As part of its sale to JP Morgan, OpenInvest orphans RIA clients and fires the startup’s direct index sales force



New York City Super Bank ends OpenInvest’s days as a money manager and turns it into a tech hub within the $ 4 trillion AUA company to infuse ESG into wealth, asset management and possibly even credit cards.

Brooke’s Note: All investment results are null and void if the Earth’s surface looks more like Mars. The biggest investors on the planet are taking notice, as we move on from wondering if climate change exists, to putting a timer on the “point of no return.” This mindset is reflected in the rise of ESG investing. Strange weather strikes Seattle. Strange events are now striking San Francisco; climate-conscious fund manager is offloading RIA assets he worked so hard to attract after forming an unusual partnership with JP Morgan. Time is running out on how 7 billion people can share the planet and the New York giant is acting with an urgency that reflects it.

In a shocking move, OpenInvest has put RIAs on notice to “delete” their accounts with the managed indexing specialist as part of its new partnership with JP Morgan, who wants the company’s technology to be all for them. alone.

Mary Erdoes’ # 1 priority is to fold OpenInvest into JP Morgan. (Photo: World Economic Forum).

RIABiz learned about the move in an exclusive interview.

“We are ending the existing money management… They were upset with the RIAs and the institutions,” said Joshua Levin, co-founder and chief strategy officer of OpenInvest.

“We will help them one by one” to transfer their assets to other fund managers, he adds.

After announcing his deal with JP Morgan (JPM), the San Francisco manager of $ 105 million in direct index assets revealed that he would, in fact, become a tech hub within the $ 4 trillion company. dollars.

The company’s existing customers will be gone by the end of the summer.

Great ambition

The new goal of OpenInvest itself is to imbue JP Morgan’s entire business portfolio with ESG prerogatives rather than trying to build from scratch – a condition of the deal that took time to build. its founders to accept. Currently, the company considers $ 2.4 trillion of its $ 4 trillion to be ESG integrated.

Wally okby
Wally Okby: “It’s pretty ruthless, so the fact that they’ve had JP Morgan at this point says it all.”

“We spent a lot of time specifically with Mary Erdoes [CEO of J.P. Morgan Asset and Wealth Management]”Levin adds.” She had come to our philosophy independently. This is his number one priority. “

“It took us a while to figure it out,” he explains. “But we came to understand their ambitions from top to bottom – wealth management, investment management and possibly even credit cards.”

Credit cards are a natural fit, and an ESG Chase app could very well have a charitable function, says Wally Okby, a Tampa ESG researcher for the Boston, Mass.-Based consultancy The Aite Group.

“Charity goes hand in hand with sustainable investing, and half of American donations come from regular donors,” he says.

Raise the bar

Levin says he underwent a similar change of mind when leaving the WWF to go into investing, knowing that larger pools of resources exist in the profit sector than in an NGO. .

JP Morgan is getting more than a massive upload of human talent into his system, Levin adds.

“It’s a top priority,” he says. “If they wanted to hire people, they would hire people.”

Levin hopes the RIAs will one day benefit from his business’s ostensible shift from their channel.

“If we are successful it will help RIAs because it raises the bar and sets new standards. “

Cut throat

Getting JP Morgan’s backing was a big step for OpenInvest, Okby says. There are actually a significant number of VC-backed startups in this area vying for attention, he explains.

Will Trout: “I guess the secret sauce here is to give customers control.”

“It’s pretty ruthless, so the fact that they got JP Morgan at this early stage says a lot about the attractiveness of their alternative datasets,” he continues.

Okby adds that ESG leader BlackRock took a similar move earlier this year when he invested in Clarity AI and created Aladdin Climate. See: BlackRock Could Create Biggest, Worst RIA Platform Yet As “Boy Wonder” Starts “Aladdin-izing” FutureAdvisor

“The purpose of this acquisition was to bring alternative data from Clarity AI into Aladdin,” he says.

Yet while the philosophies of the New York bank and the San Francisco startup may have similarities, the motivations can diverge significantly, says Will Trout, director of wealth management at Pleasanton, Calif., Javelin Strategy. & Research.

“I think from JPM’s point of view, it’s less about being ‘awake’ and more about positioning the bank to take advantage of the generational change in mores, and, more specifically, all this money in motion,” says -he.

“But JPM does it – according to the [Exxon CEO] Lee raymond kerfuffle – need to protect its flank in terms of ESG. It’s not just carbon-spitting companies (read Exxon) that are in the spotlight; it’s the companies that fund their businesses that hear the activists, board members, and regulators. “

“The mission was to generalize. It does not become more generalized. We are focusing on the installed base,” says Levin.

Fight against ESG

What OpenInvest has developed in its short history as a mouse may well attract the attention of a Wall Street elephant trying to take the plunge into commoditized financial services, Trout says.

“I guess the secret sauce here is to give customers control by allowing them to personalize the services to which they have access. It’s a different and more viable approach than forcing righteousness down their throats,” he says.

Looking under the covers of OpenInvest, I was impressed with the extent to which they put the end user in control through a real-time and impactful interface, ”he adds.

Levin explains that the philosophy addresses ESG at the process level rather than at the product delivery level.

“Why buy a product? ” he asks. “You should be able to push a button as an advisor or client and have software to build the portfolio and manage it over time,” he explains.

JP Morgan plans to retain most of OpenInvest’s 47 staff, but has already informed sales staff that they will be laid off as part of the transition to money management. He’s also keeping the mark for now.


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