In Conversation With Arca's Rron Rexha: Empowering Wealth Advisors With AI

0:09 Ron, thanks for being here. >> Thanks for having me. >> So, before we get into all of this, I was reflecting on the fact that you and I have known each other for a number of years now. Prior to me working at GC and you working and building your own company, Arca, we actually work together at Plaid. So, when you first met me, did you ever imagine we'd be here, you building your own company and me as one of your early investors supporting you?

0:32 >> It's a great super fun question to start with. Um, honestly, yes and no. And I'll explain. Uh, no, as in I had no idea you'd go into VC and you'd be passionate about supporting founders. And no for me because, you know, I always had a dream and passion of building a company. I didn't know if it was going to be immediately after Plaid. But on the yes part, um, honestly, one of the interesting things about being in Plaid and meeting you there and working with you, and I've told you this story before, I'm pretty sure you don't remember, but when I started at Plaid on my second week, um, you sat down and you walked me through how the entire business works, every single economic, every single KPI, how what moves the needle for the business. And that really set me up on a great path and foundation there. And then, you know, the road map kind of followed from there. So, I knew that if I ever had the chance to work with you, I would.

1:19 >> I appreciate that. Um, before we jump into Arca and the industry at large, I want to hear more about your story. So, you came here to the US in college and, uh, I think it's a central part of how you got here and where we're going from here. So, I'd love to hear a little bit about your background and and if you actually always knew you wanted to come to the US and build a company here.

1:42 >> Yeah, for sure. Um, I was born and raised in Kosovo. It's a really small country, southeastern Europe. Um, growing up there, you know, it was always a dream to kind of be able to come to the US. It was one of those things where both myself and my family had this conviction that I could do more and if only had the opportunity, you know, great things would would potentially come. So, um, worked really hard, got really fortunate, got a scholarship to go to UPM. So, that's how I ended up here. Um, even in college, I think one of the first realizations was you really can do more here. uh whether it's you take on more school and more degrees or you go and do multiple jobs and and whatnot. And so that sort of set this early foundation about being able to take advantage of this opportunity and and create value. And so, you know, that turned into kind of working great at great companies and learning a lot and whatnot and at some point developed into this deep passion to really just go, you know, take a bet and and build something ground up. So I would say yes like sort of a lot of things interconnected that that came here and and ultimately landed into building ARCA. Um but certainly you know various milestones along the way.

2:47 >> I want to touch on some of those great companies and those milestones. So you worked at Cadre and we mentioned you worked at Plaid. Um what did you learn from those companies that you bring forward as you're building your own? >> Yeah, for sure. Um I mean Kadre was probably the perfect place to start after college. um took a bet on me as a young college kid to just go and do stuff and turns out in a startup you can just do things. Um and so I got to learn a lot about just zero to one building, you know, whether it was exposure to wealth products early or whether it was building product zero to one building my first ever team. Um all of this sort of felt like just accelerant to my early career. And I sort of knew during that time that you know company building was probably where I'd have the most fun and and the largest opportunity. I just didn't quite sort of feel ready. Um and so the plaid move was quite interesting because there the learnings were different. You know, it was a lot more of this strategic kind of product thinking at a much larger scale. Um figuring out how to optimize, you know, through organization and create this value and ultimately you know what sort of things move the needle for the business right at at that scale. And I think I mean I'm sure you have this learning too and I'd love to you know ask you the same question but being at Plaid we sort of got this like 360 view of all of fintech right because all these various fintech companies were using plaid like 8,000 or so and so you got to really learn various business models and various value propositions to consumers and businesses. And so it was a really really good learning place um to be able to kind of have both this yes building 0ero to one but building a company is a lot more than just knowing how to build product zero to one. So I think the two kind of really complement it well and and set up a good foundation to be able to build a company. Um but yeah kind of similarly with you know would love to hear your thoughts. I know you were at Plaid you sort of like got really deep into fintech as a result. Um yeah what what did you get excited about fintech and also VC particularly postplat? Yeah, I mean I think exactly what you just said. Plaid offered a great opportunity to learn both on the company building side and understanding what works well uh at scale, right? Uh and then similarly where they sat in the ecosystem powering I'm impressed you remember 8,000 uh companies then and really getting to see how impactful those companies could be for the lives of people predominantly in the US. um and essentially expanding financial access and building really sophisticated business models on top of Plaid's network. So I I thought yeah I agree learned a lot and I think as I as I've gone in the investing side gotten to see a lot of those models uh leveraging this important data. Uh so maybe talking about some of those models and an industry that's near and dear to both of our hearts which is the wealth management space. Um, I think a lot of people understand wealth management at a high level but maybe don't fully understand the specifics of the industry and maybe even more importantly like what a wealth adviser actually does. Uh, so maybe just to frame this, what is the problem that an adviser is trying to solve for their client?

5:51 >> Yeah, absolutely. Um I mean so in general right like if you think about wealth building money building what it enables right um a lot of the times you look at it as just a number or something in the bank account that you've kind of built but really it's it's more than that it's emotional it carries sacrifice it carries time and effort and hard work that enabled someone right whoever they are to be able to get to that point right and to us like we see that as a it's an opportunity it's an opportunity to have the chance they're going to have the peace of mind and the clarity and confidence that they're going to take advantage of that opportunity, right?

6:28 And and help them achieve their dreams, goals, and aspirations. And so this entire industry, why I got really excited about it is because you have these incredible people in financial advisors who genuinely care about delivering that value to their clients and helping their clients take the hard-earned thing that they've done and really kind of, you know, take advantage of the opportunity in front of them. So um I think in terms of you know maybe the simplest kind of way of what what an adviser does is it all starts with building a relationship and understanding the person the individual first and foremost right understanding do they know what they even want their money to do for them. Do they know you know what are their goals dreams aspirations? How do they want to use what they've built? um understand their family, their history, their biases, their emotions when it comes to money and what's giving them the most anxiety.

7:20 And I think that part sort of, you know, maybe got lost quite a bit in the last especially decade or so as obviously technology and everything kind of became front and center. Um and then from there, how do you build a deeply personalized plan to help you get to whatever those goals may be? Right? Like you may be thinking about, you know, am I going to be okay when I retire and be able to live the rest of my life? am I going to be able to take my kids through college or you know um other sort of you know provide for my next generation right so you want to be able to have a really really good plan that's like incredibly personalized to you and then leverage various tools and portfolios and and you know optimizations to to get you to that plan and then there's a sort of like latter part of this which also very easily gets lost which is once you've gotten to that place right like to that number or value or whatever it is that you achieve your goals what do you actually want to do with it and a lot of the people right like work so hard to get to that place and then it's hard to kind of imagine how do I actually you know how do I want to spend my money so a good adviser actually also guides you through that and a lot of people sometimes just need that psychological kind of like quote unquote permission right to be told that yes you can go buy this or yes you can go you know on this vacation or do this for your for your family because you're going to be okay right and so in in you know in short think of it like I sometimes give the analogy of like what a pilot does in a plane, right? Which is, you know, they're there to kind of keep you assured, make sure that you're feeling okay and you're going to be fine during tur, you know, any turbulence and then make sure that they'll land you at the destination that that you wanted to get to. I like that a lot and and I like the framing around the emotional element versus the quantitative because I think when people think about money exactly as you say they often times think of that number in my bank account which certainly is very important but actually it's really all of the emotions that go around those that number um and that's where an adviser steps in. So you've spent a lot of time with adviserss um and you've met I count countless numbers uh I think it's safe to say uh when you've met great adviserss what is the things that they are doing that is different from the good adviserss >> yeah great question um I think it probably comes down to a handful of values and you're right I mean I I sort of before starting the company as you know I immersed myself in this industry for well over a year and got to just meet a lot of people, got to learn, got to see what actually is this industry, what are the foundations of it and ultimately the value that gets created.

9:55 And so um along the way I met some really really awesome people and I think that's what excited my passion to kind of build in this industry and and help elevate advisors because what I saw is like really really great advisors actually do genuinely care about their clients. They make it their life's mission to make sure that somebody can achieve their goals whatever they may be. And it really starts from like we said the emotional part right trying to truly understand who you are and make sure that you know I'm going not the mo through the motions of just you know what is recommended or some sort of like vehicle to kind of invest you and whatnot. It's going through what ultimately is going to help you regardless of what you know tools and things are available out there. Um and then making sure that I'm consistently ahead of the game on your behalf, right?

10:43 like any anxiety you have, I'm there a step before you, right? Like and I'm there for you and you can lean on that. Any sort of, you know, life event or change that you're having, I'm prepared. I I will be there proactively for you, right? And I think what I learned is that the really biggest challenge is even if you're a really really great adviser and you're doing all these things that create value, there's only so many clients you can do that for. And that's I think what sort of like created the large opportunity where we saw it as hey how do you actually empower advisers to spend more of their time doing these great things um as opposed to sort of like today which you know what we can get into more detail about which is unfortunately not a lot of time to to be able to do all the things you want to do for a client.

11:26 >> There's a the point on value. So we've talked about the emotional side. you have a a data point that I think is actually very interesting and ties the emotional to the quantitative um which is folks uh often times you know against their best interests will pull money out of the market uh when things go down uh and advisers can step in there. So maybe talk about that to just show that the value of an adviser both on the emotional side as well as actually helping you generate higher returns not by beating the markets but by solving that um personal relationship with money.

12:02 >> Absolutely. Um it's actually really funny, right? Like cuz you think about oh every given year there's all these things you can do to kind of optimize your wealth and and whatnot but really the the the eventual outcome you might have and the delta between a great outcome and not so great outcome is two three decisions you make throughout your entire lifetime and those two three decisions a lot of the time I mean we're human beings right like we we let our fears greed emotions anxiety whatever it is impact them and unfortunately a lot of the times they have really really big kind of repercussions right um actually Um so one of our uh board members and mentors Bill McNav who's the former CEO of Vanguard him and I spent a lot of time um on this research that Vanguard did called the advisor's alpha which is ultimately the value that an adviser can create and actually it's quite large um about half of it is behavioral and half of it is exactly from moments like this which is you know panic selling or some sort of like other anxiety I have or or bias I have that maybe my portfolio doesn't speak right the way that I internally kind of believe it and so I'm bound to make a mistake, right? So like having that person there kind of guide you almost like good friction point between you and and decisions that could could uh impact is is great and it's shown like right like econom or empirically that can uh provide a lot of value.

13:23 >> It's clear how advisors can be valuable. Now let's maybe talk a little bit about the market structure. Um, so the way I see it, and we've talked about this a bunch, which is you have the ultra- high net worth segment, a bunch of firms, you know, very bespoke, high-end services doing a great job for their clients. And then for folks that are just starting to build the wealth, their wealth journey, you have a lot of these robo advisors, fully digital solutions. Talk about the middle, which is where you're building, like what what are the problems they're solving? What are the solutions out there in market? And why are you focused on that segment? um as opposed to the other two which has probably gotten more attention both on the venture side as well as on the um traditional bank side.

14:05 >> Yeah, for sure. Um so the primary sort of like segment that we're focused on is what's you know in the industry known as kind of the mass affluent segment. Um over the last decade there's been one of the largest kind of growing segments. Uh which is great because more people are building more wealth and obviously this is America and it's the land of opportunity that lets you do that. Um, however, today they're sort of stuck in this middle where, like you mentioned, there's all these DIY tools that are great for people just getting started out optimizing their spending and their, you know, debt and and everything. Um, but those tools don't really satisfy the needs that they have, right? Like they have more complicated sophisticated needs. They're thinking about, you know, I may sell my business and I have to think about my kids college and I have to think about my estate, you know, for the next generation. And it's a lot more sort of like services that today unfortunately the larger banks or the ones that kind of focus primarily the ultra high section just it's not economical for them to service and thus you know they're not being serviced well. Um that's sort of like a lot of how the RA kind of you know channel got built and you know all the independent advisor movement which we really really believe in and we think is the right kind of segment long term to create value in this industry. However, um it's also really hard for the reasons we mentioned earlier to be able to provide really really good service and constantly know that this segment is going to get the absolute best most optimized advice without all the resources and the investment that I think the other two kind of like segments maybe have had more of. And we saw that as a really really big opportunity to not only make a huge impact for all these families and you know millions of people in this in this segment um but also naturally from being able to elevate a lot more of this value that advisers provide to to more >> amazing I think that's a great segue into talking about arca >> what you're building so yeah tell us what arca is and maybe frame it from the perspective of a new client coming to Arca and what the experience they will Yeah.

16:02 >> So, ARCA's vision and mission is to deliver the highest possible quality financial advice in a very proactive, personalized and efficient way. And we do this through financial advisors because we fundamentally believe it's the power of that human and emotion that that we talked about um that enables really really great outcomes. So, as a new client coming to ARCA, you get paired with a financial adviser. um that financial adviser will meet you where you are. Whether you want to meet them in person or you want to meet them virtually or you want to talk to them on the phone or just exchange emails. It it shouldn't matter. We will be there. will be able to guide you, understand what are your goals, what are the challenges, where have you had sort of like anxiety maybe on on your wealth and then be able to build a really personalized plan for you with all the sets and tools and things that enables you to achieve those goals and sort of you know continue with you throughout this journey and this journey may be 5 10 15 20 years right until the time that you know sort of like you you've achieved all the things you want to do and we want to be that first place you think of that takes you all the way there and the shoulder you can lean on to get to your goals.

17:08 >> Nice. And so you touched on a piece that's very critical to this story and we're going to talk more about which is the human element, right? A lot of fintexs have are trying to automate away the adviser or build that fully automated relationship. You have taken a very different approach. Um and you've touched on this a little bit with your thinking about kind of the emotional element. Um but yeah, talk about the decision to build an AI enabled wealth firm as opposed to a fully AI uh wealth firm that replaces the human adviser entirely.

17:41 >> Yeah, good good point. Um, so we thought long and hard about this and kind of spending a lot of time with this segment and the RA kind of channel and understanding the I feel like the the two or three kind of things that came away with is one um historically over the last you know maybe decade or so. Um I think people looked at the kind of overwhelmed burden adviser who had to you know stitch together 12 different tools and data and just to keep the lights on as as friction and you know the kind of wave of you know a lot of the fintex was let's remove the friction right and and hence remove the advisor um but in reality what happened is that friction was actually passed down to the end client >> because now the end client was in charge of their portfolio they had to figure out tax rules and optimization patients they had to think about what estate even is and how do I do that and more importantly all the anxiety was passed down to them and they didn't have somebody to kind of share you know the the value so as we looked into what is the value of an adviser and how do you empower and elevate more of the value we learned that advisers you know just generally how the industry is built and how the technology framework you know today and the stack exists unfortunately aren't able to spend a lot of their time doing these kind of things for clients that that drive this value. So um we decided that instead we were going to empower the adviser. We were going to basically build automation instead of replacing the adviser removing all this friction that the adviser has so they can fully focus on the part that um you know this particular client segment but in general on the part that we've seen has proven over and over again truly delivers value to these clients. So in in our sort of vision, our advisers should not be spending any time on sort of, you know, admin work and being able to kind of put together things in in one place to service their clients. We want our adviserss to only think about their clients all the time and think about all the various optimizations and the various kind of advice and how to even deliver that advice. And similarly, our clients to feel like we are there for them. we're going to help them and they're the only ones that matter and the only ones in the room when an adviser is is working with them.

19:53 >> That's great. So, I want to click double click on the advisor side, right? So, we've talked a lot about the clients and it's clear that you are building both for the client but also for the adviser. Um, and it's funny you used an airplane analogy because I also have a plane analogy which is I think of what you're building as building a cockpit for an adviser. um where they go in and as you mentioned as opposed to using 12 or 15 different disjointed tools they come in and they have one solution they log in and everything gets handled in that platform. Maybe not playing golf with a client but everything else. Um so talk about your first principles approach to rebuilding the advisor workflow from the ground up and maybe give some tangible examples. I've gotten to see the demo.

20:40 Um I know you've gotten a lot of feedback from your wealth team adviserss. Um so yeah talk about yeah how you decided what it looks like to rebuild this product and again you know what are some examples of how this really transformed their lives such that they can go out and serve more clients have more facetime um and and deliver a better product experience. I think it started with just immersing ourselves in various advisory firms and just understanding what are all the things that ultimately you know an adviser or the team actually around them there's you know a pretty meaningful group of people behind the adviser who actually do a lot of work as well and so we looked at it holistically and said what are the actions or or things that ultimately an adviser should be doing that create a lot of value for the client and a lot of what we touched on earlier and what are all the things that are getting in the way of that and as we looked at all the things that are getting in the way of that, we realized that they didn't need another tool.

21:38 There's actually a lot of tools in the industry and that's the problem to begin with. There's too many tools. Um, what what we realized is that we had to kind of rethink this a little bit differently. We had to sort of figure out if you were to just like forget the existing stack today. If you just take it from of the first principles of what a client needs and what a GL what an adviser needs to be able to serve as a client in the best way possible, how do you build the kind of system that enables that? And you know um that effectively ended up being us building a fully vertically integrated AI native platform where we build for actually agents and AI first because we you know just assume that 80 90% of the work will be done by the agents but then give the advisers all the visibility and all the opportunity and tools for that last sort of like 5 10% which is that client piece where the human really really matters to be able to to execute on and be able to create value. And so over time we've seen, you know, a pretty big shift in how, you know, when our when our clients come in and we capture information about them, whether it's through meetings or whether it's through various documents or or statements that they give us, like our adviserss are always a step ahead because they have this system behind them that's constantly putting together the latest most kind of opportunistic information about a client that that we know. um and also recommendations and various things that they can sort of immediately go and deliver that value to the client. Could you talk about some of those either those recommendations or some of those agentic workflows because I think a when a lot of people again think of wealth tech they think of the robo advisors that will say hey you're >> 60% equities 40% bonds maybe you should go to 8020 because of your risk profile right and like that of course >> is part of what you're building but is really a small piece um yeah so maybe talk about some of those sort of specific recommendations that the human augmented by agents provides to the clients.

23:36 >> Yeah, for sure. So, um I'll maybe give you a few examples. So, one um when our clients sort of like come in, right? And I and our AI kind of native system alongside the adviser are trying to understand what are the goals that they have, what are the challenges that they have. A lot of the recommendations come down to at its before we even talk about portfolio, right? Because we see the portfolio as a tool to help you get there. um the our agents are able to help our adviserss understand like what are the sort of you know maybe like biases or like hot buttons or or different things that this client has right that maybe they don't even themselves realize right as they're kind of speaking and a lot of the time we try to really incorporate a lot of that in our planning methodology because like we said right like the behavioral piece is incredibly important um and so that's one example right of like having the adviser having almost like a second set of eyes to capture all these little signals that make a really really big difference on the journey of that client throughout throughout time. Um or other elements like you know um a lot of the time when it goes to the more execution piece which is actually deploying you to the portfolio and opening your accounts and whatnot that's a lot of time that clients you know during that phase which is kind of the probably most anxious phase of transferring your accounts from places and money in motion and it's a new relationship you're building. It's really really important that it happens fast and it happens in a way that like is being communicated incredibly well along the way. So we've built a lot of agents that help with you know taking care of things like opening accounts and optimizing for the right account split and how should portfolio be deployed across those accounts. So that way not only we're removing a lot of sort of inefficiency from what the advisers have to do but we're also delivering much better client experience during this time that we know is sort of like high anxiety through the process. So I want to hear about specific example of when an adviser logs into the platform. What are the benefits that they're capturing from agents uh working on their behalf?

25:33 >> Yeah, for sure. So for example, let's say an adviser logs into the platform and you know they know that in 20 minutes they have a meeting with a client. What the agent has done throughout this time is it's gone through the entire history of the relationship with that client. any new kind of interaction we've had with that client, whether it's from email, whether they were working with somebody else on the support staff, um any decisions we've made on their portfolio or their plan and changes we've made and whatnot, and any new information they've given us. And so all of that gets summarized and prepared for the adviser in a way that they can very quickly up to speed get up to speed in the sort of like relationship that they're about to go enter and discuss about. But more than that like here's opportunity errors that we see optimizations and again these are these are provided to the advisers and ultimately you know they are the ones delivering and they will decide what's kind of most important but we want them to have all this information the tip of their fingers with every conversation both from a kind of more personal emotional element of what's important to make sure that the client you know is has this peace of mind that that you know we're taking care of their their money but also um just more tactically what what's needed right and then once that meeting, you know, has ended, our agents like immediately sort of like go get to work on all the other stuff that needs to happen. Things from, you know, updating the state of the world of what is now the latest after this conversation, various things that we have decided on the meeting that we're going to do, even suggestions on little things that they picked up that maybe would be a good additional touch, right?

27:01 Like we talked about or or maybe would be an optimization to think about maybe 3 months from now, right? because they mentioned that eventually they're going to I don't know maybe like sell their house or change their job and whatnot. So all of this kind of like second brain is is constantly being being updated and then go in and and doing work things like opening accounts right for for trading or suggesting optimizations on the portfolio etc. So that way the advisers have this complete kind of like unified journey and and system around them that's helping them make sure they're delivering the best possible work for every client. The other thing I like that you're building is in addition to all of the sort of pre and post meeting workflows, you're actually building this platform where an adviser can log in and just see all of the highest value things that they can can be doing right now. It's like a task list on steroids. Uh, and it's something I think we all would want in our daily lives, but it's really only enabled because every single thing they do occurs on this single platform. Um and so I think that's something that again can only be done because you have that full visibility across advisor's work.

28:08 >> Exactly. That was our thesis from day one, right? Like unify all the data layer, unify all the application layer that gives your agents the biggest opportunity and autonomy to be able to not only have the latest information in the world, but also be able to execute and do things and go from point A to point C to point Z, right, across the entire platform. And that way as they're kind of learning who the client is, how does the adviser operate, what are the things that create value, what are the outcomes we're generating, they're able to now suggest things, right? That otherwise, I mean, again, advisers would certainly be able to do, but it'd be very very difficult to do all the time for every single client at scale, right?

28:49 Like if you ask I mean this has been my conversation with adviserss are always like the most fun and and fascinating because you truly do understand and see that like they really care about doing great work and if you ask any adviser like if you just had one client what are all the things that you would do for them and it'd be like 20 things like all the time but in reality where you don't have just one client unfortunately you know you can maybe only do two or three and we're trying to break that paradigm right that it enables you to do everything you could possibly do about the client despite the fact that you know you have a lot more clients to kind of take care of and that's how you scale your impact as well.

29:24 >> I love that framement. I love that. Like if you only had one client, it's if you asked an adviser this, it's clear there are so many things they would do. But of course, I mean apart from certain types of clients, most of the these advisers don't just have one client. Um and so can AI really unlock that mass personalization at scale? >> Yeah. And like we say, like our vision is to make each client feel like they're the adviser's only client while at the same time that adviser can scale their impact to three, four times more clients that they ever could. You know, obviously I'd ask you the same question.

29:54 I'd be curious your investor perspective on the trade-offs between building an AI native kind of services business versus an AI enabled software first business. >> Yeah. And I definitely think there are pros and cons to both sides, but I think what attracts me to the AI services approach is the opportunity you have to create a truly differentiated product. So by owning that full stack of the relationship um in this case the wealth management relationship with a client uh both the technology and the human delivery you really are able to give them a fully rethought of solution from the ground up um around their wealth advisory around their wealth relationship. And so I think what that allows you to do is both give a improved product experience uh as well as capture more of the economics uh and build that really really durable relationship that becomes difficult to replace. Um that being said, I don't think it's easy as I as you know well uh and the you know really you need to marry the technology with the change management uh as you're going into working with you know seasoned entrepreneurs in different industries. And so I think it has a bigger upside um but also carries greater risks um and potentially you know lower scalability as you could deploy the software to tens of thousands of advisers um which is much harder in this model. So again I think pros and cons to both but when I think of where you could build the very very large business that can have the level of impact that I know you want to have on this um ecosystem and frankly on the society at large. Uh I really think owning that client relationship full stack is what's so critical.

31:37 >> Yeah, I agree. >> So I know you have a very active Slack channel with your adviserss. Uh and I've seen screenshots of some of those uh pieces of feedback and what's fantastic is you're getting this feedback constantly. Correct. Right. Because you're building for your own team. Correct. Um can you share some of the feedback you've gotten thus far and how you know if an adviser joins ARCA today how different it feels for them than the other places they've worked where they had again the you know 15 different systems that they were bouncing between.

32:11 >> One of the kind of really critical core values that we tried to establish in the engineering team especially early on was that we're here to service two major constituents. It's our clients and is the people servicing the clients which is advisers and and everyone else. And so we've designed everything we do, everything we build, the product, the platform around making sure that these two constituents get the most amount of value as possible. And so when it came to the advisor and our internal kind of platform that advisers use, you know, again, because we're building for our own team, we can be very creative. We can put certain things in product that enable us to get this summer real-time feedback. We've built a lot of places where advisers with a click of a button can immediately tell us whether something is helpful, whether something is, you know, could could be optimized and and etc. And so, um, that's sort of like how we're able to get so much feedback constantly from from our adviserss. And a lot of it, you know, it it begins with as, you know, in the early days, right? like there's certain maybe areas or gaps or or things that that we had. But more recently, what's been fascinating to see is they've sort of really embraced the AI and the agents that that we're doing and are now working with us to help train it based on their subject matter expertise of like, you know, one, two, three decades of of work that they've done with clients. So, a lot of the feedback, you know, um more or less these days is like AI was great, but here's how we can make it even better. Here's how we can teach it. Here's how we can tune it on on certain things. And of course our engineering team is is fascinating by all of that and really really excited um as you've seen when >> I have >> you come to the office um about all the all the feedback we got. And I think when it comes to the model as well in terms of how we're building the company when you put these two great groups of people who have a shared goal and a mission um working together so closely you're bound to be very creative and you're bound to kind of go to that like next level of of value we can build. the feedback loop is just incredibly short here because again you one of your two major constituents is are your own teammates. Correct. Right. And so they're constantly giving you and I've again I've seen a lot of these uh pieces of feedback lots of emojis uh and yeah I think it's a it's an ability to ship incredibly fast incredibly uh impactful product because there is no gap. There's no account managers or user interface researchers or anything of that nature.

34:36 It's just your own team. >> Correct. Um I I want to click on one thing uh which is a book actually that you recommended well you've recommended to many many people but have recommended to me as well uh which is a book called unreasonable hospitality about the founding of 11 Madison Park which is one of the fanciest and best restaurants in New York. Um, it's an interesting book because it talks about, of course, building a restaurant, uh, and the hospitality that goes into it, but there's a lot of learnings that can be extrapolated for other industries. And clearly, it's really resonated with you. So, I'm curious, what have you picked up from that book about the restaurant industry, which I think most people would probably not directly connect to the wealth management space. Um but yeah, what what have you leveraged from that as you've begun building ARCA?

35:25 >> Yeah, absolutely. Um I read that book actually um around the week that we started the company which was very very great time to read that book. Um I think the so as you alluded to right like the the book talks about the restaurant industry the service but it's not just about what happens at a restaurant it's what does it take to be the best >> because you know will and team sort of effectively made EMP the best restaurant in the world and so uh for me that was a really really clear picture and learnings of in a service-based industry which is what we are wealth management at the end of the day is a service-based industry right like ARCA is a technology enabled service-based company. So for us um the the learnings there were how do you push the bar and ultimately create this like incredible client experiences and what does it take to be the place and the brand that everybody wants to kind of you know work with and and get help. And so from the very early days I tried to kind of instill as much as I could obviously you know we're we're still only a year into our journey and um a lot more work to do but I tried to instill these values in the team from the very early days. we have this book in the office. Um, you know, I make sure that everyone takes it and >> and hopefully reads it >> reads it hopefully. Um, and so but I I think uh kind of why this book is so important to me additionally is our first um wealth management team that we're working with that are our partners and co-workers. Now um one of the um kind of founding advisor partners there Paul um him and I met and on our first conversation we talked about two books that have sort of totally changed our mindset about how this industry should work and that is unreasonable hospitality and psychology of money by Morgan who's you know grateful is an adviser to us and has really helped us think through this entire behavioral psychology part of of wealth and so we really bonded and connected over how they at their scale and and efforts, you know, had really embraced this kind of service element of the business, like little touches, little things that go a long way. And so we got really excited together about what would that look like if you could scale it, but in a really really personalized way in a way that you could again remove all this friction and all this like inefficiency that the team spends times on today and enable them to do more of that to truly build like a really really great services company. Are there any fun examples of personalized touches that the team out in Portsouth uh leveraged across uh your time working with them?

37:59 >> Yeah, absolutely. Um I mean we you know one of the clients that kind of we work with um one of our larger clients, you know, they were um they mentioned in one of their calls that they were kind of overwhelmed. There was a lot going on with their family. they had this sort of like big, you know, family event that was happening and they were having a hard time thinking about that and also kind of working, you know, on some of the stuff that we we were working with them on when it relates to their portfolio. Um and Paul actually ended up sending them like a this like really really massive plate for like a hundred people of you know foods and goods and and all these things and sent a really not that was like hey I picked up on our conversation that you know you were stressed and and anxious about this. So hopefully this helps you know take care of of everyone there and and you know alleviates kind of the pain and of course you know they were incredibly grateful. They were incredibly excited and it's it's those little things that even makes our team be excited to kind of do more and and do better for them.

38:58 >> It's amazing. You've touched on a few of the folks that are part of this journey at Arca. So talked about Bill from Vanguard, Morgan, um Paul the first adviser to join the platform. You've assembled a very unique team, I think it's safe to say. Uh so you've got again all of those folks in conjunction with this incredible team of engineers building in New York uh from companies like Plaid, Stripe, Ripling among others. Um and so yeah, I'd love to get a sense of how do you bring all of these people together uh given their very diverse backgrounds to execute and really drive towards this important mission at Arca?

39:40 >> Yeah. Um I think I mean what you just said it really starts with the mission and vision and the value alignment at its highest. I think one of the things that this group and you know as as you know beyond this group um even people like Jason Wang from Ultruist and Peter Crawford from Schwab and others um the thing that connected us from day one is that there is a better value that you can create for clients here and everything else comes down from there, right? like if if at the highest kind of level that that mission and alignment is really really strong then um it's it's a lot easier to regardless what background you come from to be excited to kind of roll up your sleeves and and work together. I mean I don't know like in the early days of this like I didn't think that like you know our engineers would kind of like be so excited to like go up to you know our management company that we work with and spend time with there and get deep in their workflows and be in client meetings and and sort of like be part of delivering advice and then vice versa our adviserss and and everyone come to the team like talking to us about AI and what our agents can do and should do and should be doing and leaning so heavily into it. So, I think um all of those kind of more kind of maybe tactical little things all stem down from the fact that we have one shared goal and one shared vision and and and alignment on on what we're trying to achieve here.

40:55 Um and I think that's probably been my favorite part about the company building journey so far is that you know you you can bring incredible people from any background and it doesn't matter what the background is because we have a shared goal that we're working together on. you you touched on um your engineers working closely with the first advisory team in New Hampshire. Can you I I know you done a few trips up there. Yeah. Um and again, I think it to your point, it's a it is a nonobvious pairing, but then when you think of that throughine of delivering this value for clients, it actually really makes sense. But certainly very different. You know, the the first team multi-deade experience uh building their own wealth business. I mean, f fantastic entrepreneurs on their own side. Uh, and then again, this incredible uh group of engineers based in New York, you know, maybe share some lessons learned and even some specific stories of kind of merging those teams initially um as you've been scaling Arca.

41:52 >> Yeah, absolutely. Um, we from day one made sure that that bond was going to be really really close and special. Um that's why we we made deliberate efforts from us going up there and them kind of coming down multiple times as we were kind of even in the exploration phase of like what are we even building right what are the workflows in the first place um but I think every time we've gone with the team it's just been fantastic like you get to see people at the end of the day who just genuinely care they care about the clients they care about the business they care about the work that they're doing and so I think that's been and again we're we're in our own kind of tech world sometimes and you know don't kind of see the rest of the world as much as maybe we should.

42:32 And so having that being able to kind of be exposed to to that culture of, you know, care and value um and working together incredibly well. I mean the team has been together for a very long time, you know, working together. So um I think that's been really kind of special and a fascinating learning. And so on when we went up uh earlier this year when we were kind of launching a lot of our tools and and product, I just saw this like really really unique drive from the team where they wanted to make sure it was perfect and they wanted to make sure it was special. And you know, we have pictures and and recording stuff from like 6:00 a.m. in the office kind of like making sure we're ready for the next day. And >> 6 a.m. starting all night, not getting at 600.

43:16 >> No, no, no. Not sorry. awake all night for multiple nights in a row and you know um claw code building on the train and all these all these different things. But yeah, I think the the the drive and push and I think them seeing how much our engineering team here cares about and listens to what their challenges are and their ideas on how to make things better has also like really really helped in that. Um and then of course we party together so that helps too.

43:43 Um, I am think it's safe to say you are talent obsessed. Uh, and you know, you've talked about identifying these folks that are really missiondriven across all of these different backgrounds. I I'm curious how what's your approach to hiring and convincing people to join? Um, because I think this is a critical question not just for ARCA, not just for the wealth management industry, but really for all of technology businesses more broadly. Um and I think you have a very specific perspective on this.

44:14 >> Yeah, absolutely. Um so primarily when we hire, we first and foremost are looking for that mission, vision kind of alignment. It is core to everything we do. Again, I say it again, we are in the services business. Like to us, our client is incredibly important and we want to make sure that we absolutely have this um sort of like as the core thing that everybody joining us understands. Um I think from there um we really look for people who we think one day can and should be building their own companies. We think about people who are you know incredibly hardworking and motivated and you know can be creative to like get resources around them and and just do things right. Um and then lastly, incredible focus on product mindedness because as you know right like with the advent of all the various AI coding tools um the execution layer for the most part to some extent has been commoditized and so I think it's even more important than ever for people to kind of really be obsessed with who is the user what is the user trying to accomplish what is the best most optimized way for that user to accomplish that and then how does that translate into product product thinking product design all of this. So um we we tend to kind of think that you know we we keep a fairly lean team of people who in our minds play the role of both technology leader and product leader and client service leader working with with our customers directly and then you know can scale their execution via all the great kind of AI tools in front of them.

45:45 >> Makes sense. Um you touched on uh sort of commoditization at the execution layer uh and talked about being a services business a few times. So I want to touch on a very hot uh and contentious topic in the world of investing and venture today which is thinking about AI enabled software versus AI services. Um you're building this amazing technology platform which we've touched on. Um and there was there's two approaches there right one is what you were doing which is owning the endto-end stack uh working with advisers um around the country and deploying that into their systems uh and effectively bringing on these clients as your customers. Uh but the other approach would be to distribute this technology to other wealth firms around the country uh of which there are many and certainly would get a lot of value from what you're building.

46:39 Why did you take the approach that you did? Um, and yeah, how did you think about that trade-off? Because there are benefits and drawbacks to both. >> I mean, look, I do think ultimately this is incredibly large industry. Um, I do think both models are going to be successful in their own ways. Um, I think for us, there's probably two elements that really really were core as we thought about building the company and building it this way. Um, the first one was just primarily from just a business kind of durability perspective.

47:08 um to us being in the wealth industry having that direct client relationship um building the kind of muscle of I don't just understand the adviser as a customer but I understand the end client as a customer and I'm able to service them really really well was really really important because that's ultimately informs the type of software for advisors we built right because again it's it's always kind of like client first um and then as we you know kind of seen a lot of the this maybe like more software middle layer and and what's happening I do the the labs are going to continue to kind of do more and more there as as the models get better.

47:42 Um to us from a just durability perspective being yeah again having that relationship having the data that gets created as a result of it working with these firms who you know been around for 5 10 15 20 years sometimes that's all data and resources right that we can leverage to kind of build build better product and is proprietary to us. So um from a business kind of like durability perspective um we felt that that was incredibly critical um in addition to being enabling you to also build a brand right around that consumer directly as well as the adviser. The second reason was as we thought about the more kind of like mission element of the company which is at the end of the day how do you ensure that you're delivering the highest quality possible financial advice at all times. Um to me it was hard to kind of see a world where you know you can build the greatest software you can build the greatest tool but at the end of the day it comes down to what advisor is adopting this software at what scale at level are they adopting it and then do you understand the impact that is having to the end client and for us that impact the end client was was really really big and so by building an RA services company on top of this you know AI platform it essentially gives us this 360 view of the entire business it gives us a view of every single decision that gets made on a client journey ever.

48:59 And it lets us map to the outcomes it created. And it lets us take those outcomes and be like, well, which are the ones that move the biggest needle, right? Which which are the ones that were most optimized? And then how do we productize those? How do we compound on those outcomes to ultimately achieve what we want, which is the delivery of great financial advice, not just a tool to enable, you know, um, advice. So, I would say those two probably are the reasons why we decided to build a company this way. Um, but like I said, I do think both models um have value. Um, maybe flipping it the other way as an investor.

49:33 Um, your thoughts on investing in sort of like a services first AI kind of human enabled business and and maybe um pros and cons as you see. >> Yeah, and I think you're right. I think there's pros and cons to both. Um, look, I I think that if you own that full endto-end experience as you talked about uh and really can deliver value uh across that uh value chain, there's a lot that you can unlock, right? And um certainly, you know, you durability is seeming the the word dour. uh and there is a lot of execution risk and difficulty of doing some of the work you talked about of bringing the AI enabled platform into these advisory teams having them actually utilize them making sure that it really delivers a fantastic end client for your c end result for your customer but when if you are able to accomplish all of that you really do build this unique um relationship that is not just a software layer uh is something much more uh visceral, emotional as you talked about earlier which allows you to uh both distribute more products and build a more holistic offering for your customer and also uh you know from a more investment perspective reduce the likelihood of churn um by just again not not by lock in but by building that better product.

51:00 Um so but but I think it's very fair to acknowledge the drawbacks to this approach which is the scalability question. Um and so you know it certainly is faster to provide this fantastic technology to others who then actually go and capture much of the value from it. Um and so I think there is a trade-off. Uh but if you are able to bring on the fantastic adviserss uh that you've so far been able to do, if you've been if you are able to really get them to leverage this technology, you build a more comprehensive business that I think will stand the test of time.

51:38 >> Cool. >> But not easy >> as you know. I actually I want to double click on sort of this concept of the multi-product fintech uh thesis which is something that we spend a lot of time thinking about across the fintech portfolio both B TOC and B2B is this opportunity you land with a wedge product you build trust with a customer and then you have the right to cross-ell um additional products and services uh I think this is something that you definitely see in the wealth space I'm curious how you're thinking about that as you build ARCA Um what else can you deliver for your clients after you've really nailed the advisory portion?

52:17 >> Yeah, absolutely. I mean the vision of the company is to deliver any financial related service that anybody in our segment who can and should be you know or client needs and to us that goes beyond just wealth advising right like wealth advising is probably the core kind of element of somebody's entire financial picture but there's a lot of auxiliary things like tax or estate planning or insurance or other even like you know to some extent family office services that this segment you know deserves and and and needs to kind of have as a holistic kind of full picture.

52:51 So um our vision is to be able to enable that. I mean you know right like in the sort of the DIY market that we talked about like there was the advent of like the super apps where you know you could get sort of like various products in in this kind of way. I think of us and you know I I won't take credit for this one of our other investors coined this but we effectively I'd like us to become the super service for this segment. So being able to enable pretty much an holistic entire financial kind of life and value for them um through what we're doing at Arca and and our adviserss and and other kind of folks at the company.

53:25 >> And why is wealth the right wealth advisory I should say the right entry point to offering that super service because you know a customer could come in through any of those other doors um and you could have decided to start there. But why if the end result is this full collection of financial products, why wealth advisory to start with? >> Yeah. Um I think um I would say a few reasons. So back to when we were speaking earlier about the value of having somebody who truly understands your life end to end, right? Like we don't think of wealth as just like a utility that needs to be kind of completed, check the box and sort of like move on, right? For for us like wealth is or just in general for the industry the job of an adviser is to sort of like play that holistic role and picture in your financial life. And if the adviser truly understands all the various opportunities, optimizations, challenges, problems you're trying to solve, we're going to do a better job at enabling those other elements because we have this deep kind of understanding of of what that looked like and and the needs that you have. Um so to us it's always felt like building that initial relationship even in in the other I would say kind of segments right like a lot of the times if somebody's sort of like you know starting maybe with like tax or estate and whatnot most of the time if you have an adviser they're part of the picture because they are that sort of like person that you're leaning on to kind of think through your entire life holistically and we wanted to make sure that core foundation and DNA of the company was really really good before we started expanding into some of these other services >> to use an overused sports analogy they're the quarterback >> correct uh >> of your entire financial >> correct um I want to fast forward 10 years to the future and thinking about what ARCA can become uh and we talked a little bit about from a product perspective but if we zoom out and think about uh really the value that you can drive on this important mission what do you want to solve?

55:18 Yeah. So, um I think 10 I mean 10 years from now um the world is changing so quickly. A lot of things will change probably in the next 10 years. But overall um 10 years from now I would love for us to be thought of as the place where people know they're going to get the clarity and confidence to solve any financial problem that they have in in in their life. Um and we become the place that's able to prove that we can do that at a much much much higher degree of service, much greater value, much more personalized and much more efficient um holistically across every aspect of somebody's life. Um and yes, I mean early early part of the journey, but very very confident and excited to be able to do that.

56:00 >> Amazing. Uh, last question. If someone can take away just one thing from this conversation, what do you want them to take away about Arca and what you're building? >> I would say the one takeaway is that um, I fundamentally believe what we're doing is important. I fundamentally believe financial advice is really, really important. If more people had access to great financial advice, I think they'd be able to achieve a lot more with their very, very hard-earned kind of money and and sacrifice and and luck to some extent, right, along the way. And so I do think um we have an opportunity to create the kind of company that hopefully is here for decades um you know well well beyond our times and is able to do that at a really really good scale. Um and you know if uh anybody is sort of like excited about the mission that that we're doing we could take all the help we can get. So >> amazing. Thank you so much. This is awesome.