Fintech startup launched by financial advisers lands $2.7 million in funding

Two advisers are getting financial backing from some notable names in the industry to boost their fintech startup.

Seeds Investor, a software offering digital client assessment, automated portfolio construction and ongoing client engagement tools, has landed $2.7 million in a seed funding round led by Social Leverage, a venture capital firm whose leadership includes Stocktwits founder Howard Lindzon. Additional investment came from The Compound Capital Fund, a venture capital fund affiliated with Ritholtz Wealth Management; Ryan Shanks, CEO of FA Match; and Paul Walker, former co-head of technology at Goldman Sachs.

Seeds was launched in 2019 by CEO Zach Conway, who is also a financial adviser and managing director at Conway Wealth Group, a registered investment adviser with $6.48 billion in assets under management according to the firm’s most recently filed form ADV. The firm’s tagline is “aligning life and wealth,” but Conway felt existing adviser fintech fell short of delivering on that goal.

“We wanted a way to show people that you can reach your financial goals in a portfolio and at the same time feel really engaged with your money in the process,” he said.

While there are plenty of client assessment and automated investing tools on the market for advisers, Conway says Seeds helps advisers provide more personalization in both portfolios and client meetings to show clients they deliver value that goes beyond the balance sheet.  

“If you sold that you’re a super smart asset manager and that’s why [clients] should hire you, you’re having a pretty tough year,” Conway said, referring to the market volatility that has defined much of 2022.

In addition to risk tolerance and time horizon, Seeds’ client assessment tool tries to assess the client’s mindset toward investing, such as how involved they want to be in the investment process and whether they prefer traditional investing products or “disruptive” approaches like alternatives and cryptocurrency.

“Risk tolerance is ephemeral, it changes on where the market is on a given day,” Conway said. “We think advisers need to understand more about how clients think about investing.”

[More: CFP Board releases guidelines on cryptocurrency]

Seeds also asks investors about their personal values to build out what Conway calls a three-dimensional client profile: risk and time horizon, behavioral finance and personal values. Seeds feeds this into a direct indexing engine to automatically create a portfolio tailored to the client’s preferences and uses the client profile to inform a client engagement tool that shows advisers which aspects of the portfolio resonate most for each client.

Conway believes this creates tangible benefits for advisers, including significant increases in inflows and converting prospects into clients at nearly double the firm’s usual rate. Seeds condenses a sometimes multimonth process of onboarding a new client into a 45-minute meeting, he said.  

This is part of what made Seeds an attractive venture for Compound Capital. The growth in model portfolios shows that advisers want to spend time doing financial planning with clients rather than managing investments, but most tools deliver a cookie-cutter approach, said Michael Batnick, director of research at Ritholtz Wealth Management.

“If you can tie the investment management to values that align with the client, then behaviorally they will feel more tied to the financial plan and will be more likely to stick with it because it's not just a bunch of Vanguard ETFs,” Batnick told InvestmentNews.

Batnick also appreciated the fact that Conway’s experience as an adviser gave him first-hand knowledge of what technology advisers want and need when they sit across from a client. Conway founded Seeds with his father, Michael (president and CEO of Conway Wealth), and they've brought aboard veterans from Russell Investments, BlackRock, J.P. Morgan, UBS Wealth Management and Charles Schwab.

“This was as much a story about the people behind the product as the product itself,” Batnick said. “I felt these were the right people to deliver a differentiated solution to the marketplace.”

Seeds was first adopted by Conway Wealth and is now live with “several large independent firms,” including Tampa, Florida-based One Seven, Southern California-headquartered KWB Wealth and Ohio firm Cunningham Wealth Management.

The company plans to use the seed funding to continue building out its team and technology. The investment included participation from DuContra Ventures, a fund launched by Adrian Grenier, an actor best known for his starring role in the HBO television show Entourage.

[More: Advisers should brace for the relentless case for direct indexing]