The collaboration of two New Jersey companies has resulted in an opportunity for people with as little as $50,000 to invest to have a robo-adviser and get access to alternative investments formerly available only to those with $1 million to invest.
The two companies are Building Benjamins, the online arm of Tradition Capital Management, a Summit-based registered investment adviser (RIA), and Invessence (Chatham), the wealth-management technology provider that built and customized the engine behind Building Benjamins’ offering. Together, the companies developed a customized online robo-advisor called “Building Benjamins.”
Benjamin C. Halliburton, founder, CEO and chief investment officer of Tradition Capital Management, explained that, during the past four or five years, ’40 Act mutual funds (pooled funds under the Investment Company Act of 1940) have allowed the investment community to offer alternative investments as part of a portfolio. These alternative investments provide a wiser way to diversify portfolios so that they are not so dependent on stock market forces, he said.
Such asset classes as reinsurance, alternative lending, real estate, variance risk premium harvesting and others can now be included in portfolios offered online, and thus made available to a market that didn’t have access to them before. He noted that ’40 Act funds have to file with the SEC before they are launched, have a board and are subject to more scrutiny than alternatives such as partnerships or hedge funds.
“There are 100 or 200 firms doing this for the million-dollar-and-above clients, but nobody is doing it in the $50,000 space,” said Halliburton. “So we are going to take these stronger, better-diversified portfolios and present them to the mass market.”
People who wish to include these investments in their portfolio could have a return that is two percentage points higher than if they were just buying stocks and bonds at the same overall portfolio risk level, he noted. “And compounded over time, that is a huge advantage to a client,” he said in an interview.
Invessence provided the white label technology for the digital adviser. “They have all the code for portfolio selection, monitoring, online reporting, etc. In addition, they customized the product to work with Building Benjamins’ specific portfolio requirements.
“After investigating the various capabilities, we chose a robo-adviser platform company and worked with them for about 10 months, when we realized they couldn't provide the customization that we needed to deliver the value-added presentation capability. While they could deliver the value added, their solution wasn't going to hop out at clients as they went through the process to sign up.
“Invessence was very customizable. We have a very unique platform. As we worked through this process, and we explained our needs, we have made significant improvements to their white label capabilities. Clearly, they will be able to transition this to other online brokers. They have been very good about building out a customized product and making something that is going to work.”
Building Benjamins launched its product in February.