Mike Paulus: Our goal is to be transformative from a technology perspective.

Addepar means to be the only technology platform RIAs will ever need -- and has MIT minds and PayPal money to back it up

The Silicon Valley fast-riser already won over Mark Zuckerberg's advisor and aims to serve the complex, high-end advisory offices

June 11, 2012 — 3:16 AM UTC by Kelly O'Mara


Brooke’s Note: Most of us think of the old guard in RIA technology consisting of Advent, Schwab and Morningstar. The newer guard have names like Orion, Black Diamond, Tamarac and IAS. But there is also a new, new guard and recently we wrote about Market76 as one example. But perhaps nothing has that next-big-thing aura — with its dream admixture of money, pedigree, holy birthplace and self-assuredness — as Addepar. Is it really all that great? It might be — if not now, eventually.

Addepar’s mission statement, laid out on its website, is relatively straightforward: “We are poised to revolutionize the wealth management industry by creating a new standard for financial technology.“See: Addepar hits $50 billion of assets and turns its eyes to Advent-Black Diamond’s plump RIA market.

Planning to revolutionize the financial advisor industry is not new. But with 65 employees, extensive backing from venture capitalists such as Peter Thiel and David Blumberg, and demos that have wowed all the advisors who’ve seen them, Addepar LLC might actually do just that. One high profile believer is Iconiq, the newly formed RIA serving Mark Zuckerberg and other Facebook execs. See: How the Facebook IPO is creating the mother of all RIAs, Iconiq, and what an in-your-face it is for Wall Street.

“It’s a cloud solution that has multilevel data on mobile devices and offers on-demand access to anything and everything,” says Bill Winterberg, principal of Dallas-based FPPad.com.

Mike Paulus, 24, president of Addepar, confirms some of the flashier aspects of the software system his firm has developed, which aims to be all the technology an advisor needs rolled into one platform. If you wanted to see all your assets in any way connected to Google from any custodian and how they’ve performed over the past six months and you want to see it in multiple currencies, you can do that yourself with the press of a button, says Paulus. There’s no need for an advisor to have someone else run the reports over a couple of days.

The system also has the functionality to analyze hedge fund data and generate automatic alerts when there are irregularities or numbers statistically don’t make sense. In theory, Bernie Madoff would never get away with his scam if his clients’ advisors used Addepar.

“We’re an ambitious company. Our goal is to be transformative from a technology perspective,” says Paulus.

A slice of team Addepar shows the company has no absence of youth.
A slice of team Addepar shows
the company has no absence of

But, for all its Silicon Valley credentials, Addepar could easily go the way of other high-profile entrants into the financial technology platform field, such as Kinexsys Corp. and Intuit Inc., if it can’t connect with advisors on the ground.

A computer-human triumph

Addepar was founded by Jason Mirra, one of Forbes’ 30 Under 30, and Joe Lonsdale, who worked with Thiel at PayPal Inc. and later as an early executive at Clarium Capital Management LLC, which famously shrank from a high of more than $7 billion in assets to less than $1 billion in the last few years.

Lonsdale, though, left Clarium (in 2004) before it plunged to found Palantir Technologies LLC, a data software company that develops mission analysis systems used for criminal profiling by military organizations, the CIA and the FBI and makes government calculations in the Troubled Asset Relief Program. Palantir Finance, an offshoot, was used by JPMorgan Chase & Co. to fight fraud. Mirra also worked at Palantir, which, Paulus says, was in some ways a forerunner to Addepar in its data collection and focus on human-technology interactions. But the roots of Addepar go back to Paypal.

In the beginning

In Paypal’s early days when Lonsdale was hired, the company was losing nearly $10,000 per month because of fraud. Criminal rings would take payments through the online system and then never ship the promised items. Paypal, in turn, would be on the hook for that money. A computerized system to detect the fraud was effective only briefly before the criminals would adapt. But, a human is nearly always able to tell when internet fraud is happening — you are rarely duped by the e-mail scams from purported Nigerian princes. The key was to build a computerized system that assisted people in being able to affirm fraud that they had detected themselves.

“The goal of the computer system was to assist humans,” says Paulus.

Zack Reynolds studied math at MIT and is now in charge of return metrics at Addepar.
Zack Reynolds studied math at MIT
and is now in charge of
return metrics at Addepar.

It worked and set the stage for Lonsdale’s later companies.

Two years ago, Paulus, Lonsdale and some other Silicon Valley entrepreneurs were looking to invest their money, but were unable to find the computer system they wanted to assist them in their investing their portfolio. Not only did they want all the aggregated data and reporting for a complex foundation-style investment platform, but they also wanted to be able to analyze the risks of their investments.

“A lot of the things we saw in the space look like they were made in the ’80s,” says Paulus. Many advisors are using PDFs as reports or Excel to gather their data, neither of which is really functional. So, Lonsdale built Addepar. “We really built it for ourselves.”

A cut in pay

Paulus, Lonsdale, and a handful of the other early employees are investors in Addepar, along with a number of venture capitalists.

The key, they decided, was to hire top-level engineers out of MIT, Stanford and UC Berkeley. Many of the engineers would otherwise be working at Silicon Valley technology companies such as Google or Facebook, says Paulus. But, most of them were willing to accept about 30% less in pay than they would get elsewhere because they believe in Addepar and get equity shares in exchange. The company now has 65 employees, nearly all of whom are engineers.

“We’re fundamentally trying to bring world-class engineering to wealth management,” says Paulus. “We want to give someone the sophisticated tools.”

Just one needed

James Carney: Addepar is a spreadsheet on steroids.
James Carney: Addepar is a spreadsheet
on steroids.

But the first six months at Addepar made it clear just how hard it was to achieve the kind of data collection they were looking for, that is, aggregating and analyzing any asset from any custodian, he says. While the focus of the system is design, a simple user interface and a platform to analyze the metrics, it all relies first and foremost on data aggregation and reconciliation.

While Addepar is a client of ByAllAccounts, according to the latter’s president, James Carney, it is also working directly with custodians, says Paulus, to improve the data coming in.

“Everyone who has access can get data, but what they do with it is different,” Carney says. “Addepar is a spreadsheet on steroids.”

Instead of using other technology companies to supply customer relationship management, rebalancing or portfolio management software, Paulus says, Addepar has “no significant partnerships,” but aims to be “an end-to-end system” and the only software an advisor needs.

“We want to be best at everything,” he says. Clients are welcome to integrate another specific technology system if they want, but “99% of the total data flows through our pipes.” See: ByAllAccounts doubled advisory assets aggregated to $400 billion in 2011.

5 basis points

And, for the price they’re charging, it should be the only software a client needs.

The cost for Addepar clients is reportedly 5 basis points — significantly higher than other tech platforms But, says Paulus, it really includes everything upfront on Day One. Other software companies, he says, will charge additional fees for archive retrieval or data storage or installation. There are no installation costs for Addepar, no additional fees down the road. The price includes a client portal, hosting, all historical data, a designer to work with the advisor and 24-hour customer support.

“What you’re getting is everything,” he says. “When you look at it like that, we’re pretty competitive with what’s out there.”

It must be worth it for some people. While Paulus won’t comment specifically on clients, the company has about two dozen firms on its platform: large RIAs, family offices and institutional investors. Prominent RIA Iconiq, which serves Facebook executives, is a known early beta tester for Addepar and currently a client. See: How the Facebook IPO is creating the mother of all RIAs, Iconiq, and what an in-your-face it is for Wall Street. But, contrary to rumors, Paulus says, “all our clients pay for our tools.”

The focus, so far, Paulus says, has been on the complex, high-end advisory offices that can take advantage of and are willing to pay for all the analysis tools, mobile applications and cloud-based reporting that Addepar offers. The company also focused on early investors that would be interested in using the product and testing it out. So far, all Addepar’s clients have come through referrals, since the company has no salespeople or marketing.


“Our early clients are very large and very complex,” Paulus says. He does add, though, that in the next few years, the company may move somewhat downmarket and offer the product to more mid-level RIAs.

“Addepar is not going to hold fast to any particular asset level,” says Winterberg. It will focus more, he says, on clients with a similar vision and needs, who may be dissatisfied with Schwab PortfolioCenter or Advent. See: Schwab PortfolioCenter may be poised to shed its utilitarian image.

Though Addepar executives won’t comment on revenues, Paulus says, “you’d be surprised” at how much the company is making, despite the investment in offices, research, and extensive staff. With offices in Silicon Valley, New York and a new one in London, talks are also under way with investors in the Middle East to branch out into those markets. The startup has officially opened its doors.

“We no longer consider ourselves in beta,” says Paulus.

Remember Intuit? Or Kinexsys?

Reed Colley: If you can't figure out how to leapfrog your technology, someone else is going to do it.
Reed Colley: If you can’t figure
out how to leapfrog your technology,
someone else is going to do

Of course, Addepar could fail. The company is very much in a Silicon Valley mold, without a firm foothold in what advisors need on a day-to-day basis, say some critics. Other splashy and well-funded software platforms like Intuit and have been unveiled and quickly disappeared when they failed to perform up to the needs of advisors or draw clients.

“This space is littered with failed deployments,” Paulus acknowledges, but that is why the company’s founders spent two years developing the product and avoiding press while they worked behind the scenes. This is the first press interview Addepar has done.

“They have to make sure it’s useful and successful,” says Reed Colley, founder of Black Diamond Performance Technologies, a unit of Advent and likely one of Addepar’s biggest competitors in providing software to RIAs.

Orion Advisor Services, LLC and Black Diamond, says Winterberg, have given advisors a number of cutting-edge tech options and will be watching Addepar closely in the coming months. Orion, he says, is doing “great stuff” with mobile video and Black Diamond’s Blue Sky, introduced two years ago, allows advisors to create better reports. The company also has launched a mobile app. “Every vendor is watching this market and every vendor wants to provide the best options to advisors,” Winterberg says. See: Black Diamond releases BlueSky Mobile for the iPad.

“There’s clearly a need in the market,” he says, for more up-to-date software, and portfolio management and reporting systems. As Addepar becomes fully public, more advisors will become aware of the technologies available to them, which will force other software systems to up their game. “I think that benefits everyone,” Winterberg says.

Addepar wouldn’t necessarily, then, have an advantage in an industry that is already very competitive.

“If you can’t figure out how to leapfrog your technology, someone else is going to do it,” says Colley. “Five years from now, whatever we’re using today everyone’s going to laugh at.”

Mentioned in this article:

Black Diamond (An independent business group of Advent)
Outsourcer, Portfolio Management System, Trading/Rebalancing, Performance Reporting
Top Executive: Dave Welling (SVP & GM, Black Diamond)

Consulting Firm
Top Executive: Bill Winterberg

Portfolio Management System, Performance Reporting, Alternative Investments
Top Executive: Eric Poirier

Share your thoughts and opinions with the author or other readers.


Stephen Winks said:

November 26, 2012 — 8:03 PM UTC

It is the absence of money and vision which gripple innovation. There are so many areas in which the brokerage industry is deficient in support of advisory services, that new blood and resources are required to advance innovation essential for an inviolable professional standard for advisory services. Much work is required to advance the technology of continuous comprehensive counsel required for fiduciary standing in ther client’s best interest.

There is an inverse correlation between performance reporting and portfolio analytics to the creation of an asset/liability study. Thus Addepar is in very rich technological space, but to advance a complete thought that supports fiduciary standing and expert advice it needs to translate its work into user friendly deliverables managed by advisors: asset/liability study, investment policy, poerfolio construction, monitoring ansd management which support and authenticate expert continuous comprehensive counsel.

It may take an entirely new set of eyes to create large scale institutionalized support for fiduciary counsel as it presently an act of insubordination with in a brokerage format to work counter to the broker/dealers best interest and principal defense against fiduciary liability—which simply denies that brokers do not render advice. With no acknowledgement or support for fiduciary standing, the brokerage industry cripples the ability of its brokers to add value in meaningful ways for the client as that would be pertsonalized advice which triggers fiduciary liability. Thus working outside the context of a broker/dealer Addepar has unique latitude to innovate in ways not possible for a brokerage constituency.

Addepar may be the next generation of innovation made possible by its technological development being focused on the consumer’s best interest, not the industry’s, thus uniquely no impediment to innovation.



Rick said:

November 26, 2012 — 7:11 PM UTC

I have a lot of respect for what Addepar is doing, however am concerned with how much money they are burning.

Anyone who is interested in Addepar’s success should look at QuantAdvisor, who is serving the same market, on a smaller budget with a more focused objective.


WWP said:

July 19, 2012 — 4:07 PM UTC

Hope it does something to help the family office. Black diamond is clearly not the answer and not sure what else is out there.


Peter Giza said:

June 22, 2012 — 3:55 AM UTC


Thank you for the plug:) We believe that what we provide here at RedBlack is something that is in the best interests of investing public.; the Advisor; and custodian. The combination of RedBlack with a quality book of records and reporting engine, enables our clients to save $100K, even $200K per year in OPEX. More importantly we enable there firms to think, act and execute in ways they formerly were not able to accomplish. This has resulted in 30-60 basis points for the advisor’s clients. The aforementioned are not mere claims contrived through “what-if” scenarios. There are case-studies behind them proving that portfolio accounting and rebalancing and trading technologies are at the core of a scalable business.

Kind regards,



Stephen Winks said:

June 19, 2012 — 8:33 PM UTC

Thanks Pete for the RedBlack update.

Your subaccounting, trade and order routing capability is indeed core technology that makes omnibus block trades possible which along with the selling of order flow mades a zero or negative trading cost environment possible for RIAs which is an important fiduciary duty if one is going to act in the consumer’s best interest.

Most brokers are not aware there is an option where they charge a fee for their advice and their client’s do not incur any trade execution cost in the best interest of the client.

Consumers are surprised trading can be achieved for free when discount brokers like Schwab charge $10/ per trade. This is an inherint advantage of RIAs, not to mention a far superior level of continuous comprehensive counsel in the client’s best interest, where the advisor is both accountable and responsible for their recommendations.

Every RIA should be aware of your and other sub accounting, trade and order routing systems essential to act in the consumer’s best interest.

Red Black should be a consideration of every RIA especially in how it fits into their reporting technology—but keep in mind this is an ancillary plumbing issue that only indirectly affects the depth and breadth of counsel provided which requires an authenticated expert prudent process (asset/liability study, investment policy, portfolio construction, monitoring and management) which is the driver of expert advisory services.



Stephen Winks said:

June 19, 2012 — 3:37 PM UTC


I just got to your earlier e-mail.

The point is simplification which requires an authenticated comprehensive expert solution, as incremental sub-solutions introduce a level of complexity not easily understood or managed by under resourced individual advisors, and in some cases even the firms that support advisors find limited laditude to execute because of poor decisions made a decade or more ago.

Thus, the very high probability of an exponential increase in the level of counsel which advisors are enabled to execute.

We are operating in a busines environment today which will not be recognizable a decade from now.



Peter Giza said:

June 19, 2012 — 1:56 PM UTC


As I stated five posts back there is a proposal prepared that speaks to your working group comment above as well as some other key points. It does not speak to the fiduciary requirements that you have outlined in detail. It would be great to get your input and bring more depth to proposal. If you are interested feel free to reach out as directed in the post. If we are going to push the industry for collaboration then we need to start here.




Stephen Winks said:

June 18, 2012 — 6:54 PM UTC


I have approached every major custodian, wirehouse and major independent broker/dealer on supporting continuous comprehensive counsel which makes advice safe, scalable, easy to execute and manage and their hands are tied. One major wirehouse agreed with everything I advanced as the economic incentives are terrific (higher earnings, margins, 3x the multible, significant increase in advisor productivity and lower cost structure) but it required a champion to advance clearily disruptive innovation—as you will just get more of what you got, if you keep on doing what you are doing.

The industry desperately needs vision, courage and leadership. Who every can execute that formula in the clients best interest will reorder the industry and empower the advisor to deliver an unprecedented level of investment and administrative counsel.

It used to be that this was the purpose of public policy. Instead, we have FINRA which has condoned the brokerage industry not being responsible or accountable for their recommendations completely absolving the industry from having any concern for the professional standing of the broker or having to modernize in the best interest of the consumer.

Reason does not work, even when you can prove the economic case for innovation.

This may require a group of individual advisors who are driven to do the right thing, to create an new faster, better, chaeper business model that delivers a far superior value proposition at a lower cost to the consumer which better compensates the advisor. The brokerage and custody businesses will not voluntatily adapt as disruptive innovation stresses an outdated commission brokerage business model that neither renders advice nor has the infrastructure in place to delineate the tangible quantifiable value it adds.



Stephen Winks said:

June 18, 2012 — 6:29 PM UTC

JP Morgan,

The point is, inorder to simplify advisory services without the denigration of fiduciary fiduciary duty, by definition, a single multi-disciplinary platform is necessary and easily achieved. The challenges to innovation correctly cited here, require us to accept that certain elements of the industry, such as account administration, as we know it today have become obsolete and require a different approach. Rather than each and every product having a totally different approach to account administration which is expensive, impossible to reconcile and affords no transparency necessary for continuous comprehensive counsel required for fiduciary standing—innovation is required to advance modernity.

Our largest and most capable private trust banks have resolved the provision of continuous comprehensive counsel required for fiduciary standing by adandoning expensive packaged products and adopting the purchase of real time buy/sell research of managers they manage through overlay manager technology (either outsourced or proprietary) which electronically and expertly manages an unprecidented degree of portfolio detail in real time for an unlimited number of unique descrete client portfolios. This resolves the questions of (1) trade execution cost being managed as a cost center, not a profit center, required for fiduciary standing, (2) eliminates investment minimums bringing fiduciary standing within the reach of literally everyone, (3) facilitates expert management of an unlimited number of investment and administrative values on a continuous comprehensive basis, transcending the limitations of human comprehension, (4) is achieved at a fraction of the cost of commission sales with a far superior level of counsel, (5) is literally in the client’s best interest and it authenticated by statute, case law and regulatory opinion letters, confirmed by an overarching expert opinion letter and (6) achieves numerous other issues that require modern thinking.

This modern approach to portfolio construction, is clearily in the consumers best interest, unlike commission sales which is neither accountable nor has ongoing responsibility for recommendations.

What makes one platform essential is everything is built around an authenticated expert prudent process (asset/liability study, investment policy, portfolio construction, monitoring and management)and associated work flow management which is tied to a properly resourced functional division of labor (Advisor, CAO, CIO) which makes advice safe, scalable, easy to execute and manage as a high margin business at the advisor level offered at a lower cost than a packaged product. This is literally one comprehensive platform which manages multi-dimensional complexity necessary for simplicity. One well know private equity firm committed $50 million to build this out but onhighly unfavorable terms. So, there is market confirmation to support modernity in the consumer’s best interest. Custodians and brokerage firms want no part of modernity as it stresses their outdated business models. Several hundred advisors with a half billion or more love it because it supports the best interest of the advisor and their clients.

None of this is possible at the brokerage or custody format—because it has been culturally prohibited for 70 years, there is no practical experience in execution, and a general fear of professionally managing fiduciary liability. In stead the industry is spending 10% to 15% of gross revenues assuring the broker is not rendering advice and has no ongoing responsibility for their recommendations.

Importantly, compliance for fiduciary standing is inherint in the process so the half billion cost of the advisor SRO is mitigated by expert documentation and a far less intrusive process.

Thus don’t think small complex incremental solutions, simplicity is only achieved by a comprehensive solution.




Peter Giza said:

June 16, 2012 — 12:25 PM UTC


It is a proposal that I wrote and put it out for review to a few industry friends and then sent it out to the custodial as well as a couple of consulting and media people. It i something that has been collecting together in my head for better part of three years. The kernel for the concept came out of my work with various cloud providers as we took RedBlack to the cloud.

Check your email today as it will be there. I warn you it is my soapbox and some views are altruistic in nature, but it is a place to start.

Have a nice weekend and feel free to give me a call if you like on my cell phone.



Brooke Southall said:

June 16, 2012 — 4:16 AM UTC


I believe that your application of Think-Globally, Act-Locally is food for thought worthy of your legendary name.


I’d certainly be interested in taking a look at the proposal. Is it yours or did somebody else write it and you vetted it for the custodians? (And, yes, there is a forum feel to things here. I’m learning.)

thanks to both of you,



Peter Giza said:

June 16, 2012 — 3:56 AM UTC


If anyone one this thread is interested, I vetted an open architecture presentation to the big four RIA custodians this February. The response ranged from zip to “this is in line with our vision.” The proposal runs in line with SCW and Craig’s line of reasoning. If you have an interest in getting a copy and contributing to it please send me your business email address to peter.giza@redblacksoftware.com and I will forward the ppt doc to you.

I think the proposal would benefit greatly by all of your input, Brooke, it seems as though your commentary pages may be turning into a forum.



JP Morgan said:

June 16, 2012 — 3:44 AM UTC

Mr. Winks:

Jesse is off mending a rather severe headache so I’ll respond in his stead. I understand your passion. And I believe that Jesse is in complete agreement with your obsevations, perhaps not so much in their delivery.

Your wholistic approach is admirable and expected by any consultant worth his salt. However, one cannot enforce the burden of all that you outline upon a single platform. It is simply not possible. This does not mean that thinking wholistically is impossible however. Applied science takes into consideration all factors, but doesn’t necessarily solve for all the problems that may come to bare.

The issues that face this industry require this same level of creative thinking – think globally, act locally. Meaning consider the universe of factors, act on those in your wheelhouse.



Stephen Winks said:

June 15, 2012 — 3:08 PM UTC

Jl Livermore


This entails (i) an expert authenticated prudent process that makes advice safe, (iv) advanced technology to support transparency and continuous comprehensive counsel required for fiduciary standing, (iii) work flow management tied to a functional division of labor (advisor, CAO, CIO) so advice is scalable, easy to execute and manage, (iv) conflict of interest management so fiduciary counsel is properly supported—all resulting in an unprecedented level of investment and administrative counsel which makes advice safe, scalable, easy tyo execute and manage at a fraction of the cost of commission sales and high margins at the advisor level.

You might observe this is a concise, clearily stated solution. Would you like more clarity as I can get as specific as you wish.

I can not help you on your eyes glazing over, or your attitude. But if you want concise specific solutions extremely well documented, this can be a wonderful forum.



Stephen Winks said:

June 15, 2012 — 2:10 PM UTC

Jl Livermore,

I take no offense, as I often plug in too much content, in too little space.

I have found citing an observation and drawing a conclusion is very effective in making a point without an indepth explanation that space does not allow.

You may be at a disadvantage in this particular discussion as I am extremely well prepared simply because it is a passion on mine in helping the brokerage industry and regulators find a way to support the best interest of the investing public with an unprecedented level of investment and administrative value at lower cost to the consumer which maximizing margins at the advisor level. This entailsan authenticated expert prudent investment process that makes advice safe,


JP Morgan said:

June 15, 2012 — 11:45 AM UTC

Mssrs. McLaughlin, Spears and Winks:

In short Addepar is chasing after the wind and I suspect they won’t sail their ship out of port. As an example; Tamarac has approximately 120 employees with revenues guesstimated to be around eight million dollars – not a very good return on employee investment. Addepar has sixty-five engineers and no sales, marketing, training or support staff. This isn’t even a “build it and they will come approach”, its outright cavalier.

Addepar has at least four to five years ahead to establish a beachhead and another five to ten years to become a serious force as a global player in an already crowded space. This is not some Facebook Internet play, its boring old finance. My faith in their altruistic view of being all things to all firms of all types is less than par with their expectations.

All the money in the world won’t force people to buy your product. And without a savvy marketing and sales team aboard its just another bull pen (what do you want I couldn’t use “cow”) of really bright people with too much money and nothing better to do. Hats off and best of luck to Addepar. But I believe their business model is flawed fundamentally.



JP Morgan said:

June 15, 2012 — 11:29 AM UTC

Mr. Southall,

If one cannot express one’s opinion whether about a person, place, thing or thought what is the point of allowing commentary? Jesse can be a negative old curmudgeon I’ll give you that (he probably didn’t get his haircut today to his liking), but he is usually right in his assessment. After all he isn’t called the Bear of Wall Street for nothing.

Jesse go get your hair cut and save your razor tongue for I have sharpened my dagger and readied it for battle.



Brooke Southall said:

June 15, 2012 — 5:19 AM UTC


Yes, creative thought patterns leading to solutions is what I hope for on these comment boards.

Your most recent comment states an opinion and tosses in some tongue-in-cheek humor. I think it’s more likely than the previous one to elicit a positive response like this one.



Mr. J. L. Livermore said:

June 15, 2012 — 4:57 AM UTC

Mr. Southall,

You state your own opinion when you accuse me of being smug; self-satisfied – complacent – conceited. I do not agree, but then again I state my own opinion in my defense. The opinions I make are stated without prejudice with regard to any particular subject or person.

I am not talking down to or condescending Mr. Winks. I am asking that he present his arguments with clarity and suggest solutions along with problems stated. This sort of dialogue produces creative thought patterns leading to solutions.

As for anonymity; there is no such luxury in this world unless you are dead of which fact the lead in my head proves.



Peter Giza said:

June 15, 2012 — 4:30 AM UTC


Again nice summary of the facts. I cannot agree more with the death spiral of pricing or the feature/function game. If one cannot sell their product based on value – hence the value proposition, then you become relegated to cheap date status by virtue of the next obvious step which is resorting to price.

Productivity, streamlined processing and work flow flexibility are the value proposition that bring measurable ROI. The Human Factor should be $0 cost. However, if the human factor is not adequately considered the cost is usually far beyond the cost of the software or service in question. And the human factor ill-considered can be the single most destructive force in an implementation.

For the most part custodians have proven themselves unable to acquire and adequately meet the market need post acquisition. This has been proven many times over in the past 5 years. RIAs tend to be very independent and look at custodian platforms as the “company store.” Even recent “open architectures” are looked upon with hopeful pause with concern of being held captive.

It is precisely as you said all about streamlined productivity and reduction of work load regardless of the process being considered. Once the industry as a whole embraces that concept we may actually reach a set of open standards that will empower what Steve is presenting here – an efficient technology platform that enforces fiduciary responsibility.




Brooke Southall said:

June 15, 2012 — 4:30 AM UTC


You can state the opinions you want within reason— and I appreciate the energy you put behind comments. But I don’t think the smug, condescending tone becomes you.

I would be less likely to criticize it were you to come from behind the cloak of anonymity and own your ideas.



Mr. J. L. Livermore said:

June 15, 2012 — 4:13 AM UTC

Mr. Winks,

I am quite familiar with the institutional world and the advances made as well as level of technical capabilities. Perhaps the issue is the run-on sentence structure in your explanations that cloud the issue. Mr. Morningstar’s comprehensive statement is clear, concise, articulate easy to consume. While your points may be valid they are lost in ambiguity of delivery. Simply stated: get to the point without the platitudes.

Bringing problems to bare without solutions is of no benefit. If you have a solution that can be clearly articulated in clear bulleted format – please do so. I for one cannot distinguish your posts one from another because my eyes glaze over after the first sentence.

My advance apologies for being so blunt in a public forum, but I think I speak for all those present.



Stephen Winks said:

June 14, 2012 — 4:18 PM UTC


The authenticated expert prudent process I speak of (asset/liability study, investment policy, portfolio construction, monitoring and reporting—authenticated by non-negotiable expert fiduciary criteria of statute, case law and regulatory opinion letters) is nothing new as it is universally used by top advisors and institutions around the world, just not in the retail market where there is neither accountability nor ongoing responsibility for recommendations made. It is of particular interest in the soverign wealth world. You suggest the modernity I advance which streamlines cost, increases the economic metrics (earnings, margins, multiple) of the industry and supports an unprecedented level of investment and administrative counsel (none of which is possible in a brokerage format) is simply the opinion not fact of one man—namely me. You might be surprised to know these are widely held views and are largely in place and are literally the advance of modernity. I would be glad to oblige you with how this is so.

For further clarification, an antquitated approach to packaged product account administration which cripples their use in portfolio construction by virtue of limited transparency, high cost and inability to manage across vendors and accounts in real time required for continuous comprehensive counsel necessary for fiduciary standing, is not best thinking.

Our largest and most capable private trust companies have gone to overlay management utilizing real time buy/sell research divorcing account administration from packaged product managers resulting in a less expensive far superior approach to portfolio construction (managing extraordinary portfolio detail in real time) by doing account administation just once at the client level rather than redundantly at the manager, client and trustee levels which adds no value. This is a far more modern and effective solution for managing an unlimited number of custom portfolios for each advisor. The high end of the private trust banks have have adopted this ten years ago.

Thus, when it comes to simplification, advanced technology, investment and administrative values expertly addressed and managed, streamling of cost, reliability of expert counsel, etc there is no question modernity in the best interest of the investor and advisor—are not being advanced in a brokerage or custody format. If this were medicine, it would be mal-practice—a point in which we agree.

I hope this satisfies any questions you may have concerning opinion versus fact. I can go into great depth and depth with a high degree of granular detail on a broad range of innovations with which you may not be familiar.

Best Regards,



Craig Morningstar said:

June 14, 2012 — 2:50 PM UTC

Hello Pete, Thank you for the excellent additional comments. Here are some additional thinking about technology and the RIA industry.

The approach we have taken in providing solutions to the many different types of Advisors and their needs is being the comprehensive platform. The platform does not have everything, and it does have more than any Advisor could use or want. We flipped the typical equation of “in the absence of value, price is the only consideration”. It is all about value and really has nothing to do with price.
All at a price point of $400 per month, which an Advisor could never achieve, own their own.

The most important aspect of the combined technology solution is the “human factor”. The cost of an Advisor staffing to support our comprehensive solution is zero ($0). The cost of being trained on the solution is zero ($0). The cost of installing and setting up the solution is zero ($0).

When any new providers come to a market place…......most believe their advantage is a lower price or new product features. The result of lower pricing is the “race to the bottom” for almost all providers in the market place. Development budgets are cuts and margins are reduced with new product development only happening as needed to match others.

After running a few TAMPS and RIAs network firms, I learned Advisors want solutions that reduce their workload, drive top-line revenue, increase margins, reduce problems, making available solution they cannot achieve independently and provide support and resources for all aspects of their business.

I could see large custodians coming in a buying up technology firms, like TDA has done. The challenge is the actual integration into the custodian’s existing platform. For most custodians the underlying technology infrastructure dates back to the late 90s when Y2K budgets were used to do major upgrades.

Advisors are Advisors, not technology experts. The product clutter, noise and intentional vendor confusion works to every Advisor disadvantage and raise their overall operating cost, even with low cost technology solutions. Anything solution that doesn’t create time for an Advisor and staff is a poor solutions.


Peter Giza said:

June 14, 2012 — 4:57 AM UTC


Your layout of what is required for comprehensive service is a perfect example of why a single platform cannot be all things to everyone. Even if a single platform could provide all of the above and scale appropriately as well as meet new market needs, the cost would be prohibitive for the majority of firms.

Not even the most expensive hand-crafted performance automobiles are made of components from a single vendor. Look as Aston Martin, Lamborghini, Ferrari et. al. Not one of those marques produces every part even in their hand-built lines. Bosch builds electronic (because Lucas can’t), TRW supplies steering components, and so forth. Why do these marques looks to the likes of Bosch and TRW? – specialization, expertise and focus.

Comprehensive services require comprehensive solutions made up of specialized, focused, comprehensive design and delivery. Take a look at the comments to the Schwab article recently posted here at http://www.riabiz.com/a/13715570 where I outline some of the issues that cause unnecessary complexity and reduced efficiency for end-user and vendors alike.

Speaking strictly as a vendor I can tell you that most Advisors and firms have no idea the painstaking work that goes on behind the scenes to make the “client experience” somewhat enjoyable. I say somewhat because we all know there is tremendous room for improvement. Managing the burden of disparate data feeds, managing relationships with custodians that vary widely in their level of project and product management approach, and so forth and so on. The burden on the vendor is heavy and getting heavier as more and more streamlining is demanded by the end-user. And I haven’t even begun to talk about the human factor.

A lot of tech companies have reached out to grab the brass ring claiming to be all things to all users only to fade away into mediocrity.

JLL’s comments above are on point – 65 engineers; that is one heck of a burn rate and they have just begun. For a moment let’s assume they stop at 70 engineers, that means they will need an additional 140 sales, marketing, support, administrative, legal, compliance… staff members to support those engineers. 210 persons at JLL’s basic calculation and we’re at a $21MM burn rate. That is an awful lot of clients. That demands that custodians buy into Addepar and provide it’s solution to all advisors under the custodian banner.

The political landmines that exist would make such an event very unlikely. I would expect one of the large custodians to throw $100MM or more at Addepar and buy them lock, stock and barrel. Why not, think of the competitive advantage if Addepar lives up to its Pharlap legendary status.

Time will tell and we’ll all be watching to see where it all goes. If nothing else Addepar is providing some great and interesting work for foxy-minded professionals.



Craig Morningstar said:

June 13, 2012 — 5:55 PM UTC

In is interesting to see new approaches to existing technology and support problems. Big firms like PAS, Schwab, TDAmeritrade and Fidelity have all struggled with providing comprehensive technology platforms. To date firm of size and with great knowledge and financial resources have not been able to pull it off….yet. The industry benefits and Advisor pay the price for technology fragmentation.

It is great to see new technology solutions, however, the most important aspect that is always over looked is….the human factor. The human factor of what will it cost in labor to support yet another solutions, and will it actually deliver more revenue and better profit margin to the Advisor’s bottom line. Most often neither increased margin nor improve margin are deliver…..and once again the advisor pays the price.

Part of the industry’s challenge is coming to a common understand of what comprehensive actually means. For most providers comprehensive means everything they offer, which most often is only a small slice of what an Advisor needs.

From a firm that provides comprehensive services, here is what it mean to us, with as few as three software systems working together all in the cloud, here is what we believe comprehensive mean and we deliver: secure email with archiving that includes social media, CRM, website solutions, performance reporting, client meeting reports and full financial reports, 7 different custodian options, 3 assets aggregation solutions (DST, ByAllAccount and Advisor Exchange), Think Pipes, Morningstar Workstation, Infinata, access to a few thousand separate account managers via custodian platforms, unified Managed Account solutions, access to alternative managers, the Advisor having easy access to several custodians, all account billing handled for the advisor, client portal, automated delivery of quarterly and annual disclosure documents and fee statement, all solutions available for RIA firms or IARs who choose to be part of an existing RIA firm all at the same price, electronic document signature service for clients, compliance reporting with connectivity for the RIA’s compliance support firm, a secure cloud based network for file sharing, automated document management, 80+ investment models to choose from (DFA, American Funds, Vanguard, Russell, Swan and Manning & Napier), with the flexibility to use or build your own models, integration of outside insurance assets and connectivity with Insurance Marketing Organizations for high insurance business payouts, practice management coaching, full financial planning resources and support, packaged DFA 401k solutions with self direct brokerage options. These are some of the solutions available as part of Dynamic Wealth Advisors full offering for Investment Managers, Financial Planner, Financial Advisors and Wealth Managers. So the next time you hear the term “comprehensive’ all of the above and more is what the standard should be.

Another limited technology service solution is just that…...just another piece of an over crowed puzzle that make doing business harder and more confusing.


J. L. Livermore said:

June 13, 2012 — 5:43 AM UTC

Mr. Winks,

I am assuming from your comment above that the “expert” in “expert authenticated prudent investment process…” is you. Perhaps you should apply to Addepar as a subject matter expert:)

You write platitudes and grandiose commentary on fiduciary process and “transformational (sic) innovation” that are based on your view of the world. I wonder who or if anyone shares your views.

The bottom line is the industry is fragmented by it’s leadership on all fronts: custodial; regulatory; professional consumers and technology providers.

Pragmatic solutions borne from collaboration by the industry’s community is what is needed, not another platform whose end-game is to own the world.



Stephen Winks said:

June 12, 2012 — 7:16 PM UTC


If they get the big issues right everything will fall into place. The problem has been, technologist do not know what the big issues are, they are nibbling at the edges, making little progress when transformational innovation is required. Tne starting point is an expert authenticated prudent investment process (asset/liability study, investment policy, portfolio construction, monitoring and management) which makes expert fiduciary standing safe scalable, easy to execute and manage as a high margin business at the advisor level. Nothing else is important. This focuses Addepar on what is important and works,



Jamie McLaughlin said:

June 12, 2012 — 10:20 AM UTC

Some circumspection is warranted with any new entry in a space riddled with undercapitalized companies that have failed or been acquired; certainly something as ambitious as Addepar’s omnibus application.

I’ve spent extensive time with their senior management, I’ve visited their Mountain View office, and I’ve heard feedback from beta users. They have very wisely and purposely focused their initial attention on system design and recruiting the very best engineering talent. To date, they have done no formal marketing and have no dedicated marketing staff, but they’re deeply networked with investors and advisors on both coasts and in Europe.

Pricing and adoption will be challenges, but I like their chances in introducing what may be a disruptive technology capable of setting standards where none exist.


Mr. J. L. Livermore said:

June 12, 2012 — 4:38 AM UTC

Dear Ms. O’Mara,

How delighted to learn of Addepar’s quest for the Holy Grail – platform of all platforms. How unfortunate that the one partner they will talk about has likened them to a “spreadsheet on steroids”. I just cannot wait for the opportunity to thrash my way through yet another Excel spreadsheet. I am quite sure that Addepar’s Berkeley, Harvard and MIT brain trust have accomplished so much more.

Rooted in family office operations and client experience Addepar seems off to a good start. The comment “We want to be best at everything” seems a bit naive especially in an industry so fragmented. “trying to bring world-class engineering to wealth management” and convincing them to be your clients are two different matters. And 65 engineers even at 30% pay cuts is a lot of money to burn through. If a Silicon Valley engineers fully loaded cost is $150K discounted 30% to $100K that is still a burn rate of $6.6MM annually without any revenue to speak of and that doesn’t include the data feeds that they are surely paying hefty sums for.

Then we have the nagging problem of market penetration. In order to carry the cost of the venture and provide the expected 10X venture return on investment, Addepar will need to go global. Consider the amount of work and the number of people at Advent and what they must do to be a globally focused company. Addepar has nary a marketing, business development or sales staff member. Unless I am missing some new discovery in the fundamentals of market penetration physics, then somebody at Addepar better do some recruiting, and fast.

Finally there is the little problem of five. Five basis points for exactly what? The story is so convoluted that one can’t be sure if it is on par with Black Diamond with By All Accounts data or something more or less. Time will tell as will the acceptance by larger firms – or not.

The scenario is reminiscent of the typical custodian sponsored platform project we have all learned to love watch grow and die sometimes spectaculars deaths and sometimes fading ignominiously into the bit bucket of neurons needlessly expensed.

Perhaps Addepar will prove me wrong, but this spectator is taking a short position on Addepar and plans to sit back and watch the fun. Hopefully in their quest for the grail there isn’t a company of french (purposely downcast to avoid insulting the real French) wall sentries castigating Addepar’s king.


PS. I wonder how much SCW has invested in Addepar:)


Stephen Winks said:

June 11, 2012 — 7:23 PM UTC

The free flow of reliable data, outdates UMAs and finally puts “continuous comprehensive counsel” required for fiduciary standing.

The industry moves from brokers selling advice as a product to advisors managing advice as an expert prudent process. This free flow of data opens the industry to hundreds of value added portfolio construction apps that will transform the industry, immediately refocusing everything on the simplification of the delivery of expert, continuous, comprehensive counsel to achieve fiduciary standing.

By-All-Accounts should be the first to capitalize on Addepar, by adapting its account aggregiagation technology into an authenticated expert asset/liability study that makes its nice to have technology into an essential technology necessary to be in the advisory services business.



Jim Starcev said:

June 11, 2012 — 5:42 PM UTC

I wish them well, but a 65 employee firm out of the gate is a lot of expenses to cover. This is a niche market, they are going to have a grab a pretty big share quickly, even at 5 basis points (which is very expensive). I would guess their expenses have to be close to $10 Million per year. I think this industry will benefit from a successful Silicon Valley startup, it would encourage others to try and backers to back, but if I had to bet, I wouldn’t put my money on their success.


Jeff Spears said:

June 11, 2012 — 5:33 PM UTC

I think the main thing that seperates Addepar from the field is that it was built by wealthy tech savy entreprenuers for themselves first.

I’ve seen the demo and it is very impressive.

Another differentiation is that this group does NOT want to disintermediate the advisor like several other tech companies in The Valley.

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