To attract more assets, kaChing, an online provider that connects investment managers with investors, has launched a platform for small and midsize registered investment advisers.
The new platform, kaChing Pro, allows professionals managing less than $500 million of assets to take on new clients and increase assets under management. More than 25 investment managers have already signed on to the platform, which started Friday.
Small-to-midsize investment managers have traditionally struggled to increase their assets under management because of difficulties in differentiating their services, the prohibitive costs of taking on smaller accounts and no effective means of distribution to reach new clients.
However, by using kaChing's platform, advisers will be able to simplify their back-office operations and focus on wealth management, said Andy Rachleff, its chief executive.
Since it launched in October, kaChing has accumulated $8 million of assets under management. But, Rachleff said he hopes to have $200 million by the end of the year. "We think that managers will bring assets with them," he said.
"To provide the best experience," Rachleff said, "we need to attract as many investment managers as possible. The more investment managers, the more investors that are using our platform."
Dan Carroll, the Palo Alto, Calif., company's founder, said the platform would also help RIAs market themselves to smaller investors. He called kaChing Pro an "Amazon-style self-service storefront" for advisers looking to attract mass-affluent clients. "In a [separately managed account] world, a lot of investment managers have high investment minimums and a lot of managers are turning money away because investors don't meet minimums," Carroll said. "Now they can turn those investors over to kaChing where they can make the same investments, but on a different platform."
KaChing requires a $3,000 minimum investment. A traditional separately managed account could have a minimum investment as high as $200,000.
Analysts said that many investors are disenchanted with mutual funds and are turning to companies like kaChing. Its biggest competitor in this space, Covestor Investment Management, a New York and London company, is also attracting assets by targeting mass-affluent investors. Covestor has a minimum investment of $10,000 and Perry Blacher, its CEO, said it has seen a surge in large portfolio managers joining the platform.
In March, Covestor announced that five investment management firms have signed on to allow its clients to mirror the firms' portfolios. This added 12 new portfolios to give Covestor a total of 24 professional money manager models and 34 models from nonprofessionals on its platform. Covestor expects to have 100 models by the end of this month and 300 to 400 models by July.
Blacher said many portfolio managers are tired of working with wire house firms because they are often "squeezed hard on fees." With a firm like Covestor or kaChing, advisers have an opportunity to develop direct retail distribution, Blacher said.
Carroll acknowledged that Covestor is a competitor, but said it does not have the equivalent of kaChing Pro. "There are two significant differences between kaChing and Covestor," Carroll pointed out. "All of our managers have to be professional and that is not the case on Covestor. We carefully screen the managers on our site and only a small percentage qualifies. [Covestor does not] have that either."
But, that doesn't bother Blacher. Covestor started as a company with "investors talking to investors," and has no plans to move to kaChing's "professional-only" model," he said. "Part of the power of the Internet is that individual investors have the same access to tools and research," Blacher said. "Investors should be able to follow both other investors and professional money managers."
Platforms offered by companies such as these are not for every investor. Burton Greenwald of BJ Greenwald Associates in Philadelphia said they require more of a "do-it-yourself approach at a time when investors are begging to have their hands held." Greenwald said it could be difficult for these companies to attract significant assets, but he would not be surprised to see them bring in $3 billion collectively in the next three to five years.