Wallace Finance, an artificial intelligence-powered investing platform, launched Wallace Understudy last month, a new platform designed to create a “digital twin” of an advisory practice for training, continuity and succession. Now, the company is working on an enterprise version of the platform to serve as a due diligence comparison tool for RIA roll-up firms.
Matt Baldwin, CEO of Wallace Finance, said when the company rolled out its custom indexing and portfolio management tool, many advisors identified a pain point in transferring advisor judgment and methodology with a book of business.
“The more we talked to these people, the more they were saying, ‘All my practice really, it lives in my head. I have all these systems, but the trust, the real secret sauce, it’s up here, and I don’t know how to transfer that,’” Baldwin said. “They don’t know how to train up somebody new, or they don’t have a system for that.”
Wallace Understudy aims to provide that system. It starts by capturing all the relevant documents, policies and procedures of the advisory firm. Then it maps the rules and methodologies to the advisor’s practice, identifying gaps and disagreements in judgment calls. That’s the system’s “validation loop,” which checks the data against the actual actions the advisor takes through their CRM, custodian, notetakers, email, etc.
Advisors also undergo a deep dive into different areas of their practice through an interview process, and their answers create a methodology profile.
“We’re never going to be able to exactly dynamically replace that rapport that an advisor has built with their clients and the trust they’ve built,” Baldwin said. “But at the same time, we can say, ‘An advisor knows exactly when to reach out to clients, what is sensitive with clients, exactly how they talk to clients, even their voice over emails, how they discuss things with various specific clients and how they differ between clients.’ And then we can give that to the next in line. We’re getting everything aside from maybe eyebrow movements and the way they laugh and shake hands, we’re taking all the stuff that they do actionably, I should say, and transferring that to the next generation.”
But Baldwin said there’s also a use case among roll-ups and aggregators participating in the consolidation trend. Wallace Finance is currently working on an enterprise version of the software, coming early next year.
Larger RIAs and aggregators would take their Understudy and compare it against the smaller firm’s version, with their own compliance due diligence checklist involved.
“When an acquisition is occurring, it’s a great tool to actually run the due diligence while making sure everything aligns, especially for the SEC,” Baldwin said. “The last thing you want is for you to have something on paper for a client, you treat them differently, all of a sudden something happens, and the authorities get involved. That’s where we come in. We want to make sure that never happens.”
Wallace Understudy is available under three tiered plans. The Playbook plan, which costs $199 per month, is a self-serve version that includes five seats. The Digital Twin plan, which adds validation and client data capture, comes with 10 seats at $599 per month. The Enterprise plan, which will integrate into multi-advisor firms’ tech stacks, will cost $999 a month.
Tim Welsh, president, CEO and founder of Nexus Strategy, said it seemed like Understudy was targeting a niche and that an advisor wouldn’t necessarily need an ongoing subscription.
“The use case seems very narrow, particularly if it is for an M&A transaction that happens every once and you wouldn’t necessarily need an ongoing subscription,” he said.
Welsh said there could be a use case in deal preparation, as advisors need to get organized so their firms can be easily transferred. The tool could also help them get a higher valuation.
Baldwin said the tool can be used for a couple of months during a transition, but it can also act as a validated source of truth for onboarding, training and continuity for expanding firms.
“A new advisor/employee can ask the firm’s Understudy about anything, regardless of the lead advisor’s availability,” he said. “So the lead advisor’s judgment is always available, especially during expansion and hand-offs.
“We are also solving a two-sided problem for larger RIAs that are acquiring smaller firms,” he said. “The acquiring RIA will have an Understudy available, so all acquired firms know exactly how they operate. This also validates operations against their actual client tempos, judgment calls, methodology, etc., and automates due diligence.”
Doug Fritz, co-founder and executive chairman of F2 Strategy, said it was a novel idea. But such knowledge-transfer tools don’t necessarily challenge advisors to do better.
“It’s only going to make you a consistent version of yourself as opposed to challenge you to be better,” he said. “It’s just saying, ‘Did you do what you thought you were supposed to do?’”
