Former Schwab CEO Promotes Fund Screening Tool to Protect Advisors
David Pottruck, the former Charles Schwab CEO and Hightower Advisors investor, is putting his money behind a fund search tool that aims to help brokers meet compliance demands when recommending investments.
Pottruck, a marketing executive who steered Schwab into online investing, said he has become a significant investor in Magnifi, a search platform meant to help advisors, portfolio managers and Ma-and-Pa investors compare and act on investment options.
Though Magnfi is free to use, professionals can pay a monthly subscription fee that enables preservation of document searches. That is a vital component for complying with the Securities and Exchange Commission’s Regulation Best Interest that took effect on June 30, according to Magnifi.
“An important part of every advisor’s business now is that they have more and more responsibility for regulatory compliance documentation,” said Pottruck, who is Magnifi’s executive co-chairman. “Advisors may be pushed to recommend low cost, but what this allows you to do is document any recommendation.”
A final pricing schedule for the premium subscription aimed at advisors is still being determined, he said. The firm’s revenue model also includes payments from asset managers who will sponsor investment keyword searches that show their ads.
Magnifi will initially be aimed at independent brokers and advisors who make mutual and exchange-traded fund recommendations to clients with about $1 million to $5 million to invest, according to Pottruck. It will be a tougher sell to wirehouses and other large retail firms that would have to integrate it into existing technology platforms, but he is hoping that retail demand may drive search engine sales.
“When we get this on some of the big retail platforms, and customers can use this for free to look at what they want, we will be doing tens of thousands of searches a day,” said Pottruck.
Magnifi was developed by The Tifin Group, a financial technology firm founded by Vinay Nair, a former hedge fund portfolio manager who calls himself a “serial entrepreneur.”
The search platform last month said it hired Richard Hurwitz, former CEO of electronic invoicing firm Tungsten, as its CEO. Former mutual fund distribution expert Jeremy May, who was president of ALPS Fund Services, is Magnifi’s chief operating officer.
Other backers of the search platform are Gary Kaminsky, a former Neuberger Berman portfolio manager, CNBC anchor and Morgan Stanley Wealth vice chairman, and Tricia Rothschild, former chief product officer at Morningstar.
A Magnifi spokeswoman declined to break out specific details of their and Pottruck’s ownership stakes.
Pottruck, a former college wrestling star who was fired by Schwab in 2004 after more than 20 years with the firm, said he remains a “very large” shareholder in Hightower despite stepping down as its chairman in 2018 when it was recapitalized by private equity firm Thomas H. Lee Partners.
“Hightower continues to blossom, and blossom beautifully,” Pottruck said.