Flourish, a technology platform for RIAs, catapulted past $5 billion in assets under custody this month as the company is now venturing into insurance products.
Nearly all of the growth so far has come from Flourish Cash, which launched in 2018 to offer variable-rate account products with FDIC-backed deposit insurance through partner banks. Flourish grew its RIA clients by 40% to 800 the past year as depository interest rates skyrocketed. Now, the company has launched Flourish Annuities as its first step into insurance products.
Still,
"That's a learning that we did not appreciate in the beginning that we obsess about now," Lane said. "It's a lot of crawling over broken glass. … We need to make sure we go on the other side, make sure we understand deeply when we send the data across, what does it look like on the other end? So it's turning a complaint into an opportunity."
Lane sat down recently with Financial Planning to discuss Flourish's new offerings, its approach to AI and more.
This interview has been lightly edited for clarity and length.
Financial Planning: What were the factors that drove that growth in assets under custody to $5 billion?
Max Lane: I'd say there are three main drivers for the AUC growth over the past 18 to 24 months. No. 1, and probably most obvious, is interest rates.
We're at a two-decade high on interest rates right now. That certainly made savings-type solutions and cash yields far more attractive than it was for the past 10 to 15 years since the Great Recession when interest rates were pretty much zero.
The second major driver was the renewed importance of FDIC insurance. If we go back to just over a year ago … you had
So solutions like Flourish Cash really came in handy in that time of need, offering investors and savers this harbor in the storm to get this protection in an easy-to-use solution that really helped to drive growth.
The third is something that has been true regardless of interest rates since we've launched. It has been a core tenet of our solution, our company: to win on experience.
We obsess over every detail to make sure we're delivering beautiful technology and great, delightful experiences for our RIAs and their end clients. It's all very intuitive, all very quick, all very easy. And that really helps solidify the trust and credibility with the clients and RIAs.
FP: How have the needs of RIAs evolved, and what is Flourish doing to meet those changing needs?
ML: If we look at where we are today, while advisors are advising — providing holistic financial advice — they are not providing holistic implementation. And that is where we think the puck is going.
What I mean by that is an advisor may deliver this great, holistic financial plan for an end client, but when it comes to administering that plan, they're largely limited to the investment management for their client's life — the stock and bond portfolio. There aren't great advisor solutions to help with reserve savings, with various types of insurance solutions, whether it be annuities, protection, income. And all of these things in aggregate are just as important to the end client.
You're already seeing that play out as more and more RIAs are trying to
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FP: Is that one of the reasons that you launched Flourish Annuities?
ML: Yeah, exactly. It isn't just in the banking type services or insurance, but we'd say those are two broad categories where we see a lot of opportunity for advisors to add value and improve client outcomes.
Flourish Annuities is our first foray into the big world of insurance. So annuities is really sort of an interesting asset class in the sense of it could be part investment management, part protection, part income.
They have some really compelling characteristics. They offer guarantees, which stocks and bonds cannot do, they offer protection and they offer income. All of those do great things from a behavioral standpoint, in addition to dampening volatility in the portfolio.
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So that was our first step into the insurance category, and over time, we think there's more opportunity, whether it be on the protection side, the income side. But insurance and banking, I'd say those are two big categories for us as a company.
FP: Why did Flourish choose to offer annuities now?
ML: More and more RIAs are going to a fee-only or fee-based annuities structure. The insurance industry today is still heavily commission based, but the advent of fee-based structures has really opened the door for RIAs to be able to incorporate these fee-based annuities practices without completely changing their DNA.
We stood up our own insurance agency to really be the RIAs' insurance desk. RIAs don't really have an appetite to go get an insurance license to sell insurance. So we set up our own insurance agency. We will help with detailed recommendations, we'll help answer any specific questions about any products for the RIAs or the end clients.
FP: What are the next steps for Flourish? Where are you looking for other areas of growth?
ML: On Flourish Cash, while we've crossed $5 billion in assets under custody, we think that there's plenty of room to grow there. That has always been who we are as a platform. That business should continue to grow because we feel it's a great solution, and everybody has cash.
On the Flourish Annuities side, the immediate roadmap is rounding out that marketplace and platform capabilities. So, making sure we're meeting RIAs' needs through more technology and operational capabilities to handle various kinds of complex-edge cases that come with annuities. There's different ways you can own them, and we're making sure we're handling all of that.
Further out, without giving too much away, we see a ton of opportunity in the banking solutions and the insurance categories broadly.
FP: Are you experimenting with AI?
ML: One of our company core values is to win on experience. We want it to be the best service, end to end. That's part of the reason why we haven't quite implemented any AI solutions yet.
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We are technologists. We're keeping our ear to the ground to see what's out there and see how the space evolves. At some point, it will be the right time for us. But we want to make sure that technology is mature enough because this type of clientele expects a high degree of service. Human-touch service is a key part of our brand and our offering to our clients.
We can't be a solution where an RIA's high net worth client is going to have a bad chatbot experience or wait on hold for 30 minutes.
The No. 1 goal of any financial services company is to protect the wealth of your clients. We take that very, very seriously. A piece of AI technology may be incredibly exciting, but if it's not robust enough, not mature enough, we're not going to implement it until we feel it's ready for prime time.
FP: What have been the lessons learned along the way while growing Flourish?
ML: I've got a lot of learnings, but one of the things we didn't do so great in the beginning, and it's a really important one, is especially taking to heart that your product and your experience — every interaction your RIA has with anything to do with you — you're responsible for it.
And I say that because in the beginning days, we did not appreciate or invest enough in how something as simple as our data feeds, how they show up in a third-party system. There's the Envestnets, the Orions and Black Diamonds that play this really important role in workflow. Flourish is a piece of that, where we pipe in an advisor's end-client data into one of those systems. And I'd say for too long, we did not obsess about understanding what that workflow looks like [on the back end]. And then we'd get support calls of "Hey, your data's not piping through the right way on XYZ."
And many times it wasn't our fault. The data was going there, but we weren't looking there to make sure it was showing the right way, to make sure we understood how many steps it took for an advisor to turn on that configuration.
That's a learning that we did not appreciate in the beginning that we obsess about now. Every piece of it is our product, and we're responsible for delivering a delightful experience at every point of that, of every interaction there.
FP: How do you now know you have fixed the data back-end issue? What did you do to ensure the RIA clients are satisfied?
ML: To steal a phrase that is not mine but I love: It's a lot of crawling over broken glass.
I wish there was a shortcut, but there's not.
We need to make sure we go on the other side, make sure we understand deeply when we send the data across, what does it look like on the other end? So it's kind of turning a complaint into an opportunity.
Sometimes it is on our end. Sometimes it's chasing a partner on the other side. It's just being really dogged to want to deliver a great experience for our clients, and saying, "What can we do? How can we work together to deliver a better experience for our mutual client?" Because we each benefit if we're able to make this better for our mutual client.
It's no silver bullet. It's just being aware of it, being sensitive to it. And having a high degree of empathy for our advisors that when they come into work in the morning and log in to their systems, they just want it to work. That's really what they want.
