revelation when everybody went commission-free was people started asking the question, well, how the heck do you make money? Like, how, how does this business actually work? If you're giving away everything for free, only then did people start to go, oh, wait a minute. Like, that wasn't even how you made money. That was literally like, just a complete smoke and mirrors way to fool me into believing you only made $7 to trade, when the reality was all of the real money was made by paying me 0.01% interest on my idle cash, making me trade whole shares, which makes me have more cash in my account than I really should, making me buy these different funds that

• 36:48Speaker 05

  all have a bunch of conflicts of interest through all of their various, you know, forms of 12B1 and 15C3 revenue sharing agreements. I mean, like, just like, very esoteric stuff that very few people ever talk about. And to your point on float and liquidity through PFOP, payment for order flow, I mean, it, it just, it really opened everyone's eyes into the fact that the clearing and custody business, turns out, it wasn't a high-scale, low-margin business at all. In fact, it was a very high, you know, margin business. And that was just one kind of irrelevant piece that, you know, confused people into believing that was the full, full price of admission.

• 37:28Speaker 04

  I recall a couple of years ago, it was after Schwab went free commission, zero commission, free trading. I don't remember if it was TD or Schwab, that one of the public companies in a poorly earnings, 57% of their gross came from the float, came from what they got paid. The difference between what they were paying investors, point oh whatever, and the actual rate that they could generate internally. How does, how does Altrus deal with that?

• 38:07Speaker 05

  So I think the key is doing whatever you're doing transparently and whenever you can, giving as much of the economics to the client. So I'm a big believer in, you know, the flywheel, kind of made popular by Good to Great, one of my favorite books. And, you know, our flywheel is that the first spoke is invest in innovation that drives better outcomes for advisors. The second is invest innovation that drives better outcomes for end consumers, the end client. If we do those two things, it will drive the highest satisfaction amongst our user base. This will increase the amount of assets on our platform, which gives us the scale to invest more in innovation, right? So, which drives better outcomes for advisors, better outcomes for clients.

• 38:51Speaker 05

  If you're going to do that, there's, you have to earn revenue, like, of course. But in our case, we built a very integrated wealth platform. So yes, we have custody and clearing revenue. We make money on net interest income, the float, if you will. We make some revenue on payment for order flow, but we built what's called the Wheel Order Routing System. It's 100% optimized to drive the best possible execution for every single client transaction. If we happen to get a better execution, you know, through Citadel or Jane Street, whomever, we might make a tiny amount, like literally measured in fractions of basis points, mils. It's the lowest amount of revenue we earn, but like, there is something there.

• 39:34Speaker 05

  We do earn money again on float, but we offer fractional shares. So we have the lowest cash holdings in the entire industry. People can hold virtually nothing. We also have some earnings from things like mutual funds, but we have the lowest amount of mutual funds in the entire industry because we offer fractional shares. So people can buy ETFs, they can buy individual securities. So we have very, very little in way of rev share through fund companies. But there's definitely money that is made at that clearing layer. Where we've really innovated is that we also do all of the software layer, you know, for advisors. We offer an asset management layer for advisors. So each kind of component of the Altruist business is generally going to be 60 to 80% cheaper than if these things were bought individually. So you may recall, you know, when I shared the story about how

• 40:17Speaker 05

  you go to a custodian and say, why can't you do my fee billing? That makes no sense. You have to buy a third-party software. We built all of these things natively, and most of them are either free or very low cost because we have this sort of benefit, if you will, of stacking the various forms of services that advisors and their clients need.

• 40:34Speaker 04

  On a modern platform.

• 40:36Speaker 05

  Correct. And we do it with, I'd say fairly insane amounts of automation. So, you know, the, the, the kind of knock I made on using PDFs, like, there's no PDFs necessary at Altruist.

• 40:49Speaker 04

  You're not, you're not exporting CSVs and then having to upload it to Claude to get a ROI on your quarter or year?

• 40:56Speaker 05

  A hundred percent. Yeah. You, you, you can open an entire family's accounts, do all of their account transfers, link all their bank accounts, do the whole thing in under two minutes. The accounts are being real-time validated. The transfers are being real-time validated. 98% plus of these workflows, there's no human being ever involved in them. So every time we build a new innovation or automation, we're able to operate with a much higher amount of operating leverage than anyone else in the industry. This allows us to invest back into more innovation, which allows us to offer more services at lower price points. So, look, we earn revenue, just like everyone else does. I think one interesting tidbit, we don't talk a lot about, but is the fact that on the aggregate, Altruist earns more revenue than I believe any other RA custodian on a per-dollar basis, meaning

• 41:41Speaker 05

  per dollar on our platform, we earn more revenue than the big players. And it's not because we charge more. In fact, we have the lowest fee schedule in the entire industry. But it's because we do more for those advisors than just provide custody and clearing. We're offering software and services, AI products, asset management services, automations around things like tax management and tax loss harvesting. So because people use more surface area, we end up having, again, more and more diverse revenue as a business. And we have much better operating leverage because we have so much automation that we don't have to hire a lot of people to actually offer this at scale. So these are a lot of the benefits to modern, right? You do it this way in this day and age, you're not going to build the same way you would if you did it 50 years ago.

• 42:26Speaker 04

  You're earning more revenue as the custodian per dollar on the platform, yet at the same time, the advisor is paying less costs per dollar on the platform. Of course, they're not working with five or 10 third-party add-ons. It's just one turnkey solution.

• 42:44Speaker 05

  Correct. Yeah. It's material. And consumers, you know, consumers, if using the platform correctly, are getting better results as well. So because they don't have things like cash drag, because they can be more fully invested, because they can reduce the need for third-party investment products, they can hold securities directly on the platform, reducing expense ratios. Because we have automation on tax management, they can drive down the tax consequences of investing materially. So again, it's one of these things where it almost sounds too good to be true, right? But like, yes, advisors should be able to run more efficient, better businesses. We can have a great business, and consumers can win too. Like, I think that is very much a real possibility. There doesn't have to be a loser.

• 43:27Speaker 04

  It's a win-win. Let's talk about AI and automation and your platform, Hazel. I know my team loves it. Everybody is super, super positive about it. Is Hazel a standalone AI bed? Is it part of the long-term vision? Is it planning and custody, custody ship and other services as one seamless workflow on a single platform? Tell us all about Hazel.

• 43:55Speaker 05

  Yeah. So the, the basic thought, so first to answer your question, it's very tightly integrated with Altruist, but it's available totally separate. So really, any wealth manager can use it. We have people using it all over the world in, in many different industries. So we have large CPA firms that are using Hazel and obviously large financial advisory firms. So part of the, the thinking here is that the Altruist business will eventually be a very large scaled business with trillions of dollars and assets. But the total size of our industry is going to be tenfold that, right? So we don't want to limit the power of AI to just the whatever percentage of market share that Altruist has. We want everybody

• 44:39Speaker 05

  to benefit from these innovations. And so the things that are really cool with Hazel is that, again, it can be used by any financial advisor or really a lot of different segments of financial services. It's been a ton of fun to build, and a lot of what we're doing is just taking the hardest, most like laborious, non-glamorous, but you know, important work that used to really be hard to get if you didn't have tens of millions of dollars. And we're just bringing the unit cost down to like $3 to $5. So you can do like incredibly complex tax planning and do it for, again, effectively like a dollar to $5. This makes it accessible to everybody. And AI, you know, people have their fears about, you know,

• 45:23Speaker 05

  what could go wrong. But we like to think this is a lot of the what can go right.

• 45:27Speaker 04

  Coming up, we continue our conversation with Jason Wenk, founder and CEO of Altruist, discussing how he built the firm to compete with the big guys. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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• 47:55Speaker 04

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My guest this week is Jason Wenk, founder and CEO of the new custodian, Altruist. I've seen some crazy numbers as to what advisors manage. I don't want to talk about mutual funds. I want to talk about straight-up RIAs, who are your prime clients as a custodian, 10, 12, 20 trillion dollars, just crazy numbers out there. What is the total addressable market there? And how much do, you know, the, does the oligopoly, the big three have of that total market?

• 48:37Speaker 05

  So the approximate number is 10 trillion today. It's about 35,000 firms. These firms are roughly half are SEC-registered investment advisors.

• 48:47Speaker 04

  Meaning more than 100 million.

• 48:49Speaker 05

  More than 100 million. And then the other half are state-registered firms that are sub 100 million. Some of those are just new entrants, like they're just firms that are first registration. They'll probably mature into the SEC within a year or two. And others just, you know, they operate small, independent, you know, businesses serving a loyal but small group of clients. The, yeah, the top of the market, you know, I think it's, Persian gets oftentimes lumped into the big three. They don't have much market share of the RIA segment. It gets, it's a bit muddy, but the reason is they support all of the big broker dealers that usually they have a companion, corporate RIA, and so that's kind of how they get in here.

• 49:30Speaker 05

  But true standalone RIAs, I mean, 85% of the assets are with just two companies, Schwab being the largest. They're north of 50% market share and then Fidelity being the second largest. So it's your very classic, you know, disrupt, like if you were to just kind of say, hey, what would be the recipe for disruption? You'd say, big, fast-growing market dominated by old companies using old infrastructure with generally low NPS, like low customer satisfaction. That is exactly the market that we are in today.

• 50:00Speaker 04

  Huh, really, really fascinating. So, so given the fact that you got to build a clean sheet custodian, you're not built on this legacy hardware that can't do all these things fast and easy. What's the biggest take-up from advisors? Where are they still inefficient? Is it just paperwork and portfolio management? Is it tax? Is it compliance? Is it client service and disbursements? Like where are the biggest advantages? Or is it just the whole thing?

• 50:31Speaker 05

  Yeah, I mean, so we break this down into like two elements. So, you know, with Altruist, we have our core wealth business. This is like the custody and related software to custody. We started there. It's a super big hairy build, like it just takes a long time, you know, just hundreds of thousands of engineering hours. You know, there's no shortcuts, very expensive, time-consuming.

• 50:52Speaker 04

  Was that, was that a BHAG reference?

• 50:54Speaker 05

  Oh, absolutely. Yeah, I mean, like this is like as big and hairy as they get, right? And there's just, again, there's no shortcuts, but that infrastructure is so critical because what it allows you to do if it's done the right way is it allows you to tackle all the other work, right? So I'll start with this work, right? The, the custody part, you can open accounts super fast, you know, do all of the automation around onboarding clients. This is great, but you only onboard a client once, you know, ideally. And so if you serve a client for 30 years, the custody part is really a pretty small part of the picture. It was a huge, you know, kind of friction point because it was oftentimes one of the first experiences that a client would have with their advisor. And if it was a bad experience, like

• 51:36Speaker 04

  As it often is.

• 51:38Speaker 05

  Yeah, it's usually not fast, like it's, it's, you don't have a lot of clarity, like, hey, when is my transfer going to be done? Like, why did this thing get rejected? Why am I redoing this paperwork? So we solved a lot of the infrastructure. Now with our AI products, Hazel, we're tackling like the rest of the 30 years, right? So maybe there's again a 5% or less of a client relationship that's really connected the custodian. You know, you're onboarding the client, you're setting up rules around trading and rebalancing and tax management. But a lot of the work really is all of the, the one-to-one, hard-to-scale work. So you meet a new client, they're a prospect at this point, you need to, you know, uncover

• 52:18Speaker 05

  a bunch of data that they have, you need to then analyze that, build a financial plan, create a proposal. Once they agree to it, then you do that onboarding, and now you have to serve that client for decades. And there's going to be all of these life events that happen, all of these emotions that kind of these folks will live through with you. So it could be massive changes in, you know, macro conditions, it could be, you know, changes to their family, whether it's, you know, death, divorce, new children, it's, I mean, there's so many things that happen. And advisors have to be able to react, ideally be proactive, but react to all these things and make sure your money's aligned at all times. And this is where AI is like incredibly powerful, where you can take a ton of that work that

• 53:03Speaker 05

  used to be heavily compromised. And, you know, compromise is interesting because every advisor, whether they want to admit it or not, historically has been making compromises for the clients. And so kind of one of two directions, like one compromise is, I want to save the world. I've got a hero complex. I'm going to take every client under the sun. If I do that, the compromise is I can't possibly give the highest level of quality care and service to every client. It's just not possible. You can't earn enough money and revenue from the lower end of your client, you know, client base. The other compromise might be, I am not willing to compromise in the quality and service and attention, but as a result, I can only serve 50 families. And so my minimum's going to have to be $10 million or something like that.

• 53:44Speaker 05

  Whereas the compromise is, I can't actually give my advice to as many people as I'd like to. AI is this great equalizer where we think about all the infrastructure we built on Altruist and you then layer all of the agents that can do things like gather data for you, build financial plans, build tax plans, help you be incredibly responsive to client emails and questions, to build a level of intelligence across your client base that no human being could ever possibly attain. So it's very easy to have, you know, incredibly precise, you know, and highly personalized, you know, perspective on every unique client that you serve. So these are the things that we're building.

• 54:27Speaker 05

  I mean, I think in the end, you know, the clearing and custody business will end up becoming very agentic, like these agents will be the ones who are probably, you know, logging on, if you will, and they'll be performing functions, you know, that today humans have to log in into, but it's a pretty exciting, you know, time to build.

• 54:43Speaker 04

  Really interesting. I recall a couple of years ago, and I don't want to put words into anyone's mouth, but it was the CEO of either BlackRock or Vanguard or somebody that size was asked, what keeps you up at night? And the answer was cybersecurity and fraud. How do you make sure, and I totally understand, no one wants to wake up one day and a billion dollars is missing. How do you integrate that into Altruist? How do you think about the human element, you know, deep fakes and synthetic identity and voice fraud and cloning and all that stuff?

• 55:27Speaker 04

  What can the modern custodial platforms do that, hey, some of the big guys don't have the integration with technology to engage in this arms race against the bad guys?

• 55:38Speaker 05

  Yeah, I mean, I think the biggest reason they'd have that, that, you know, paranoia is that if you're working on a, you know, 50-year-old tech stack, and we see this with like the latest anthropic model, these, kind of these, you know, connected models where, you know, they sit it on top of some, you know, legacy infrastructure and they'll find, you know, hundreds of critical vulnerabilities that no human being could have ever identified because the codebase, essentially one giant monolithic codebase, like it is just like this huge albatross that these companies have been dealing with for decades. And replatforming is really hard. If you're already big and you're scaled and you've got tens of trillions of dollars,

• 56:19Speaker 05

  it is nearly impossible to replatform and go from, you know, physical mainframe-based technology into a cloud-based infrastructure using, you know, smaller, more manageable microservices. So, yeah, it's a huge risk. If I was running a giant old bank or brokerage, I would have the same probably primary paranoia. If you're building today, you know, the best defense is oftentimes a strong offense. So why not just build, again, in first principles, a bunch of protocols to make it much harder for bad actors to even get in the door? And this is like overstating the obvious, but just having like modern multi-factor authentication and requirement of security keys, even eliminating some of the highest

• 57:03Speaker 05

  risk, like for example, like phone calls are a lot easier to dupe ironically than is a properly-built multi-factor authentication program. So, you know, I think there's a lot that will change. We don't, you know, rest on like the fact that, oh, we're a tech company, therefore we're impenetrable. Like, of course, we get, you know, we have bad actors trying to come after our clients all the time. And I think that if you're not building, especially AI that can help identify other AI and other bad actors, you're in a bit of a quandary. And it's really hard to do that if your core platform, again, has tens of millions of lines of code written in languages that, you know, honestly, nobody uses and hasn't used for decades.

• 57:48Speaker 05

  That is a major problem with financial services.

• 57:50Speaker 04

  So you've raised a decent amount of venture capital money. I want to say the 2025 Series F gave you just under $2 billion valuation. I think I'm in the Series F, E, I don't remember.

• 58:02Speaker 05

  Yeah, correct.

• 58:03Speaker 04

  Last year. Discuss the need for capital to build out. And, and we're not talking about the hyperscalers that are spending, you know, ungodly amounts of hundreds of billions of dollars. This is just a nice little startup that's taken on a couple of big entrenched companies and, and working off a clean sheet. What has the capital spend been like on the technology side?

• 58:29Speaker 05

  Yeah, so we've raised a little over 600 million in capital over the last seven years. Yeah, I don't think we'll need any additional capital going forward. Like, we still have a lot of cash on balance sheet.

• 58:41Speaker 04

  You're cash flow positive now. You're actually...

• 58:44Speaker 05

  Our broker dealer's been profitable for about three years.

• 58:47Speaker 04

  Profitable. I wasn't even talking profitable. I mean, just like, at least holding your head above it.

• 58:51Speaker 05

  Yeah, well, look, in our industry, every broker dealer's financial records are public. So, you know, you can go look up our balance sheet. It's not hard to find, you know. And then, but we still, we still use cash on balance sheet for R and D investments to keep building, you know, more, more tools. But you can imagine if we backed off from, you know, our aggressive building of products and features, yeah, it wouldn't be a hard business to, to run standalone for decades. But yeah, there's, there's a, there's a serious cost to start a custodian. So beyond the cost of building all of the technology, there's also the regulatory requirements and the capital requirements. So when you run a brokerage business, every time you add a new client, a new dollars to your platform,

• 59:35Speaker 05

  you have to have reserve capital on your broker dealer. And so there's no shortcut. Like, this is something where I tell people every now and again, they'll ask me like, hey, you know, what would it take for someone to compete? And I say, well, it'll take about five years and at least 250 million dollars just to have a shot, just to have any shot in the dark of making it. That assumes, of course, you do it right and what you build is somehow substantially better than anything else in the market. And, and you can get enough clients to run it on. But just to give yourself a shot, it's like, again, non-trivial. And just to pick up, because you made a comment about these, these sort of hyperscalers building these foundation models. I'm not so sure that when we look back in 20 years and say, okay, well, or maybe 30 years, 40 years, 50 years, but some amount of time in the

• 1:00:18Speaker 05

  future, we look back at what were the most impactful companies that made the biggest difference on society. I'm not so sure those are the ones that we'll be talking about.

• 1:00:26Speaker 04

  Really?

• 1:00:27Speaker 05

  I think it'll be businesses like Altruist that we'll be talking about and going, wow, like, they have managed to unlock trillions of dollars for consumers. And that is not something that any of us can be convinced is possible with foundation models yet. At this point, all they are are money guzzling machines that have yet to figure out how to turn, you know, sort of inference into profits, in which their costs are higher than what they're reselling their, their products and services for. I'm as big a fan and believer and user of AI products as anybody. But when we really start measuring impact, like what changes the world, you know, that's very possible, but there's nothing proven about it. What we're doing is very proven. Like, you can very objectively say,

• 1:01:10Speaker 05

  if we give every single client, I don't know, 1% back in economic advantage, and you scale that across trillions of dollars for decades, you can start measuring your impact in hundreds of billions of dollars. That's, to me, more than like a small startup. Like, that's incredibly ambitious, but it's like incredibly good for humanity. I hope more people do this type of stuff.

• 1:01:31Speaker 04

  That's Eric Balchunas's column, which became a book, The Vanguard Effect. I want to say it was like 2016, 2018. Vanguard has saved $2 trillion in fees for clients. I mean, that's an insane, insane number.

• 1:01:45Speaker 05

  Yeah.

• 1:01:46Speaker 04

  And you guys are looking to push into the same space. I want to be respectful of your time before I jump to my favorite questions. I just have to ask one other question. You've built multiple businesses in the wealth management and fintech space. What's the repeatable lesson that carries over from one to another? Or is each one a completely different animal?

• 1:02:11Speaker 05

  I mean, these are all pretty connected businesses. If someone looks at like the evolution arc of my career, it's sort of like, each time I find a problem, you know, again, metaphorically...

• 1:02:21Speaker 04

  Solve it, go on to the next one.

• 1:02:22Speaker 05

  Yeah, you kind of go, okay, well, that was an interesting problem, but this is an even bigger problem. And this is an even bigger problem. Yeah, I'm curious now, I think there's going to be, you know, reasonably good need for a highly specialized LLM, specifically narrowly trained for our industry. I'm not sure the big L. So maybe we'll do that at some point in the future. But the point is, is like, there's always something that has the potential to make a bigger impact. And, you know, one thing that I'll say, yes, for me, again, I don't spend a ton of time, you know, trying to compare what I do compared to other entrepreneurs. So I can't really say, like, if there's a lesson to be learned, you know, broadly. But with, with each venture that I've been involved with, I've started

• 1:03:05Speaker 05

  with a pretty simple North Star, which is, I want to help people. These are all mission-driven organizations. I'm very passionate about that. This allows you to attract other people that are also mission-driven. These are your more missionaries versus mercenaries. And we have some of the most incredible people that I could never even dream of assembling a team like what we have at Altruist. But it's because they share that same kind of core ethos of serving clients, driving better outcomes, again, sort of being on the right side of the customer, doing things that really matter.

• 1:03:38Speaker 04

  So given that, look out, I was going to say, so given that, look at five to 10 years, where's Altruist? What are you doing? How big is Altruist at that point?

• 1:03:49Speaker 05

  Yeah, it's hard to predict with precision, like, just how big. But I suspect we'll be very large. You know, if we look at the trajectory of the business today, again, we don't talk a lot about our numbers publicly. So people have to sort of, sort of like, we'll take Jason's word for it, you know. But in our first five years of operating, from when we opened our first account, you know, through five years, we had more assets on our platform than Robinhood, Betterment, Wealthfront, Public, Stash, M1, Acorns combined, right? So when people wonder, like, is this working? It's scaling very, very rapidly. And it's growing at a really, really fast pace. People, I think, sometimes don't understand that this sort of network effect you get when you serve advisors, and those advisors are

• 1:04:31Speaker 05

  growing fast, firms like yours are growing super fast. The clients are adding deposits to their existing accounts. The market tailwind is, is pretty material.

• 1:04:39Speaker 04

  15% a year the past 15 years.

• 1:04:41Speaker 05

  And it's better for advisor clients than it is for self-directed clients. You know, so these are all things that create enormous tailwinds for businesses like ours. So I think, you know, 10 years out, we'll be multiple trillions in assets serving, you know, many millions of end clients. And, and likely, we'll be doing, has kind of capped out at 100 or 125 or 150. Like, those things, these laws of physics will sort of be removed. And I think that's a net great thing.

• 1:05:05Speaker 04

  All right. I want to be respectful for you, of your time, and I'm going to jump to our speed round. We're going to do these really quickly.

• 1:05:11Speaker 05

  Sure.

• 1:05:12Speaker 04

  Starting with, who are your mentors who helped shape your career?

• 1:05:15Speaker 05

  Yeah, so Nick Beim was our first investor at Altruist. He was also a big supporter of me at my last company. He's a partner at Venrock. And he's just awesome.

• 1:05:24Speaker 04

  What are your favorite books? What are you reading currently?

• 1:05:27Speaker 05

  So right now, I'm reading Life 3.0 by Max Tegmark. It's like a book from 2016, 2017. He's one of the, he's a professor at MIT and one of the, like, real forward, like, early thought leaders in AI. And so he kind of like, yeah, there's three phases of AI. And I'd say we're in like, Life 2.0 right now, still human-powered. And like, get to read the book, you'll find what 3.0 is. Good one.

• 1:05:54Speaker 04

  That's, that's interesting. And you mentioned good to great. Anything else you want to mention?

• 1:05:58Speaker 05

  Yeah, I mean, look, these are a little bit cornier, but some of the most important books for me, I'm a total math nerd, so I can live in a Max Tegmark, you know, book for, you know, forever. I had to learn a lot of soft skills, you know, to be a better entrepreneur. I learned a lot of those from reading Seth Godin's books, like, one of my favorite, amazing books, great blog as well.

• 1:06:15Speaker 04

  Let's talk about what you're listening to, streaming or watching, what's keeping you entertained on these cross-country flights?

• 1:06:22Speaker 05

  Yeah. So I don't, I don't watch much TV, although I did watch your Knicks. Congratulations.

• 1:06:28Speaker 04

  That was, talk about perfect timing and a fairly easy path.

• 1:06:33Speaker 05

  Yeah, well...

• 1:06:34Speaker 04

  Perfect storm.

• 1:06:35Speaker 05

  Avoided my Pistons, you know, I'm a Detroit Pistons fan. But, um, so, yeah, I don't watch a lot of TV. I do listen to a lot of podcasts. So listen to yours. I listen to, I'm a big fan of, of Henry Stebbings, so 20 VC is a good one. I listen to you quite a bit. And then I listen to Lenny's podcast, if you're a tech person. Everyone who Lenny is, he's a product person that goes in the deep on like, how different tech companies are being built, especially kind of product-led companies. So there's some things I listen to a lot.

• 1:07:03Speaker 04

  Really interesting. Final two questions. What sort of advice would you give to a recent college grad interested in a career in, fill in the blank, entrepreneurship, fintech, or even financial services?

• 1:07:15Speaker 05

  Yeah. I think in any career, I would become the most AI-forward, you know, person in your field that you could possibly be. So it does not matter if you're working in sales, if you're working in tech, if you're working in financial services. I mean, there, if you can become the person, when you walk into the room, you are the absolute master of Claude for your, you know, kind of job function. I think that's one of the most important things for any person. I think young people have an actual advantage there, and it's one they should definitely be leveraging.

• 1:07:45Speaker 04

  You're not going to be replaced by AI. You're going to be replaced by someone who uses AI better than you do.

• 1:07:51Speaker 05

  And it's, it's getting cliche, but it's very true.

• 1:07:53Speaker 04

  And our final question, what do you know about the world of technology, entrepreneurship, or financial technology today that would have been helpful back in the 2000s when you were first ramping up?

• 1:08:07Speaker 05

  I mean, I don't know that there's necessarily some innovation that I wish I knew. I just, I wish I would have spent more time getting proximate to really high caliber people. Now that I'm older and I've done a few things, I've got the chance to meet some just outstanding people. Man, if you can get close to those people early in your career, it's just going to be such a massive accelerant, because your way of thinking is going to be so much better and sharper and inspired. That's what I do.

• 1:08:36Speaker 04

  Thank you, Jason, for being so generous with your time. We have been speaking with Jason Wanks. He is founder and CEO of fast-rising custodian Altruist. If you enjoy this conversation, well, check out any of the previous 648 we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you get your favorite podcasts. I would be remissified and thank the crack team that helps put these conversations together. Each week, Alexis Noriega is my video producer, Anna Luke is my podcast producer, Sean Russo

• 1:09:16Speaker 04

  is my head of research. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.