Building TurboTax for Private Funds
Tim Flannery, co-founder of Passthrough, on building TurboTax for private fund investing
The bottleneck is not finding demand, it is turning messy private fund paperwork into something a custodian can process at scale. In an alternative IRA flow, the custodian has to review eligibility, gather and execute subscription documents, run KYC and AML checks, move money correctly, and then keep servicing the position with tax forms, valuations, and investor reporting. That workload is exactly why specialized operators emerged between big custodians and private funds.
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Passthrough describes the core pain at the front of the workflow. A private fund subscription can involve 100 to 200 questions, multiple rounds of corrections, and coordination across lawyers, compliance teams, admins, and investors. That makes each alternative IRA investment feel less like a brokerage trade and more like a custom case file.
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The pain does not stop after the investment closes. iCapital built a business around taking over feeder fund administration, including onboarding, KYC and AML, allocations, tax forms, NAV reporting, document delivery, and exception handling. Former product leaders describe post trade servicing as the biggest burden because every investor position creates its own reporting and reconciliation work.
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Big incumbents participate where the product is more standardized and economically worth the operational load. Schwab offers self directed IRAs broadly, but its alternative investment program is limited to funds distributed through Schwab. Alto markets itself around handling the paperwork for self directed IRA alternative deals, including collecting issuer documents and executing subscription documents for advisors and clients.
The market is heading toward infrastructure that hides this complexity behind software, data standards, and specialist service layers. That favors companies that can own the workflow between fund, custodian, advisor, admin, and tax provider. As private wealth allocates more retirement dollars into alts, the winners will be the platforms that make these investments look operationally closer to buying a fund than closing a bespoke legal transaction.