While working as a financial advisor for Merrill Lynch during the Great Recession, Margaret Hartigan realized that most people don’t really understand how investing works.
It’s not because they aren’t smart, but because they never had any formal training into the very complex subject matter. At the same time, from an internal perspective, Hartigan also saw the high costs that financial institutions face when trying to reach potential new clients and retain their existing ones.
Hartigan’s company, Marstone, bridges this gap with its digital wealth management platform. The platform uses automation to make it easier for retail clients to invest their money, while reducing back office costs for the financial institutions offering their services.
Founded in 2013, Marstone is strictly a technology partner. It provides its platform to financial institutions that white-label it with their own brands and price their services as they see fit. Then, customers of that institution can enroll on the platform electronically and set up their investments.
“I thought we could create an Apple-like experience on the front end that was more personal and really met the person where he or she was, in terms of helping them express what they wanted to do but also what they feared,” said Hartigan, who heads up Marstone as co-founder and CEO. “We were really trying to humanize finance for people and make it highly more interactive and visual, and less reliant on just numbers and jargon.”
Because the platform is so automated, financial institutions are able to reduce their costs by eliminating manual processes such as paperwork flows. The technology also reduces the amount of human interaction needed between the institution and retail investor, which can save institutions money.
Marstone asks users questions about their risk tolerance, their personal financial goals, their prior knowledge about and how long they want to invest their money. Marstone’s algorithm then uses these answers to construct a customized investment portfolio for the user.
“Our platforms enable banks or any financial institution to serve a greater number of people, because it's all done electronically,” Hartigan said. “They are actually able to work with people who don’t necessarily have tons of money, because their cost of operations and service is greatly reduced because of our platform.”
Customers that invest on Marstone range from first-time investors with just a few hundred dollars to high-net-worth individuals. Marstone also has clients who prefer to work with a financial advisor but want the ease of online tools.
Although Hartigan came up with the idea for Marstone after the recession in 2008, she said she went about building the company slowly and methodically, so she could win the hearts and minds of her strategic partners.
As a turnkey technology solution, Marstone features comprehensive integrations with custodians including Apex Clearing, Pershing and Interactive Brokers, as well as multiple core banking systems providers including Fiserv.
These companies carry out all of the IT services, recordkeeping and transactions that go along with investing. While it took time to develop these partnerships, Hartigan said, this strategy paid off, because it allows for seamless integration of Marstone’s platform into its institutional clients’ core banking systems.
Marstone has also partnered with industry-leading investment firms including BlackRock, one of the world’s largest asset management and financial services organizations, to deploy the company’s model portfolios to Marstone’s institutional clients. This allows these clients to offer differentiated investment strategies to their end clients, the retail investors.
Marstone’s institutional clients now include large banks such as HSBC. Hartigan says the company has a strong pipeline of potential future clients ranging from insurance to asset management to advisory to banks and credit unions.
The Marstone team is currently developing a financial planning platform that will seamlessly integrate into the existing investment platform.
Financial literacy was one of the driving factors that pushed Hartigan to create Marstone. The financial planning platform will further push financial literacy by helping people figure out what assets they currently have, where they’d like to go with those assets and ultimately, how they can get there.
“We are not yet convinced that everyone is ready to be investing, but we believe that almost everyone needs a platform to help them understand their financial life,” said Hartigan.
