Basketball legend Michael Jordan is one of a group of investors betting that fintech can improve estate planning by participating in an $11.6 million funding round for startup Vanilla.
While fintech firms have been working to disrupt the wealth management industry, most of their innovations have focused on investment and financial planning and little attention has been paid to digital estate planning. That’s why financial adviser and wealth management entrepreneur Steve Lockshin founded Vanilla in 2019, to fully digitize the process for registered investment advisers with a platform that automates client estate planning and document processing.
“Your typical adviser gets paid on assets under management, and all they care about are assets and they ignore estate planning, so consumers are getting short shrift,” Lockshin said. “Advisers aren’t differentiating themselves and a lot of it is because they just don’t understand it.
“So we want to simplify and automate, that which can be automated, and accelerate the high-quality advice that clients need and deserve,” he said.
Lockshin, who has worked with Jordan on his estate planning for 25 years, said he approached Jordan and his business partner Curtis Polk with the idea of a fintech that automates and democratizes access to estate planning. Jordan and Polk were quickly interested in becoming investors, Lockshin said.
Leading the funding is Venrock, a venture capital firm that’s been an early investor in companies like Apple and Personal Capital. William McNabb III, former CEO and chairman of Vanguard Group, is a participating investor and has joined Vanilla’s board of directors.
It’s not the first wealthtech McNabb is advising. In May, he joined the advisory board of Altruist, which is seeking to disrupt the RIA custody space, after its latest $50 million funding round. Jason Wenk, founder and CEO of Altruist, also participated in the funding round.
“It appears Vanilla is putting in the effort to develop deep integrations with other parts of the adviser ecosystem to avoid having yet another bolt-on wealth stack appendage that isn’t connected and creates workflow and data issues,” said Gavin Spitzner, president of Wealth Consulting Partners.
Mariner Wealth Advisors, Carson Group and AdvicePeriod have already deployed Vanilla across their organizations, along with 435 other registered investment advisers, according to the announcement.
“We not only use Vanilla’s estate planning capabilities today but are also planning to integrate the software into our firm’s overall client service solution,” said Marty Bicknell, CEO, and president of Mariner Wealth Advisors. “The technology will help ensure a uniformly high level of service with a modern experience.”
Estate planning has fallen behind in terms of both technology innovation and talent, and advisers are going to lean more on technology to fill this gap, said Jamie Hopkins, managing partner of wealth solutions at Carson Group, which is an investor in Vanilla as well as a user.
“I started off as an attorney and in the estate planning arena, but it never felt like a growing field, instead it felt stagnant and stuck in the decades past,” Hopkins said. “To a large extent, estate planning has diminished in perceived value as federal and state estate taxes have been curtailed.”
Additionally, there are perceptions that estate planning is only for the rich and not for everyone, he said. Technology can help democratize advice, including advice on estate planning.
The challenge for most advisers is that they’re not specialized in estate planning and each state has different legislative quirks, said Simon Tryzna, chief investment officer at ClearPath Capital Partners.
Moreover, Tryzna said, advisers have trouble finding the appropriate estate attorney to work with a specific client, which can be costly.
“Collaborating with multiple parties and spending time researching and interviewing estate attorneys was extremely inefficient on our end,” he said. “Client experience rarely gets talked about, but fintech solves many problems there.”
Estate planning has recently come into the limelight as high-profile cases, like Britney Spears and her battle over who controls her $60 million estate, show material gaps in the practice, Spitzner said.
While Spears’ case is unique given the conservatorship she’s currently fighting, the wealthy also simply lose a great deal of money by not taking advantage of estate planning opportunities available to them and optimizing tax treatment, Spitzner said
“Estate planning is absolutely ripe for disruption, especially given how estates are changing with digital assets, illiquid investments and tax law revisions,” he said. “[Vanilla] is also a great example of a growing trend of practitioners like Steve Lockshin who see a gap in the marketplace and what they wish they had, and decide to do something about themselves.”
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