Selling a suite of online and mobile services for wealth managers and individual investors, Starburst Labs, a new New York-based startup has landed $6.25 million in its first institutional round of financing.
A relatively new entrant into the market, Starburst Labs began working on its first product in 2013 and is targeting the independent wealth managers and armchair investors that account for a still-sizable portion of the investment management community.
The company’s first product is a customer relationship management system, Wealthbox CRM, which is already integrated with the eMoney Advisor tools sold by industry giant Fidelity to its 40,000 advisor customers.
With the new money coming in, Starburst Labs hopes to launch a new set of tools that will expand its appeal to a broader group of would-be stock market mavens.
These new products include a consumer-facing investment community and advisory site called InvestorSay; the already-in-beta PaperTrade.io, which is targeted at the media business and sells a virtual-trading platform for competitive, simulated stock market moves; and finally Wealthbase, which will function as a kind of Quora for consumers to ask financial management questions to qualified wealth advisors via third-party media sites.
The promise of this product suite was enough to attract Bel45 Capital Partners, itself a wealth manager for a private family office.
For Starburst Labs’ chief executive John Rourke, building customer relationship management tools is nothing new. The serial entrepreneur previously build Bantam Live CRM, which he sold to Constant Contact back in 2011.
“Because there were legacy products with legacy designs and legacy managers, there was an open field situation in financial services,” Rourke says
One reason why there may not be a ton of new entrants in the market could be because the number of financial services professionals has been declining in recent years.
A 2015 report from Reuters noted that the industry had been in a steady slump since 2013.
There were roughly 285,000 financial advisers in 2014, a 1.9 percent drop from 2013, according to a report by the Boston-based research group Cerulli Associates. The industry has lost more than 39,000 advisers, roughly 12 percent, since its peak in 2008, when there were 325,000 advisers.
The decrease held steady from 2013, when adviser headcount also fell by 1.9 percent, but researchers say retirement will continue to hurt the industry.
Nearly half of all financial advisers are over the age of 55. Over the next decade, Cerulli expects nearly 100,000 brokers will retire.
With that kind of attrition, it’d be reasonable to expect that investors and entrepreneurs would be disinclined to launch new products, but Rourke sees more than the ghost of an opportunity in the new machine-driven investment era.
“The real juice in the robo-advice space is a collaboration with human advisors,” says Rourke. “Getting human advisors to use robo-advisory tools to better their practice.”
That’s the long game that Starburst Labs wants to play. Getting investors into the money management funnel and ensuring that they can use all of the tools at their disposal.
We’ll see if this is a game that ultimately only the robots will win.