How an under-the-radar UHNW performance reporting firm is taking on Addepar and Advent in a bid for RIA bucks

A performance reporting services company to the stars — J.P. Morgan, Credit Suisse and Goldman Sachs — is ready to go after the RIA market.

To make this happen WealthTouch Inc., a Denver-based performance reporting firm, is getting some much needed bulk from a software firm that focuses on accounting. Indianapolis-based Archway Technology Partners LLC. Archway bought WealthTouch on Nov. 20, outbidding WealthTouch’s own chief executive Craig L. Pearson, who came up short in an attempted buyout.

Archway bought WealthTouch from three owners — Dallas-based RIA Kitano Investments LLC, Allen & Co. of (Lakeland) Florida Inc. and international private-equity investor Anthony Bloom. Those investors had owned the company since 2007.

“Archway has been trying to get into reporting and the acquisition of WealthTouch will solve that for them,” Pearson says. “We’ve got solutions in the industry where so many others have struggled. It’s easier to buy us than do what Addepar has done raising $50 million and burning through it.” See: Addepar slashes prices, opens up its architecture and shows RIA custodians some love as it confronts market realities.

A third-party PR firm declined to comment for this story on behalf of Addepar.

Chief rival

WealthTouch has mostly focused on the ultrahigh-net-worth market, overseeing about $200 billion in assets for about 300 wealthy families. Archway is a software company that focuses on accounting, and reporting functions for single family offices, multi-family offices and advisors. Pearson declined to list the firm’s clients reasons but a source says that J.P. Morgan, Credit Suisse, Goldman Sachs and several top family offices are clients of WealthTouch.

Though performance reporting is a crowded field, Pearson is particularly determined to lap Addepar LLC, another player with designs on a full spectrum of wealth managers, as it sets its sights on RIAs. See: Addepar hits $50 billion of assets and turns its eyes to Advent-Black Diamond’s plump RIA market.

“We’re going to do an aggressive RIA campaign. From an awareness standpoint, it’s us against Addepar and they’re well-funded but we have a long track record of success and that helps,” Pearson says about 13 year-old WealthTouch. See: Addepar has two new 'grown-up’ leaders but the same mantra: double down, triple down then quadruple down on engineering.

'Uberhigh-end’

Joel Bruckenstein: I don’t know any
advisors who use them.

Archway’s chief executive Jason Brown declined to comment on the deal but his purchase reflects a determination to get into the performance-reporting side of the business without being controlled by private-equity firms like Addepar, according to Pearson.

With combined resources as well as deep partnerships with clients as giant investors, the newly combined company is also seeking to take market share from San Francisco-based Advent Software. One company WealthSite, is succeeding with RIAs to UHNW clients by building its performance reporting software right into Advent. See: How two ex-myCFO guys are winning big RIA clients by using a pilot fish strategy to win Advent clients without harming the host.

“If you think about the uberhigh-end where we played, it’s a very quiet, opaque industry and it’s all word of mouth. We haven’t done a lot of marketing and a lot of RIAs haven’t heard of us. Some RIAs use a firm like Advent for the majority of their clients but need a firm like WealthTouch to address their large clients. The go-forward plan is to be that single point solution for both,” says Pearson. See: Look before you leap: Six questions you must consider before becoming a multifamily office.

Advent leaders are comfortable with their position.

“We believe it takes focus, experience and dedication to serve the RIA market. Advent has been at it for over 30 years and Advent and Black Diamond serve thousands of advisors on our technology platforms including close to 600 on the Black Diamond wealth management solution,” says Dave Welling, senior vice president and general manager of Black Diamond as part of Advent Software Inc. “We see it as a sign of our strength that our competitors continue to compare their capabilities to ours.”

Swimming downstream

Between WealthTouch’s high-end offering and Archway’s mass-market chops, Pearson is confident he’s covered the field.

“In the low-end market, investors don’t need the same service but they do want the cool technology and Archway is more of a technology platform that we can scale in the low-end of the market.” See: Ric Edelman is looking to add a $1-billion RIA elephant even as he unveils an online consumer strategy aimed at the chipmunks.

It’s harder to swim upstream than downstream, he adds.

“It’s easy for WealthTouch to go down-market and support less complex clients. But it’s near impossible for a reporting system that can only support mass affluent to go upmarket and support complex wealth. WealthTouch will always remain focused on the ultrahigh-net-worth complex side of the market — that is where our differentiation is most pronounced, but we will also be opportunistic and support specific RIAs when appropriate. We have no interest in a price war with Advent.”

WealthTouch focused on clients with $30 million or more with an average account balance of about $230 million, Pearson says. The firm has clients in seven different countries and some investors have $10 billion or more. Now, he is hopeful that the new company will be able to woo clients whose assets are as “low” as $5 million.

“The client demand has been pulling WealthTouch down-market,” Pearson says. “If you can support complexity it’s easy to modify so that there is less complexity. Where Addepar and Advent fail is you can’t build for more complexity if you’ve built for the mass affluent. To be honest, I don’t think those firms want more complex clients. Addepar has raised a lot of money but they need to grow and build head count. They don’t want to be in our market. They need to go down-market and pick up bodies.”

What’s that name again?

One major obstacle this firm faces is that it is virtually unheard of in the RIA arena.

“I’ve come across Archway and WealthTouch but our space is not their space,” says Joel Bruckenstein, a financial technology expert who runs the T3 conference. “WealthTouch has gone after family offices and private banks. I don’t know any advisors who use them. That doesn’t mean no one does, but I can’t think of anyone.”

Archway is also mostly associated in serving family offices, he says.

“They’re not really someone I cover very closely. I’m familiar with both of their names. It seems like they may have some interest in this space.”

Pearson is convinced the company can build its name among RIAs quickly by attending numerous conferences and also getting introductions from its high-net-worth clients.

“We’re not known today in the RIA market but we’re very well known in the ultrahigh-net-worth market. We can leverage our brand in the RIA space. We’ve got 13 years of proven history. Some people don’t like Advent, and Addepar continues to struggle, and we’re the best choice and the proven and credible choice,” he says. See: Why a disconnect between reporting software and advisors to UHNW assets persists — and what makes the problem so thorny.

Staying in Denver

WealthTouch’s operations team of more than 30 people will remain in Denver but the name will change to Archway. It’s still unclear which WealthTouch executives will remain.

Pearson says negotiations between the two firms proceeded at a brisk pace. In an attempted management buyout, Pearson placed an offer to purchase the firm but was outbid by Archway. He says he remains committed to the firm but many final details are still being hashed out.

“This was relatively fast, which is why we’re focused more on the transition right now. Typically, all of the strategies would have been worked out worked out and we’re doing that now.”

In order to ramp up its RIA profile its sales force has attended conferences such as Schwab’s IMPACT last month.

With Archway handling the accounting and WealthTouch overseeing reporting, the combined company can oversee the entire back office, Pearson says.