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Hi all, Julie here.

When I was at Bloomberg, I wasn’t allowed to invest in stocks (outside of my 401K), let alone private companies or cryptocurrencies. I also didn’t have equity in Bloomberg. In other words, my financial life was pretty simple and low risk.

Like many things from the pre pandemic era, that’s a very different picture than what it looks like today. Many of you also have equity in the startups you work at (or founded), and/or you own crypto of some sort, and/or you angel invest.

Even though our financial pictures have gotten more complicated, there hasn’t really been much done to help us manage and get a true sense of how we’re doing. It’s still all about family offices, which aren’t super accessible and are addressing a different type of person to begin with. Family offices provide a number of private wealth management services to one or a small number of ultra-high-net-worth families. Besides financial services, family offices also offer planning, charitable giving advice, tax planning and more. You’re probably going to need millions of dollars in investable assets to qualify, and they still probably aren’t going to be the best option for you. The 2020 family office report from UBS, for instance, is 39 pages and doesn’t mention private company equity or crypto once.

Enter Harness Wealth, an idea incubated at Bain Capital Ventures and the topic of our next deep dive. Reminder, we get paid for these, but I also say no to a lot of them that I don’t believe are worth my readers’ time. A number of you have actually started trying out Harness Wealth recently, so it’s obviously something you guys are interested in and worth our time. Let’s dive in!

The Backstory and the Problem

I think it’s great that so many people in my generation have decided to take more of a risk and work for private companies, especially startups. Sometimes as one of the first employees, or even start one of their own.

Unfortunately, there hasn’t been nearly enough focus on helping these people manage their wealth, or even understand it to begin with. You likely have no idea how much the options in the new startup you just started working at will be worth, what the tax implications will be, what happens if you hate it and leave after 1-2 years, etc. Good luck getting a worthwhile answer from HR, which is probably just going to refer you to someone else or give you a PDF that doesn’t make much sense regardless.

Harness’ founders experienced these issues first hand. Founded by David Snider and Katie Prentke English, the goal of Harness largely started out as helping tech employees who could one day have large liquidity events. It goes so far beyond just understanding what stock options are actually worth. You have to think about taxes, estate planning and more. Snider has previously worked at Compass as COO/CFO, and English at Nutmeg as CMO.

What Harness Does

As I mentioned earlier, traditional firms are going to have strict requirements in order to take you on as a client. Similar offerings from Fidelity, for instance, require $2M managed through Fidelity Wealth Services or Fidelity Strategic Disciplines and $10M or more in total investable assets. There’s no talk of crypto here yet, but I’d expect this to change fairly soon.

There aren’t many requirements to sign up for Harness. No asset minimum, no fee to use the platform, and it’s pretty simple to get started. Harness is then paid by firms on its platform for referrals (think Credit Karma and credit cards or loans). Typically, clients can expect a fee of 1% or less for the first $1M, with fees tending to go down as assets increase. Clients can find everything from financial planning to tax planning to estate planning document creation for a flat fee of $650-$5,000 per service.

Harness not only pairs individuals up with independent registered investment advisors, it helps customers connect with a team of pros that they might also need such as a tax advisor or estate attorney. Harness then collects part of the fee that advisers on the platform charge for their services. This means it is free for the user to sign up, and Harness only makes money if you decide to work with the advisors on a longer term basis since there’s no upfront fee (you also get a refund for your first year of advisor fees if you are unsatisfied with the advice you received). The firm also counts several members of our community as users, as well as employees of Facebook, Google, Coinbase, Stripe, and several VCs. As Snider tells it:

“We are building a comprehensive financial platform for people that are generating wealth, and with it financial complexity, through equity based compensation. Our software provides tools around equity and liquidity tax scenario planning. Those insights plug into recommendations of value-add services powered by over 1,000 of the best advisers in the country.”

While TurboTax and Credit Karma’s tax products work really well for a lot of people, many of us have situations that simply get too complicated to handle on our own. This is why tax planning has been the most popular product on Harness to date. Much like the aforementioned online platforms, a lot of this is done online (like communicating with your CPA, managing documents, and taking care of billing). There are then several options to choose from depending on your situation. Here’s what I was recommended when I filled out the questionnaire.

The Market Landscape

There’s no question that a growing number of us are in the same boat when it comes to finances getting more complicated. Given the boom in our industry and the rapid embrace of new technologies, like crypto and NFTs, I don’t see that changing anytime soon either. When it comes to managing our wealth, this also feels like an area where, at least for now, people want more than an app or algorithm telling them what decisions to make. Sure, I want to be able to utilize the efficient tools that we’ve come to embrace from digital platforms, but I also love the human element and having an expert reassure me that I’m not messing things up and am making good decisions for my future. This is part of the reason I really liked Harness Wealth’s offering as I was learning more about it. Yes, it does a lot of things online, but it also connects you with real experts that have helped dozens of others in similar financial scenarios. The impact of this is particularly significant when one of the companies you own equity in goes public, when Yellen is discussing taxing unrealized capital gains, and when the tax code is quickly playing catchup to crypto.

Competitors

Harness isn’t the only company attempting to develop this space. Others that might be considered competitors would be Personal Capital, Mint, and Copilot, though Harness appears to be the one most geared towards the type of individual reading my newsletter. Personal Capital is probably the closest of these, with dedicated advisors and access to specialists in real estate, stock options, and a tax optimization offering. Mint is much more geared to folks that don’t work for private companies and need more help with basic personal finances. Copilot is in a similar bucket to Mint, with budgeting and spending trackers and no expert-advising element.

Somewhat unexpectedly, taxes have been one of the biggest draws for Harness. Thanks to IPOs, SPACs, crypto and more, Snider told me that clients are finding that tax planning is among their biggest concerns. This is also an area where the competitors we mentioned don’t have as strong of offerings. The team sees a big gap to fill when it comes to digital assets as well:

“Those creating wealth through digital assets is another area of focus. There are ways to add crypto assets and there are advisors on our platform that help people that have gone through a lot of the nuances of conversions of tokens to digital assets to real monetization.”

Future of the Space

To me, it seems like there is innovation to be done for both those with complicated financial lives as well as those that are a bit more black and white. However, I think that the more complicated side is the one with more room to run. As Snider told me when we were chatting, Gen X and older millennials have been making more money and have more complexity, so they have been looking for more solutions. DIY doesn’t cut it, but it also hasn’t really made sense to go to a family office.

Not just because young people are more entrepreneurial these days, either working for startups or becoming creators themselves, but because I don’t think a ton of innovation has been done here yet. The first waves of fintech were much more focused on the millennial generation and the underserved, neither of which had that complicated of financial lives five years ago.

From crypto to investment planning to tax management, there’s a big gap to fill in terms of advice. The other thing that I find interesting about Harness is that it is much more outcome-oriented as opposed to investment product oriented. This also doesn’t mean that I’m about to give up my Betterment account. I love being able to use them for my 401K and other savings products. But Betterment doesn’t currently offer the ability to help me manage any of my equity in private companies or my crypto holdings.

I think that over the next five years, we’ll continue to see the financial lives of individuals only get more and more complicated, so I think that this is truly a space to keep an eye on. As an early entrant into the space, Harness has a leg up on its rivals and other incumbents and with super bright founders, it’s my belief that they’ll be a household name in the years to come.

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Julie VerHage-Greenberg is the co-founder of Fintech Today, where she focuses on editorial content and brand. Prior to joining, she was Bloomberg’s first fintech reporter, covering Robinhood from before it was a billion dollar company, breaking the news that Plaid was acquiring Quovo, and interviewing executives on Bloomberg TV and at several large conferences.