Ritik Malhotra: Independence, Culture, and AI | Next Gen

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There is a pathway for every advisor to basically be able to jump to independence.

Welcome to Barron's Advisor: The Way Forward Next Generation, a special series spotlighting the emerging leaders shaping the future of financial advice. Twice a month, we'll be digging into the strategies, insights, and game-changing moves that will help you take your practice to the next level.

I'm your host, Allison Tucci, and today with me is Riddhik Malhotra, founder of Savvy Wealth, a digital wealth platform enabling the independence of financial advisors. So I want to start at the beginning, the origin story before your, your recent entrepreneur endeavor.

So I might even take you further than that. Okay. So basically the, the, the origin story of entrepreneurship starts back in elementary school. I loved, fell in love with a computer, loved everything about it. And I suddenly got frustrated that I couldn't find all the games I wanted to play. So I said, why don't I just make my own games? Learn how to make software, program, and all of that stuff, and then fell into running a couple different internet businesses by middle school. And that's when I caught the entrepreneurial bug. So probably the best gift I got was at age 13, I knew exactly what I wanted to do. When I went to college, I ended up going to University of California at Berkeley, studying computer science and then ended up dropping out of school because I said, you know, I still couldn't get the entrepreneurial bug out of my head and said, really want to go start something. Started the first company then. We built cloud storage software. Eventually, we sold that company to Box, the mega enterprise cloud storage company. And that was back in 2014. So we started company number 2. And that was right in 2000— at the end of 2017. And we eventually built that and sold it to a company called Brex. So we— that company was in the financial services space. And so we had built a lot of fintech to help do a number of things for banks, wealth management firms, etc. And eventually that business became a $10 billion corporate wealth management arm that we built and ran at Brex. So it's maybe a few of the steps that got us to the journey today.

Well, how did you know that a digital RIA or digital wealth management platform or wealth management arm is that next journey that you'd want to take? What was the moment?

It was all the way back when we, we had sold the first company. 9 months after the company that acquired us, Box, they went public. And so I tell everyone I had the best problem in the world, which is I went from being a broke college dropout to having life-changing amount of money. And I was young at the time. Parents didn't come from wealth. And so I got the advice at the time to go find a financial advisor. And really over, call it a 6-year period between 2015 and 2021 when we started Savvy, there's a few things that I learned. The first was the value of a real financial advisor, especially at a time when all the headlines were all about robo-advisors taking over the industry and all of that. The value of an actual financial advisor was very, very high for me. But the actual experience of working with a financial advisor was the exact opposite. It was snail mailing documents, no project management dashboards, nothing more than phone calls and emails. And so it was always puzzling of why is it that this such an important industry that has so many people working in it still operates that it's, you know, like it was almost 20 years old. And that search got me talking to a number of financial advisors. I eventually, over that time span, spoke to 100+ financial advisors and asked them all these questions of why the experience is like this. And they all kind of pointed out that the firms that they're at, maybe best case, started 20, 30 years ago. But in some cases, they're 100+-year-old banking institutions. And they don't think what technology first. So a lot of the processes are antiquated, pen and paper, and that's the experience they get as advisors. And so they're limited in what the experience they can offer for clients as well. Even advisors that would break out, they would say, I spent over 50% of my time now in middle and back office and dealing with 7 to 10 different, different vendors. And so it's even less engaging with the client.

Yeah.

So all of this put together, I said, well, okay, there must be someone that's fixing this problem. So look for companies that were fixing the problem and potentially invest in. Never found any conviction around any of the approaches. And so I said, I've been thinking about this problem for so long. We haven't found the right solution. The solution isn't just another software provider that can help automate some other element of the process. It needs to be rethought end to end, and the firm needs to be the one that does it for the advisor. So we said, let's go solve this problem. Huge, been thinking about it for 6 years, huge market, huge pain point. So that's when we started Savvy Wealth, which is the digital RIA today.

How does that translate to, you know, a financial advisor listening in right now saying, okay, I'm trying to go independent or I want to go independent. How do I take that advice and bring it to myself?

The way that we look at it, and we have these conversations all the time, which is the most important element of building your business is going to be selecting the partners that you're working with. And that could be a platform like ours that's supporting the advisor and enabling the independence. It could be the technology solutions. It could be the custodian you decide to work with. It could be a number of different things. But we think it starts with who is the partner that's going to be the backstop behind all your middle and back office to help you operate and kind of be the business in a box so that you can focus on being the independent advisor. Well, what's the culture of that platform? How do they make decisions? How do they operate? How much independence do I get versus how much do I have to be, you know, within their system? What are the things that they're doing to support me? So if an advisor is really focused on, hey, look, the 6-month transition is really— it's 6 months, I just want to focus on transition and making sure everything is good. Well, what are they doing to support that? And I think that's similar to starting a company and asking an investor to invest capital. It's like, well, that's support for a certain amount of time. So those are the, those are really the kind of the two pieces there. And then the third thing, which is the most important, is similar to an investor, once they invest or once you elect to go with a partner, you're likely going to be with them for a very long time. I mean, these are very important key relationships that are sticky. So making sure that they have the longevity and the right kind of slope of how they're operating and going to be improving over time is just as important as all their capabilities today.

What would you say to that advisor that says, you know, I grew really well at a traditional firm. I'm a little bit nervous about going independent. I think I have the right partner or the right X, Y, Z. I don't really know how to take that next step. I'm a little bit nervous.

It's a good thing to be nervous about because that is an important element to evaluate. And the way we think about it is, generally speaking, there's, there's 3 elements. And I think 2 are relatively common in the industry where there's one element of just, how am I going to do— how am I going to manage my practice? And, and how is the platform or technology solution I have going to help me with that? That's your CRM, compliance, all that stuff. The second is more kind of call it the financial infrastructure behind the scenes. So who's my custodian? What access do I have? What kind of investment models do I want? All those types of things. Those two are relatively common. Advisors are on top of it. They're looking at all those things. The third one, which is around marketing capabilities of long-term growth-oriented advisors looking at that, that's the area that we actually found is the hardest to find as part of the platform services. And so certainly advisors should be looking at what is not only just the lead generation capabilities, but we find is 3 things. Number 1 is lead generation organically, whether it's digital or events and all of that stuff that I think is unique to the investor's— the advisor's strategy on where they're going to go find their clients. Generally, what we find is they know where to find them. They need the support. The second is content and just collateral generation. So oftentimes it's, well, if the advisor knows where to find the prospective clients, amplifying that is step 1. But then putting the right content, proposal generation, all that is number 2. So there's almost this enablement question. And the third one is actually unrelated to marketing. What we find is that given all the other stuff that has to happen, advisors are oftentimes found that they don't have the time to focus on these types of things. So actually it comes back to how much can the platform take off their plate on other elements so they can reallocate the time into lead generation and being in front of the prospective clients. When the time is right. We think putting those 3 things together is how you build the right marketing funnel. So that's 1/3 of our business, and 1/3 of our value props is squarely focused on that element.

You're listening to Barron's Advisor, The Way Forward: Next Generation. We're going to take a short break.

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Welcome back to Barron's Advisor: The Way Forward: Next Generation. Let's get back into the conversation.

How do you think about culture?

I think the way that I think about it is whenever you think about culture, what is the thing that you want to, to have in the company? And you have to have an opposite that you're willing to say no to it. So when we say the scrappy culture and high creativity, just very kind of go quick, some companies might say, actually, we want a very slow and methodical culture. And that is an OK thing to have. That's not wrong. The reason we went with a scrappy kind of creative culture is that when you're making something new, especially in the earliest days, and in our view, for us today, that's very much in building the best-in-class technology and services platform. Platform to enable advisors to be independent. To do something like that, and you're trying to do something a little bit differently than others, the number one thing that, that's going to hold us back is that we didn't try enough things fast enough to really identify what are the main big drivers that are going to move the needle. And so if you think of it just more kind of like an experimentation lab, which is what often new companies are, you're trying to figure out what is the thing that really resonates. You might have a thesis, then speed and urgency and scrappiness is actually the most important thing. You also don't have the luxury of having, you know, all of the money in the world like maybe a larger company does. And so you're almost forced to be scrappy about the resources you have, both in dollars and people. I think that resonates quite a bit, especially when we speak with advisors, because ultimately they're also operating similarly. It's small teams getting, trying to get and grow and scale and build all of these things. So That to me is a sign of a good culture. We selected something that doesn't necessarily— that not everyone needs to agree with. We try to live by it because it helps the business move forward. And we identify others that also believe in that culture. And that's kind of how you build the inertia in a company and the culture.

So it sounds like you have that culture throughout and that value proposition throughout hiring, technology, all facets. And you sort of move through it. Any recommendations for an advisor looking to build a specific type of culture within their practice?

I think it's identifying first and foremost exactly what exactly are those traits and really forcing yourself to be honest about what exactly is it that you want others to imbibe and emulate in the company. The first thing there actually, the easiest way to do that is actually identify for yourself and if there's any folks on the team already, what are the organic ways people are working? So as an example, Maybe there's a very strong written culture, which we have as well. Decisions are made if someone writes up a brief memo or something like that. Or maybe decisions are all made on the whiteboard. And so it's very much a creative, throw things on the wall, let's see what sticks. That's the first and foremost. Then the question is, to really get the culture instilled in the firm, it starts with the recruiting process. So we explicitly actually have one interview, which I do for every single person that is hired at Savvy. Is the culture and values interview. And it's simply a set of questions that you can map to the values and the culture that you wanted and try to assess what is the individual you're trying to recruit, how do they fall within that. And actually, the view that I have is that you actually want to find folks that are culture fits in the early days. You almost want to build this cult-like belief around how you want to work. So finding culture fits are important. And at a certain scale and size, you want to then think about culture ads because then it's not just about the ways that maybe you wanted to work initially. You need to build out diverse ways of working, different ways teams might have different operating mechanisms.

Challenge yourself a little bit.

Exactly. And the last step is it's not just done over when you're done hiring someone and identifying. It's what are the things that you're doing to instill and remind everyone of, hey, here are the cultural values. I think this is an area we're now focused on of if you have a set of ways of working, how do you celebrate those? Do you every month have a, hey, this person did something like this, and this is a really good example on, let's say, this written culture? Or hey, you know what? This whiteboarding session that we spent 2 hours on was amazing, and we got down to a really, really elegant solution. And I think reinforcing those beliefs is the way you build it in a company.

So for advisors that are listening in right now, what should they lean into from an AI perspective over the next 5, 10 years? Might be too long. So maybe the next year or so. And because there's so many changes that could possibly happen to really get the most bang out of their buck with AI.

I'll tell you a few things that we're seeing, and I think these are excellent areas for any advisor to lean into. Number one is, you know, we've already talked about proposal generation. That's a very kind of methodical, you take data and you output something. Certainly we see a big rise in and utilization of meeting transcription tools. Again, something that allows the advisor to be more present rather than scribbling notes down. Easy for the advisor. And that actually has multiple implications. They can use those notes to send a summary to the client instead of typing it up. Compliance is happy because then you can send that summary over. It becomes their note-taking and it's more robust that way. So that's a big one. I think that's another area. I'd say marketing material generation is interesting as well. So if you think about anything related to generating images, brand, et cetera, PDFs, collateral, AI is excellent at doing a lot of that if you have existing stuff that you've already worked on, because then you can ingest that into the AI system and it's able to replicate that and spruce it up the way you want to. So those are some of the areas we're seeing. That are working really well. But generically speaking, any process that the advisor is doing that requires some level of data or multiple sources to put an output together, we think that there's a big application for AI. Anything that requires them to really listen to the client, think through their personal kind of nuances that they've historically known about, and really make a decision that's going to be more subjective in nature, We find that the advisor is still the best person to make that decision, and we've continued to think that's going to be the case.

It sounds like any sort of relationship building between the client and the advisor would be something that you would say, hey, as an advisor, you should probably lean into that more.

100%. We spent a ton of time thinking through and finding as much research as we could around this concept. And the two things that are always going to be true, and these are innate and in us as humans is, number one, there's this desire or there's this fear that gets elicited. And actually, there's a lot of different research around making very critical health decisions happens to be very similar to making critical financial decisions. And so generally, individuals or households with a lot of money that they've accumulated through saving and whatnot are the most worried. And so they are the ones that are quickest to turn to financial advisors, which we'll get to in a second. But the fear is exactly what's holding someone back from just doing something themselves or trusting an automated system to do it. And actually, the second thing that gets triggered is in moments of fear, people want someone else to be accountable and culpable for the decisions they're making because the fear is actually that they make something, a decision that goes wrong. So what's interesting is that you find that the best surgeons and any kind of doctor in the world will oftentimes not be willing to make the most critical life decisions for any of their close family. They'll sometimes just ask someone else, a trusted colleague, because there's that, that fear response sometimes is too closely emotionally tied. Very similarly, financial decisions happen to have this same part of that, that brain that gets activated. So if you believe just kind of that we're ultimately all humans, no matter what kind of happens with AI and technology and all that stuff, We as just people are going to want someone that we trust deeply to be there for us, to help us with the fear element, and to enable us to make sure that we're making the right moves towards that long-term financial goal.

What is a mistake you look back on, you go, I'm very glad that I made that mistake, and then I didn't do it and I pivoted in the future for it?

Someone once told me this where You get no extra points for doing things yourself. So you might as well try to get all the help you can. And that's very true. No one's coming here with a report card of, well, hey, you asked 10 people for help, therefore you get some marks off. I mean, this is not how the world works. Ultimately, results are what drives success. And actually, this was really hard to learn and adopt early on because coming out of school, very much trained, hey, you got to do everything yourself. All problems you have to solve yourself. And so asking others for help and actually having the trust that others can help is actually the biggest problem. And I would say the first company we built, that really, I think, limited our growth. And don't get me wrong, excellent outcome, but I think we could have done even more had we been more open and nimble to ask for help. So that's probably one of the core learnings and something we definitely got wrong.

Is there any additional advice, practical advice that you'd want to leave some financial advisors that are listening today?

I'd say it's an amalgamation of everything we've talked about, which is the— I'm a big believer in the future of the independence of every financial advisor. And there is a path. I mean, we've busted the myth of it's It doesn't have to be difficult. And there is a pathway for every advisor, wherever that you are in your journey, to basically be able to jump to independence. And I actually think the takeaway here is that using technology and the latest and greatest with AI is actually going to empower the independent advisor to really jump to independence much faster. Because what may have necessarily— may have needed multiple people on your staff, maybe you need $1 billion of AUM before to really jump out and have the capital to be able to do all that. You can do at a much lower scale and jump to be independent because you have access to technology that can do automation, that can automate a lot of the work. You have AI that acts as your fractional employee and resource. So that to me paves the future for a very prominent independent advisor base. So don't wait.

Well, thank you. This has been a fantastic conversation.

Absolutely. This is a pleasure.

The production team for Barron's Advisor: The Way Forward next Next Generation is Ellie Ismailidou, Rebecca Bisdale, Paul LeBlanc, Kinga Rojak, Joseph Lesby, and Alexis Moore. Melissa Haggerty is the executive producer. Jenna Mathis is the director of programming for Barron's Advisor Programs. Greg Bartolus is the editor-in-chief of Barron's Wealth and Asset Management Group. We'll be back soon with another episode. Thanks for listening.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.