Technology and third-party providers are bringing improved transparency, growth and operational efficiencies to the Wealth Management market.

Earlier in this series, we explored three areas of payments that offer significant growth opportunities  for digital disruptors: Integrated Payments, Payment Security and B2B Payments. In fall 2019, we followed that with commentary on what LLR believes is driving growth opportunities in the Wealth Management sector and why we are also committed to investing in areas like digital wealth management and third-party fund administration.

Following LLR’s 2020 investment in YCharts, a cloud-based investment analytics and communications platform for RIAs, broker-dealers and asset managers, we wanted to provide some additional thoughts on how it aligns with our views of the wealth technology space and what drove our conviction to partner with YCharts.

Here is an updated version of our original post (as of 11/16/2020):


Younger Generations Shift to Digital Wealth Management, but the Advisor is Here to Stay

Robo-advisors have received a lot of attention as wealth shifts from older generations to younger, more tech-savvy consumers, but we believe that the human element of investing – and therefore the financial advisor – is here to stay. Our thesis is confirmed by the more recent trend among certain robo-advisors to offer access to financial advisors.

However, for advisors to effectively service a younger generation, continued tech adoption is paramount. Only ~10% of the ~300,000 financial advisors in the United States leverage a fully digitally-enabled platform to better serve their customer base. To keep pace with client expectations and preferences, advisors need to embrace technologies that enhance efficiency and improve transparency.

At the same time, financial advisors are increasingly shifting away from larger wirehouses in favor of improved economics and autonomy from independent RIA’s and broker dealers. As advisors make this shift, they are increasingly relying on third-party technologies to bring efficiencies and enable digital service delivery in a cost-efficient manner. Solutions that are easier to use, customizable and help advisors win new business and manage existing client relationships are experiencing strong demand.

Case in Point: In October 2020, LLR completed a growth recapitalization of YCharts alongside existing management. YCharts meets these parallel demands from advisors by enabling smarter investment decisions and enhancing client communications.  By delivering a single platform for securities research, portfolio construction, idea generation and market monitoring, YCharts offers advisors significant time savings and serves as a more user-friendly alternative to terminal-based tools and other desktop applications. LLR’s investment will help YCharts continue to capitalize on the trends in favor of digital wealth management through further investment in product, sales and marketing, as well as complementary acquisitions.

We believe that the human element of investing – and therefore the financial advisor – is here to stay.

Price Transparency and Conflict-Free Advice Become the Norm

Following the Great Recession of 2008 and general cynicism associated with the banking and wealth management industries, consumers and regulators alike have demanded complete price transparency and unbiased financial advice. As an example, the DOL passed 408(b)(2) in 2012 to impose new fee disclosure requirements for retirement plans, and in 2015 the DOL Fiduciary Rule was introduced to drive conflict-free investment advice and put the customer’s best interests first. While the Fiduciary Rule was eventually over-turned in 2018, we believe it will have a lasting impact as market participants have already taken steps to align with the overturned regulations. As fiduciary obligations have risen to the forefront, fee transparency and conflict-free investment options have become the new norm, not just in retirement, but across the wealth management industry.

Case in point: In 2017, LLR completed a minority investment in PCS Retirement, an independent and conflict-free retirement services platform automating the sale, design, valuation and management of retirement plans. In 2019, LLR completed a follow-on investment to fund the acquisition of Aspire Financial Services by PCS Retirement. Combined, the company now provides conflict-free retirement recordkeeping services to 16,000 plans and 750,000 eligible participants representing more than $23 billion in assets under administration.

As fiduciary obligations have risen to the forefront, fee transparency and conflict-free investment options have become the new norm…

Increased Digital Wealth Management Inspires Trend Toward Outsourcing Fund Administration

The ever-changing regulatory landscape and increased use of technology in wealth management is also driving a trend towards outsourcing fund administration across all asset classes – in 2017, Assets Under Administration with independent fund administrators grew 14%. Growth in the fund administration outsourcing market is largely attributable to continued pressure from regulatory bodies for greater transparency, including U.S. Congress’ enactment of FATCA (2010), the OECD’s Common Reporting Standard (2014) and the SEC’s Investment Company Modernization Rules (2016/2017). Third-party fund administrators relieve investment managers of operational burden and offer an independent, specialized resource that is favored by regulators and investors alike. Further, outsourcing provides fund managers the opportunity to realize the benefits of technology investments by third-party administrators (e.g. automated reporting and workflow tools), while avoiding the costly and time-consuming process of implementing and maintaining the technology in-house. Instead, allowing fund managers to focus on their core business – generating returns for their investors.

Case in point: In 2012, LLR invested in Ultimus Fund Solutions, a leading independent provider of fund administration services, including 40-Act, managed accounts, hedge, private equity, venture capital, and real estate. During LLR’s investment, Ultimus grew to service over $80 billion of Assets Under Administration through consistently providing the highest service quality and investing in technology to best support its clients’ needs. Ultimus was sold to GTCR in 2019.

Looking ahead, the private equity, venture capital and real estate asset classes all represent major growth areas within the broader fund administration space. Each of these asset classes has experienced consistent annual growth in Assets Under Management while penetration rates of independent fund administrators in these asset classes is less than 50%. Limited partners are increasingly expressing a strong preference for a third-party administrator and fund managers are seeing the benefit of leveraging a technology-enabled, third-party administrator to manage complicated regulatory requirements and other time-consuming, operational burdens.


The push for greater transparency and improved operational efficiencies for both the consumer and investment managers is driving increased adoption of digital wealth management platforms that offer greater visibility into performance and fees as well as better access to a wider range of investment data. In our next post, we’ll address the third subsector that excites us the most right now in FinTech: Lending Technology.

Learn more about the LLR team, relevant investments and our focus on Alternative Asset Technology & Services.