Tech spotlight: iCapital's plans to plug alternative investments in portfolios globally

There are countless tech providers in wealth management, and the numbers keep rising as technology rapidly evolves, largely thanks to AI. 

IT spending globally is expected to grow 8% in 2024, a jump from 4% last year, according to S&P Global. Part of that growth is fueled by a stronger market and a drive to be ahead of market trends. 

One advisor fintech platform for alternative investments, iCapital, has been on a rapid product expansion this year, some of which is backed by AI. The New York-based global fintech on May 23 released a new distributed ledger technology (DLT) with UBS Wealth Management as the first distributor to use the technology. The same month, the company launched a new model portfolio called iCapital Multi-Asset Portfolio (iMAP) to help advisors more easily integrate alternative investments with traditional market portfolios.

"It's giving advisors an easier way to not only understand how these fit in the world, but allocate to them, and do it at scale," said Jason Broder, managing director and chief product officer at iCapital, about iMAP.  

This tech vendor profile is among a series of mini profiles that give vendor spotlights to help advisors make informed decisions about the technologies they select. 

Name: iCapital

Website: www.iCapital.com

Year founded: 2013

Size of iCapital: The wealth management fintech has more than $191 billion in platform assets and 102,000 financial professional users. 

Products and services offered: iCapital is a wealth management platform specifically for global alternative investments. It uses cloud-based technology and AI tools to offer several key functions: the iCapital Architect, which the firm calls its "real-time scratchpad" for advisors to build alternative investments and structured investments in their portfolios; the iMap tool meant to help advisors in analyzing such investments; and its distributed ledger technology that's meant to securely and seamlessly handle alts transactions. 

With the distributed ledger technology, "there's never the need to start emailing PDFs or spreadsheets back and forth," Broder said. "Instead, everything is shared and consumed via API. And that's where we think the market is going."

Who iCapital aims to serve: Advisors, wealth management firms, fund managers, wirehouses and private banks specific to portfolio management of high net worth clients. iCapital has a handful of big-name custodians including Ameritrade, BNY Mellon's Pershing, Charles Schwab and Fidelity.  

What kind of problems iCapital is trying to solve: While alternative investments are becoming more popular, Broder said iCapital wants to create a faster, more seamless way for advisors to understand alts and how they can fit into the traditional investment portfolio mix. 

"The traditional 60-40 portfolio is usually public market securities, but we think there's a big place for alternative investments to come into those portfolios as the market evolves," he said. 

Alternative investment products generated more than half of the global revenue in 2023 despite representing less than a quarter of the $120 trillion assets under management, according to a BCG report released in May 2024. 

However, there are risks to any new investment, like alternatives, including difficulty in navigating the correct tax reporting and forms filing. 

READ MORE: Alternative investments can come with tax friction, unpleasant surprises

How iCapital is different from competitors: iCapital takes a holistic approach in wanting to offer all-things alternative investments, rather than some vendors who have a very refined product offering or service. 

To be clear, there's no universal right or wrong way. Wealth management firms need to first decide what they're trying to solve for when embarking on a new tech venture, and what's needed to solve that problem.

In the case with iCapital, Broder said the fintech prefers to be a universal services provider in the alternative investments global marketplace. 

"Many of the other alternative companies out here focus on one part of the life cycle or one part of the platform, the tech, the infrastructure," he said. "We really focus on everything, which is why we can have a very holistic operating system for our clients."

What it costs: Pricing is not clearly defined on iCapital's website, which is often the case with larger fintech providers that have different services. It requires a sign-in to take a demo. When asked about pricing and whether it's based on a subscription model, user count or usage in the cloud, Broder said: "It's all of the above. We offer a lot of different products and services. So depending on what you use and how you use it, the pricing varies."

What's next/new development: Broder said the new Architect and iMaps are a part of a "three-legged stool" with the third leg coming out in the coming months: the ability to streamline those functions in one model, at scale. 

"It's giving advisors an easier way to not only understand how these fit in the world but allocate to them, and do it at scale," he said. "It's the three-legged stool that I think will be the game changer."