Like in other industries, the digitalization of products and services is a major trend affecting the financial sector. Over the last twenty years, different parts of the financial industry have varied in terms of the speed with which they have adopted digital practices. According to Rob Foregger, Co-Founder and EVP of NextCapital, financial advisory and asset management have been among the laggards in incorporating digital models into their businesses. Nonetheless, the shift is taking place.
With the entrance of numerous fintech startups targeting wealth management and advisory services, as well as digital advisory products targeting millennials, demand has increased among incumbents to update their user experience with customers.
Benefiting from this demand is NextCapital, a digital advice platform firm providing enterprise solutions for asset managers and financial advisories. The interest from financial firms has culminated in NextCapital announcing today that they have closed $16 million in Series B financing. Leading the funding were AllianceBernstein, Manulife and Route 66 Ventures. Also participating were NextCapital’s existing shareholders Transamerica Ventures, Russell Investments, FinTech Collective, Kelvingrove, and Vermont Seed Capital Fund.
Speaking with Rob Foregger, he explained that NextCapital’s goal is to provide a holistic solution to their customers. As such, their technology is available as a customizable solution, which companies are able to use to digitalize their advisory offering.
Examples are online forms for clients to track their holdings with the asset manager or financial advisor, as well as third party accounts. In addition, investors are able to enter their investment goals such as saving for retirement or a large one-off purchase, and receive calculations of saving for the future.
Speaking with Foregger, one of the items he stressed is the company’s goal to be a “holistic” solution for their customers. This means offering a fully customizable product, that customers can also design in their unique shape in the form. The latter is a key item for many firms that want to differentiate their user experience from competitors.
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Among the most important customizations is the ability for firms to connect their investment methodologies. As such, following the gathering of customer information, the platform uses these investment methodologies to provide recommended portfolios to meet saving goals.
Other customizations include CRM integration and building blocks to handle support channels. The latter provides flexibility for firms that have more human interaction with their customers to continue to integrate this experience with their clients. On the other side of the spectrum, a firm such as a fintech startup that wants to remove all human interaction and create a fully digital mobile based advisory platform could add their investment methodologies and use NextCapital to power the technology behind their offering.
Proprietary vs licensed solutions
Among the big debates in the financial industry around technology, is the question of whether firms should build proprietary systems or use third party solutions. In regard to this question, Foregger said that “many big firms are able to build their own technology, but overall most institutions don’t have the availability to build this in-house”. The result is that for the majority of small and medium companies, it is simply more cost effective and quicker to work with third parties.
In terms of NextCapital, the firm is trying to meet the best of both worlds by offering flexibility with their partners to customize solutions. Foregger explained that based on client need, it will take between five to ten months to roll out the product to new customers.
With the $16 million in funding, NextCapital plans on using the capital infusion to continue to adapt their product to meet the needs of their clients. Among future initiatives are innovative methods for individual advisors to track and communicate with their customers.
In regard to the innovation, Peter Kraus, Chairman and Chief Executive Officer of AllianceBernstein, commented about their investment: “With an impressive enterprise offering and the ability to create personal, objective and affordable portfolio solutions for a broad range of investors, we believe NextCapital is at the forefront of this effort.”