For nearly 20 years, Ray Denis created custom loans for family offices and other clients at JPMorgan Chase, Deutsche Bank, Raymond James, and then Bank of America. If they needed cash, Denis and his teams helped them borrow against high-value art, private planes, rare cars, structured products, hedge fund interests and more.
As exciting as that might sound, bespoke loans don’t necessarily have a juicy underwriting process. In fact, this type of lending is a tedious pain. It can take an unconscionable amount of emailing just for private bankers to collect the account and cash flow statements, balance sheets, appraisals, PDFs, Excel spreadsheets and anything else needed to construct a loan. Then, the bankers have to manually transfer the data from those documents into their own models to earnestly begin evaluating the terms of a loan or whether they should offer one at all.
Denis, his colleagues, and their clients were regularly frustrated by that process. Borrowers often have relationships with multiple banks and will shop around for the most favorable loan, forcing them to manage half a dozen or more cumbrous inbox conversations. When a borrower needs another loan, the process starts all over again.
“You'd be surprised at how little improvement there's been in the last 20 years on that front. Some banks are doing a decent job of rolling out new technologies to help their clients aggregate data; that's definitely happening. But you're not necessarily, on the underwriting side, getting access to all that same data as cohesively as you need it. It becomes very fragmented very quickly because banks aren't great at technology, by and large. They want to be, but most of them aren't,” Denis said.
As a result, family offices tend to view banks as places to park their capital and get loans while relying on other service providers for reporting and document organization (if they are doing that at all). The lending process won’t meaningfully improve until that bifurcation is resolved, which is what Denis has set out to do.
In 2023, Denis left Bank of America to start Sandbox Wealth, a cash management, credit and analytics platform for family offices and wealth management firms. In addition to managing their own balance sheets, he says it could dramatically collapse the time it takes for loans to be approved, lead to better terms for borrowers, and help banks grow their lending businesses.
Last month, the startup announced that it raised a $1.25 million pre-seed round of funding led by NextGen Venture Partners (other investors included Northwestern Mutual Future Ventures, gener8tor, and RevTech Labs), and it expects to launch the platform early this year.
Sandbox will offer its own deposit accounts, a multi-currency payment network, and a credit card, but users will also be able to manage accounts at other institutions within the startup’s platform.
This is the latest example of a software company doing more than just aggregating financial information in one place. Many tech companies in the wealth management industry aim to simultaneously save professionals time while capturing a greater share of the hours they spend on specific tasks. In September, Addepar, the popular reporting software used by many family offices, added trading and rebalancing capabilities to its platform. Other companies have built tools or acquired businesses with the same goal.
Denis doesn’t view software companies focused on investment management as competitors. He says that Sandbox’s banking solutions complement other software.
Sandbox also offers benefits that other companies lack. The startup’s bank network will also have access (if given permission) to a would-be borrower’s deposit and other account information, cutting down on the back-and-forth during loan underwriting. According to Denis, the process of getting to know a client, which might have taken weeks or even months, could be much shorter. Making the market more competitive for those loans could also mean better terms for borrowers.
Bank enthusiasm for Sandbox might not feel intuitive. Why would they participate in a network where clients can more easily request bids for a loan and drive better terms? Meanwhile, family offices might be worried about the impact on their relationships with certain bankers. If you have a go-to woman at Citi for periodic loans against your René Magritte collection and you suddenly call a banker at Goldman Sachs, is that a stab in the back?
Denis says that isn’t the case. Multiple private banks that Sandbox is in talks with are eager to make lending more efficient for both themselves and borrowers so they can spend more time on other things, he added. Family offices often already have relationships with many banks, in part to shop around for the best opportunities.
“I think there's a way for both sides to win here. Banks want to save time, energy and capital by having transparency in some of the data that we're providing. And clients want access to cheaper, faster loans. Ultimately there's a way for Sandbox to operate as that intermediary,” Denis said.
Michael Perez, a managing director at F2 Strategy, a consulting firm for wealth managers, works with family offices to improve their technology. Most of the offices seek his advice on overall improvement, cybersecurity and ways to better manage and track their alternative investments.
But inevitably, Perez said family offices often wind up griping about their cash management and lending solutions. He said the prospect of something like Sandbox improving those things will entice family offices. “The single source of truth, the golden source of records, this is what we're all trying to achieve and get one picture…I think this platform is trying to address that,” Perez said.
In theory, engaging many different banks to find the best loan is a good idea. However, in practice, a family office could be spreading its resources too thin, according to Perez. But if Sandbox can make that easier, then family offices, especially smaller ones, will be intrigued.
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