“I wanted Alto to do for IRA investing what TurboTax did for self-filing,” he said. “So we created an investing platform and we created relationships with investors and issuers that are raising money—deal sponsors, funds, companies and investment platforms.”
Satz and his team have created connections to 30 investment partners, allowing investors to open accounts and transact with its IRAs directly from many of its partners' platforms.
Both accredited and non-accredited investors on the Alto IRA platform can tap into a host of alternative assets from a variety of platforms including AngelList, Masterworks, Republic, Wefunder, AcreTrader, Bioverge, Carofin, DiversyFund, EquityZen, JamestownInvest, Cadence, InvestX and Royalty Exchange.
In turn, these partners get access to vast sums of wealth residing in retirement accounts.
And Alto says it has become the preferred IRA provider for cryptocurrency firms such as Coinbase, Bitwise, Greyscale, Skybridge and Osprey Funds. An integration with Coinbase offers users direct access to more than 40 cryptocurrency tokens.
Growing Market
Recent moves by market regulators to relax barriers to accessing alternatives have helped buoy the Alto IRA concept.
Currently, only 2% to 5% of retirement assets are invested in alternatives of any kind, which Satz said puts retirement investors at a disadvantage to institutions like pensions and endowments that typically have 25% to 50% of their portfolios in alternatives. He noted that ultra-high-net-worth households typically dedicate 10% to 25% of their assets to alternatives.
Satz said he identified three reasons for the low penetration rate of alternative assets in retirement accounts: People don’t know they can do it; the complexity and time requirements involved; and costs.
Satz noted the scales in the U.S. economy have tipped dramatically toward private markets, as the number of publicly traded companies has declined from nearly 9,000 to fewer than 4,000. And companies are trending toward remaining private for longer time periods, leading to initial public offerings at astronomical valuations by the time retail investors are able to trade them.
It made sense to start with alternatives in IRAs, Fung said, because IRAs have grown to encompass a larger portion of U.S. wealth than workplace retirement accounts. She says there is now around $12 trillion in IRAs versus $8 trillion in 401(k)s. (Annuities and various defined benefit and contribution plans comprise the remaining U.S. retirement account assets.)
Alto believes IRAs will continue to grow at a faster pace than other retirement accounts due to the rise of the gig economy and the tendency for today’s workers to remain in jobs for shorter time periods.
Most of the demand for alternative and crypto IRAs comes from the RIA channel, said Lauren Strasburg, Alto’s head of intermediary sales. The company initially saw high demand among advisors for its Alternative IRA, but in recent months that demand has shifted toward its Crypto IRA.
“Advisors are seeing us a way to maintain or grow AUM,” Fung said. “Many of their clients are already investing in these assets. If they knew their financial advisor could support these assets in a retirement account, they would potentially keep more assets with the advisor or bring more assets into the relationship.”
Alto’s competitors include Murray, Ky.-based Kingdom Trust, which last year introduced its Choice IRA capable of holding any alternative asset. Other crypto-friendly IRAs include BitIRA, a Bitcoin-oriented IRA; Bitcoin IRA, which supports a number of tokens; and IRA Financial Trust, another flat-fee IRA provider.
Satz hopes that Alto’s user-friendly platform that accelerates access to alternatives and digital tokens will help it stand apart.
“I only have one vision with Alto, and that’s Alto and alternatives everywhere providing IRAs as a service, no matter what platform you’re working from,” he said.