JPMorgan snaps up tax automation fintech 55ip
JPMorgan’s asset management arm has acquired 55ip, a New York-based fintech which automates tax-related processes for financial advisers.
The deal, the value of which is not disclosed, is the first under CEO Jamie Dimon’s new takeover strategy.
55ip will continue to operate as a separate entity under CEO Paul Gamble and keep its current brand, the bank says in a statement.
Vinay Nair, 55ip’s founder and executive chairman, will stay on as a “consultant and special advisor” to JPMorgan’s asset management division.
In October, the two firms unveiled a co-branded product using 55ip’s automated tax technology to transition advisors’ clients into JPMorgan model portfolios.
Five-year-old 55ip, which has chosen to be acquired over conducting its own initial public offering (IPO), will help America’s largest bank save its advisers valuable time
The fintech’s ActiveTax product includes tax-smart transitions, management, and withdrawals.
Outside of this offering, the start-up also delivers advisers ongoing tax-smart trading and tax benefit reporting for its clients.
“Advisors are increasingly seeking intelligent, automated tools to provide simplicity, scale and efficiency,” says George Gatch, JPMorgan Asset Management’s CEO.
“By acquiring 55ip, we are accelerating our significant investments in advanced advisor technology.”
Jed Laskowitz, a global head at JPMorgan’s asset management division, adds that 55ip’s combination of automation and customisation “is a differentiator”. He thinks this “will be a key driver of success”.
The tax solution opportunity
The tax management market will grow from $15.5 billion in 2019 to $27.0 billion by 2024, according to a MarketsandMarkets data.
JPMorgan values the market for both asset managers and third-party strategist models at around $3.6 trillion.
Tax automation fintech Avalara, based out of Washington, went public last year. In the first quarter of 2020, it posted $85 million in revenue – up 38 percent year-over-year.
Analysts had expected Avalara to post revenue of $79 million. The overperformance saw shares shoot up as much as 10%. With its market value surpassing $4 billion in late January, Avalara’s stock price nearly doubled in 2019 alone.
“Tax-related savings are first order. Especially in a world with lower rates, lower returns and higher taxes,” says 55ip’s founder Nair.