When fintech startup Track Technologies pitched its tax management software to financial advisors at the first-ever Ladenburg Innovation Symposium last year, its CEO didn't know it would end up landing an investment from Ladenburg Thalmann Financial Services two months later.
"The senior leadership at Ladenburg made sure to spend time with my team at that event," said Track's CEO, Trent Bigelow. "They made sure to ask advisors to stress test; [to] kick start what we were working on."
Now Ladenburg is rolling out Track’s platform, which automates tax withholding and filing for independent contractors, freelancers and other self-employed workers, to its more than 4,000 financial advisors for use with their own businesses. “We recognized the potential benefits of the company’s solutions and helped Track develop its technology through our direct investment and collaboration,” noted Dan Sachar, head of the Ladenburg Innovation Lab.
At this stage, Ladenburg's advisors will test out the tool for their own business' payroll and filing needs. In its standard form, the software detects when an individual is paid, helps determine what to set aside for taxes and reminds customers when it's time to submit tax withholdings to the IRS. But later this year, Track aims to roll out the technology with added features specifically designed to service Ladenburg investors' self-employed clients.
"There are new features that we're rolling out that allow advisors to essentially engage and retain and monitor the big financial decisions of their clients using our tool," Bigelow said. "Track is connected to the client's bank account so that we can predict which income requires tax withholding," he said. "We're also able to say, 'It looks like this client could afford to contribute $50 to their retirement account.'"
Investment recommendations for self-employed workers can be tied to any kind of savings goal or roll over into retirement account products, Bigelow said. "Income stability is dynamic to every worker and is not nearly as fixed or usual or stable as your average employed client," he added. "The focus has been on how do we make this tool good enough that you as an advisor can rely on this."
Workers that earn income through freelance, contract, temporary employment or business ownership are more likely than traditionally employed workers to have over $250,000 in retirement savings, according to a 2019 study by T. Rowe Price. There were roughly 57 million self-employed workers in 2018, according to Track, citing data from Upwork and the Freelancers Union. Ladenburg wasn't able to provide information on the share of its advisors' clients who are candidates to use Track's technology at launch.
Advisor Nina O’Neal, who was at last year’s symposium and has been providing feedback on Track’s software as a beta user, said she views the product as a useful resource for her self-employed clients to manage cash flow. "Often freelancers or gig workers don't really know how much money they're going to make," she said. "In just a year, I've really seen the development of that company [Track] be shaped by the advisor feedback,” she said.
Track’s journey from symposium presenter to Ladenburg investee and partner is an example of the tech-focused development cycle that the Ladenburg Innovation Lab set out to achieve when it formed in January 2018. At launch, Ladenburg’s CEO Adam Malamed said he hoped the new innovation initiative would help the firm to “anticipate, identify, test and implement the technologies, solutions and practices that will define the next era of retail financial advice.”
Each year, the Miami, Florida-based financial services company has invited fintech startups to present at its invitation-only Innovation Symposium in front of advisors from its five subsidiary independent advisory and brokerage firms, Securities America, Triad Advisors, KMS Financial Services, Investacorp and Securities Service Network. The event’s format allows Ladenburg to gather advisor feedback on fintech products that could inform a future investment.
For this year’s symposium, Ladenburg doubled the number of financial advisors at the event, growing from 36 to 75 attendees. Advisors voted on pitches from startups like Genivity, Rize Money, Peanut Butter and Newday Impact. The firm says it's eyeing strategic equity investments for solutions that can be customized for rollout to all Ladenburg financial advisors.