After being “blown away” by the engineering prowess of AdvisorPeak, Addepar buys the company to equip its customers with automated rebalancing software
The 12-year-old performance reporter from Mountain View, Calif., With more than $ 3 trillion in assets under administration, buys the 18-person third-year startup to reach its 600 clients.
Addepar will soon own AdvisorPeak – the third acquisition since its launch in 2009 – to fulfill CEO Eric Poirier’s top priority, arming his company’s 600 clients and their $ 3 trillion in assets under management with automated rebalancing software. .
The deal with the three-year rebalancing software startup, made up of RedBlack and Trade Warrior alumni, isn’t quite a forced marriage.
Addepar struck a deal with AdvisorPeak earlier this year, and the chemistry between the companies became immediately apparent, according to their directors. Addepar signed a rebalancing agreement with RedBlack in 2017.
âWe integrated and AdvisorPeak became by far our biggest rebalancing integration,â Eric Poirier, CEO of Addepar, said in an interview. “It made perfect sense to become more strategic.”
The deal signed today (October 22) is expected to be concluded early next week.
Addepar, which has 545 employees, just raised $ 150 million in private equity in June for a valuation of $ 2.17 billion and wasted no time deploying capital.
Damon Deru, founder and CEO of AdvisorPeak, said the move was also strategic for his business. The initial integration deal with Addepar immediately became the company’s most rewarding collaboration, he says.
He also sees the merger as an extension of what prompted him to launch AdvisorPeak in 2018 – the quest to automate one of the least automated and time-consuming processes in financial advice.
Rebalancing software, however, has mostly failed. RIAs just aren’t using it near its optimum capacity – at least, in part, because it’s not user friendly enough.
âIt’s still one of the most underused software in the industry,â says Deru.
“There is definitely an intellectual divide around rebalancing software,” he adds.
âOnce you start to consider real-world customer scenarios, such as door-to-door trading between multiple custodians, customer trading restrictions, cash management, etc., it quickly becomes complex.
âIf you take a look at the best performing rebalancing systems on the market today, they were all born out of an advisory practice, and AdvisorPeak is no different.
I believe part of the “secret sauce” that makes AdvisorPeak resonate with the advisor community is that we’ve been in their shoes and understand the challenges they face, and we’ve built our software to. solve these back office business challenges that advise companies face, âsays Deru.
AdvisorPeak software stands out for a number of reasons, says Bard Malovany, director at Aspect Partners, a $ 1.5 billion consultancy sub-unit Almanack Investment Partners in a press release.
âAdvisorPeak has not only provided impressive business logic, superior user interface, and custom template management and trading, but their entire culture is built on exceptional service,â he said.
âWe have experienced [it] with everyone we worked with. They will be a great complement to Addepar’s customer-centric platform.
Poirier believes that AdvisorPeak’s trading and rebalancing solution is highly scalable, flexible and cloud-based and truly streamlines the process of portfolio rebalancing.
âIn addition, 75% of the AdvisorPeak team has worked in consulting in some capacity. They therefore fully understand the day-to-day challenges of growing a business and serving customers, âsaid the CEO of Addepar.
This dream of automated rebalancing in the RIA universe was carried over when once-standalone rebalancing software companies were buried in larger companies where innovation was a lower strategic priority, Deru explains.
Indeed, TD Ameritrade bought iRebal and offered it free in 2013. See: TD Ameritrade will make iRebal software available free of charge to all its RIA customers
Tamarac has become part of a larger Envestnet set. Morningstar swallowed Total Rebalance Expert in 2015. Invesco bought RedBlack in 2019.
Deru believes the wave of mergers has blocked innovation, “and that’s still how we feel,” he says. “We have more ideas than resources to implement them.”
Deru will soon be buried in Addepar as well, but with the opposite effect on innovation, he says.
Addepar’s resources and culture of innovation will enable AdvisorPeak to navigate a “long road map” of product innovation that its 18-person staff cannot advance alone, said Deru
âAdvisorPeak shares our values ââand commitment to R&D and offers us extensive experience in trading and rebalancing,â says Poirier.
âWe believe they have always been in step with and ahead of the market in developing their products as a whole. Crypto has certainly become an area of ââfocus for our clients, and AdvisorPeak’s current capabilities will continue. to be offered. “
Existing AdvisorPeak customers will still benefit from the AdvisorPeak service, but a decision has not been made as to whether the AdvisorPeak brand will continue.
Poirior says AdvisorPeak is currently being sold as an available technology integration within Addepar, “which we will continue to do.”
“However, it will be offered as an additional option under the customer’s contract with Addepar, at an additional cost.
“It is a high priority to make the transition as seamless as possible, and at this point there will be no immediate changes to contracts today. Prices, terms, support and training will remain as they are. today, “he said.
If there is an irony to the merger, it is the dissimilarity of pedigrees between the two partners in the merger. Addepar started in 2009 with the proverbial white paper, and RIA software specialists coded applications relatively backward.
AdvisorPeak has its share of alumni including Deru and Peter Giza, product manager and former RedBlack executive.
Asked about this strange match between the old and the new, the blue bloods of Silicon Valley and not, Poirier, who joined Addepar as CEO of Palantir in 2013, laughed and said the two companies matched up there. where it matters.
âWe were blown away by the depth of talent and the quality of the products,â he says. “We admire what they have built.”
Cashing out was not an option. If cashing out was the priority, Deru says he was able to wait because he had a list of suitors.
âWe had a lot of acquisition opportunities,â he says.