Caesar Sengupta, Co-Founder & CEO of Arta Finance — Enabling access to the ‘financial superpowers of the rich’

In today’s episode, Kailee Costello sits down with Caesar Sengupta, Co-Founder and CEO of Arta Finance. Caesar founded Arta, a digital family office, after working as a VP & GM at Google.

“We’re taking some of the facilities and products that family offices create, whether it’s to invest your money, to help you preserve it, to help you protect it, or to help you grow it, and we are using machine learning and AI and other technologies to make them available to many more people.”

Arta Finance is a digital family office. Arta offers proprietary AI-Managed Portfolios, and gives customers access to alternative asset investments such as private equity and real estate. Arta raised $90M at the end of 2022.

In this episode, Kailee and Caesar discuss:

• Arta’s mission and the segment of the market that Arta serves

“When we looked at people who were further ahead in their careers, like the founders of Google, you would see them setting up these institutions called family offices. It seemed that as soon as they got these family offices, they started to develop these ‘financial superpowers’ and we would hear about how they got incredible assets … so we started asking ourselves the question, ‘how do we get a little bit of that?’

As we started doing more research into this space, we realized this actually is a massive problem. This audience, who we call ‘rising professionals’ have started in their career, haven’t quite made it yet, but know that they’re going to make it. For that audience there aren’t many good services. So we’re taking some of these facilities and products that family offices create, whether it’s to invest your money, to help you preserve it, to help you protect it, or to help you grow it, and we are using machine learning and AI and other technologies to make them available to many more people. We’re creating a digital family office.

The first product we have is AI-managed portfolios — we manage your entire public markets portfolio based on your risk levels, and will appropriately not only invest and manage it, but also keep it rebalanced and reallocated using fairly sophisticated quantitative algorithms and machine learning. The second part is, typically, once people have got the public market portfolio sorted, they start thinking about, ‘Where can I get more growth for my money?’ A large area of growth over the last few decades has been in the private markets. Typically, these are private equity funds, venture capital funds, or hedge funds that the ultra-wealthy have access to, but the regular person just can’t access. So, we’re also helping our members get access to those. You can put money into top-tier private equity firms, who will then deploy it into the private market, and help you get better returns over the long run. This leads into many other interesting products, the ‘financial superpowers’ of the rich, where you can get products that give you investment characteristics, give you protection through insurance, and package it all together into a very interesting outcome that helps you find the right long term view of your life. Finally, where we actually really start differentiating ourselves from everybody else comes in in terms of learning — we’re trying to create an experience on Arta where you can learn from others”

• How Arta’s technology differs from other robo advice and AI/ML personal finance products

“Let me talk about how the evolution of automated investments has happened. Historically, there was a 60/40 portfolio — if somebody went to a financial advisor, they would be given a 60/40 portfolio and they would sit on that for the rest of their lives. About 10 years back, robo advisors appeared (e.g., Wealthfront, Betterment), and all they did was as the market changed, they kept rebalancing your portfolio back to 60/40, or whatever percentage allocation you had started with. It’s smart and helps you do better than a standard 60/40 portfolio, especially when markets are changing quite a bit.

What we do is we use a set of quantitative algorithms and machine learning over large amounts of market data, company data, and risk data to do one additional thing on top of this: we actually keep changing allocations based on how the market is doing. So if the market at a certain point in time is really growing fast, we will shift you into a more aggressive allocation. Obviously, we do daily rebalancing, like robo advisors, that’s super easy … but what we ended up doing is now optimizing your portfolio for that particular time in market so that you’re best positioned. Of course, we have this based on the users’ risk level and their preferences, taking their personalization factors into account. For example, a lot of early users are people from tech, so initially, we set up to diversify away from tech so that it protects them better. Over time, we will add more and more ability to personalize this based on, for example, where you work, where you live, and whether you are a big believer in ESG goals or not. So, you can essentially get access to almost what feels like a real financial adviser, but running with deep quantitative data, and at much, much lower cost.”

• How Arta provides trust and transparency for users

“We are a registered investment advisor in the US — that’s a well-regulated entity and we are fairly tightly scoped in terms of how we can offer products … on top of that, I think one of the things we’ve been very clear about from the start is, Arta is all about trust because our users’ trust, in the long run, is what is going to really help us grow this business as well as create a product and service that works very well in this in this space. And in this general space, financial investing, trust with institutions is relatively low — so it becomes a hugely differentiating factor to be able to focus so deeply on trust.

Generally in the space of finance, there hasn’t been a lot of transparency and clarity, especially when it comes to investments. Like ‘why are you making these investments?’, and ‘how do they work for me?’ I think that’s two things. One is a digital platform — technology makes it a lot easier to be transparent. And second, from our perspective, we’re building this product for ourselves and for people like us, and a key aspect of that is being transparent with ourselves and with everyone else about ‘what’s happening’, ‘what are the finances’, ‘how are they doing?’, ‘what are the fees?’

We’re very transparent on fees. One of the things we do which aligns incentives is we offer performance-based pricing. We let the user choose — if a member wants to pay just AUM-based fees, as is traditional in the market, they can do that. Or if they say, ‘I don’t want just AUM-based fees, because that doesn’t align our incentives — you still get paid if my portfolio doesn’t do well’ — they can choose a performance-based option, and choose to pay us only when the portfolio performs for you. So that also is a great way that we’ve set up to align our incentives very tightly with our users. And then of course, the basics, like being very transparent with how much you’re going to charge upfront and educating users about the fees and actual performance.”

• Caesar’s transition from being a leader at a large tech company to founding a startup, and his advice for anyone looking to start a FinTech

“In many ways, there are lots of similarities. Google was really a very deep technology company and we’ve tried to bring that heritage to Arta. The vast majority of our team is very rooted in not just technology from a technology perspective, but even deep financial research and quantitative research. Mathematics, whether it comes from technology or from finance, is a core part of what we do as a company — we’re very data-driven, and certainly, we’ve tried to retain that particular aspect. In terms of difference. Google’s a company which has several billion users at this point, and the needs and growth, and challenges are very different from where we are as a startup, especially where we are in a very new industry, or a new opportunity in a very large industry. So I think from a startup perspective, the mission here is extremely exciting for many people and for all of our teams, and that keeps us very highly motivated.

In terms of where it’s different: You’ve got to be a lot more prudent with what you’re doing with your resources, and you have to be a lot clearer than then we had to be at Google. In a way, a big part of being a startup is actually the freedom to be able to experiment, to be able to try different things to see what works with our users, what resonates, being able to very quickly change stuff around, which often becomes more complicated if you’re at a much larger company with, many, many layers of approvals and checks and things like that.”

• Arta’s acquisition of Money Minx in November 2022

“Money Minx have built a very interesting technology to give users in the US and parts of Europe access to a unified dashboard of all of their finances. Most of us have spreadsheets today, and we collect our financial life from different sources and different places where we have our money onto our spreadsheet, and we like to update it once every few months.

With Money Minx, everything’s connected to these institutions directly, and then it creates one consolidated unified dashboard for use. It’s super interesting for getting users that visibility and transparency that we were talking about. The Money Minx team of Hussein and Jessica who founded it, the husband-and-wife team, are excellent entrepreneurs and great technologists. So, it was both a fit for us in terms of the company and what they were doing as well as in terms of the team. We’re going to slowly integrate those features into the Arta product suite over the course of this year, so that not only can users be able to put their money into AI-managed funds, or private investments or use insurance, but they can also get a complete view of their finances for wherever their money sits.”

• Trends impacting the personal finance sector

“A very big trend in the sector is the use of technology, particularly AI and machine learning. It’s actually quite surprising how little machine learning has really penetrated the financial sector. There are these quant hedge funds that have tons of math and physics PhDs and business school PhDs who work there, but typically, they’re very, very inaccessible — only the super ultra-wealthy, if you know someone, can get to put their money into one of these very exclusive hedge funds. On the other hand, what we’re trying to do now is take machine learning, combine many of those techniques, and make it available to many people. So I think we will see many more models like this, where people take research as well as techniques that have existed in the industry for a while and then apply machine learning and AI to see if they can democratize it. I think a second big trend we see in the space is a desire from users for greater transparency and better pricing. When markets are doing well, nobody asks about these things, and they don’t ask ‘how’s your portfolio doing?’ because you’re rising up with the entire wave. But as markets become more volatile, and we’ve been in a period of volatility and will be for a while, people start asking questions of ‘how is my portfolio doing versus the benchmark?’, and ‘What are the alternatives that I could have for the same pot of money?’ I think that that desire for measurability will also be a trend over the years.”

• Challenges and learnings from Caesar’s experience leading Google Pay

“Google Pay was really interesting because, in two aspects, Google Pay was really about changing user behavior. People have needed to pay for things for thousands of years. But, depending on which market you were in, we had to change people’s behavior to go from a very standard format that they’ve been using to using their phones today. Let me give you the example of India, for example. When we started Google Pay in 2017–2018, India was primarily a cash economy, 97–98% of stuff used to happen in cash, you just couldn’t survive without cash. If you go to India today, it’d be very hard to pay with cash, pretty much all payments are happening via your phone. They have a system called UPI, which the government developed, and more payment apps are being built on top of that, it’s sort of like a supercharged ACH for mobile. And today, you know, between Google Pay and PhonePe, those are the two big players on top of UPI, pretty much all payments are happening phone-to-phone. We had to work on really helping users understand that this was a better change — rather than handing over pieces of paper, or dead trees, you could actually do this on your phone, and they had to feel comfortable about the security and about attaching their bank accounts.

They had to build that habit, and they had to help others get going with that habit. So, there were a number of things we did in Google Pay that help people help other people. This is the referral program where every time you brought on another friend as a user, both of you would earn something. What we interestingly found was a lot of young people would go around the cities helping slightly older people. And we created a number of systems on top of that, so hat people understand that not only can you use it for peer-to-peer payments, but you can pay a small business, or you can pay your bills, or you can pay your taxes, all using the same product. So, Google Pay was really about changing habits.

Similarly, in the US and other markets, it is about tapping with your phone, and this can be much more secure as you don’t have to give your card over to someone. We teach those behaviors to people in many ways. So that was a big part of learning. I think Arta for example, is a very different type of product where we’re not changing behavior, we’re actually helping people with a completely new way of doing things.”

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About Arta Finance

Arta Finance is the digital family office for the world. Arta is using technology to unlock the “financial superpowers” of the ultra-wealthy.

Arta’s members are able to:

• Access alternative investments like private equity, venture capital, private debt, and real-estate funds
• Create their own personalized investing game plan: Arta’s proprietary AI-Managed Portfolios (AMPs) enable members to create highly personalized, automated portfolios using stocks, bonds, options, and leverage
• Get liquidity without selling stock: Access a line of credit against assets
• Get savvier together: ‘Arta Pulse’ verified and private spaces are where members can discover new financial opportunities, benchmark themselves and learn from what their peers are doing
• Align interests with performance-based fees

About Caesar Sengupta

Caesar Sengupta has a passion for using technology to bring access. In his last role at Google as VP & GM of Payments & the Next Billion Users initiative, he led Google Pay, which went from 0 to 175M+ users in ~5 years. He also built other hit products like Files and Camera Go, and he helped start and led the development of Chromebooks. Caesar previously worked as an engineer at Encentuate (acq. IBM) and HP Labs.

He holds fifteen patents in Operating Systems Design and Expert Finding Systems and earned an MBA from the Wharton School and an MS in Computer Science from Stanford University.

About the Author

Kailee Costello is a first-year MBA Candidate at The Wharton School, where she is part of the Wharton FinTech Podcast team. She’s most passionate about how FinTech is breaking down barriers to make financial products and services more accessible — particularly in the personal finance space. Don’t hesitate to reach out with questions, comments, feedback, and opportunities at kaileec@wharton.upenn.edu.

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