Vanguard and Los Angeles-based Altruist, an AI-based wealthtech and custodial firm, announced Wednesday that they entered into a definitive agreement under which Vanguard will acquire Altruist.
The transaction is expected to close later this year, subject to customary closing conditions that the firms said include required regulatory approvals.
The companies said Altruist is expected to operate as a standalone business after the closing, continuing with a focus on advisors as well as its brand, leadership and operating model.
“Many investors in Vanguard funds choose to work with financial advisors, and far more people could benefit from access to financial advice than the industry can serve today,” Salim Ramji, CEO of Vanguard, said in a news release. “The need is broad, but the capacity to provide high-quality advice is limited.”
He added, “Technology can help close that gap by enabling advisors to serve more people and serve them better, while preserving the human judgment and relationships at the center of good financial advice.”
Terms of the transaction were not disclosed, but The Wall Street Journal reported that Vanguard is paying about $4 billion for Altruist.
Joel Bruckenstein, President of Technology Tools for Today (T3), told Wealth Solutions Report he was not surprised by the acquisition.
Vanguard pointed out that it first invested in Altruist in 2020 to bring more competition to the RIA custody space, to make advice more accessible and to deliver better outcomes for investors. Altruist also announced in 2021 that it raised $50 million in a Series B funding round that was led by venture capital and private equity firm Insight Partners, with follow-on participation from Series A investor Venrock, as well as Vanguard.
But Bruckenstein said he was surprised by the price that he heard Vanguard would be paying for Altruist.
He expressed guarded optimism about the deal but said it remains to be seen whether synergies between the two companies’ cultures will work out – something that is “not going to happen overnight.”
Ramji added, “We’ve had the benefit of getting to … know Altruist’s people, platform, and potential over the last several years, and what we saw was a mission-aligned organization building AI-enabled technology around the real needs of advisors and the investors they serve.”
He concluded, “As more investors in Vanguard funds choose to work with financial advisors, we see a significant opportunity to build on the strengths of two highly complementary organizations to help advisors serve clients more effectively and help more investors achieve financial security and peace of mind.”
“Altruist was built on the simple belief that when independent advisors have better technology and lower prices, they can do their best work and bring high-quality advice to more people,” Jason Wenk, CEO and Founder of Altruist, said in the news release.
“Vanguard shares our conviction in that mission, and their trusted investment expertise and resources will enable us to pursue it with greater speed and reach.”
Wenk added that he was “incredibly excited about what this will mean for advisors and their clients, and I look forward to building the future of Altruist together.”
In a letter by Wenk posted on Altruist’s website, he said, “The most important thing about this announcement is not the transaction itself. It is what Vanguard and Altruist can do together for advisors and the people we serve.”
“At their core, Vanguard and Altruist have been working toward the same goal from different directions: giving more people a better chance at financial success.”
Wenk added in his letter, “That’s why I see such a strong fit between the two institutions. Vanguard’s investment expertise and resources will give us greater capacity to build the advisor technology and custody capabilities our customers rely on. We’ll be able to solve more problems and help more advisors grow their businesses while delivering exceptional outcomes to their clients.”
Also weighing in on the announcement, Doug Fritz, Co-Founder and Executive Chairman of wealth and asset management consulting firm F2 Strategy, told WSR by email, “Since the days of Robo advice, asset management firms, have viewed the advisor desktop technology as an ideal destination for investment product distribution and disruption.”
“As investments have been commoditized, the dream of a unified ecosystem that connects low-cost portfolios with automated and elegant advisor-client experiences has seemed like the long-term answer for our industry.”
Fritz added, “For the wealth management industry, this is the clearest signal yet that the old boundaries of investments, technology, custody, and servicing have broken down and the new world of tech plus investments is upon us.”
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
