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Takeaways from a New York Times article about Addepar

The Mountain View, Calif. start-up kept it close to the vest but revealed who they believe uses big data to good effect

Author Brooke Southall August 8, 2014 at 3:25 AM
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Joe Lonsdale: Wealth management is designed for the 1950s, not this century.


Peter Giza

Peter Giza

August 8, 2014 — 3:27 PM


So what I think I read was:

Portfolio Accounting + WYSIWYG Reporting + Analytics = Addepar

Portfolio “MRI” tools such as Factset and platforms such as WealthSite which have those capabilities built-in already exist and have existed for some time. Whether a firm avails themselves of the technology is another thing.

Hiring lots of really bright engineers to build a revolutionary product is a great idea but will not guarantee success. Recall ill-fated LTCM of the 90’s. With two Nobel prize winners and many highly-qualified and talented quants ultimately failed at the prediction game.

The reality of using big data effectively is that it takes real genius to use it. Innovative minds with intimate industry knowledge, understanding and a solid plan are job one. Having brilliant developers, data engineers and yottabytes of storage will not guarantee anything except a hefty burn rate.

For what it’s worth, my opinion is I’m not so sure the Big Brother spin is all that endearing given the negative press in recent years. The connection is there and it may be desirable but firms may not like the idea of having their portfolios as part of an analytics dark pool.


Stephen Winks

Stephen Winks

August 8, 2014 — 8:16 PM

What ADDEPAR is missing is prudent process and judgment both aided by advanced technology but cannot be achieved without the interpretation of an advisor fully engaged client specific advice.


Bill Winterberg

Bill Winterberg

August 8, 2014 — 9:22 PM

Assume an RIA’s client likes to fund start up companies and makes a capital commitment to buy preferred shares of the company for five years at some specified annual coupon, but not all capital is to be disbursed upon closing.

Try to model the value of that asset in traditional portfolio management software. I think most advisors would choose to simply ignore the asset, for better or for worse.

This is but one of the more esoteric asset valuation problems Addepar is attempting to solve.

Pete Giza

Pete Giza

August 11, 2014 — 5:21 PM


Bill said:

“This is but one of the more esoteric asset valuation problems Addepar is attempting to solve”

This and other combinations of public and private asset accounting and reporting “problems” are not esoteric to the UHNW market. These asset “problems” are life blood of WealthSite which has been providing solutions like the aforementioned to multi-generational UHNW clients for better than eight years now.

UNHW is a niche within the RIA market and overall a specialized market with risk averse clients who are ultra-sensitive to data privacy. RIAs are finding out captive platforms can present significant challenges if a move to another platform is desired. Things such historical pricing become “non-portable”.

The “I Spy” or MRI context can only make the consumer wonder how their private data is being combined, tested and analyzed in some common data warehouse to gather this trending information. It is one thing to use external trending resources to build a decision support engine. It is an entirely different thing to use your clients’ data to build those trends. The latter is what we sign off on when we join Facebook.

Big Data analysis requires open access to data in order to provide useful trends and therein lays the issues of data privacy. I am not singling out Addepar, the same could be at issue with Advent Direct, BlackDiamond, Envestnet or any other platform using a common database to collect this information.

WealthSite provides the so-called data MRI and other services to UHNW firms without exposing their private data to a shared dark pool of omnibus client data.

We can speculate all day long as to how Addepar is going to use its Palantir roots to benefit this industry. Time and real life experience of its clients will tell the story soon enough. Stephen Winks brings out a great point. If the advisor doesn’t know how to interpret or how to use the data presented then where is the value?


Bill Winterberg

Bill Winterberg

August 11, 2014 — 10:40 PM

Great comments Peter.

Might as well build first, then figure out where the value is later (cue the Internet sarcasm)!

Peter Giza

Peter Giza

August 12, 2014 — 4:34 PM


:-D on the sarcasm. I think we’re all in agreement that this industry has been starved for innovation. From what I’ve experienced thus far over the past 9 years you either go for it with a lot of funding a la Addepar or you build a profitable business slowly that services a specific niche.

The idea of developing a product that you perceive has widespread market appeal and is in great need for improvement must be based on the reality of the market majority’s perception – not your own. The “if it’s not broken let’s not fix it” persuasion prevails and in some cases rightly so. A firm of 20-30 years of age has invested heavily in one or two portfolio management platforms. The thought of moving to another system even if there is real value can be unsurmountable. I personally don’t agree with that thought process but i understand it.

Here it is 2014, many years since the CRM boom, yet CRM is considered a new and important center of our industry’s technology universe yet we hear of implementation horror stories regularly. In fact firms are still struggling with the basics of document management and internal/external portal solutions at this late date.

Addepar is obviously going for something big otherwise there wouldn’t be $50MM in venture behind it. And we cannot expect it to give us the inside scoop otherwise they’d blow the wind out of their own marketing sails. As I’ve said developing a WYSIWYG reporting interface is in and of itself a major undertaking, one which I am dubious as to the long-term value once the wow factor is gone.

The Big Brother trending / predicitive analysis has yet to be vetted with success where data privacy is such a factor. The Big Data aspect is nothing new to this industry with the likes of Bloomberg, IDC and the myriad of data services providers, custodians and broker/dealers serving our industry.

Its fun to watch from the armchair and bet on the horses:)


August 12, 2014 — 5:37 PM

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Mentioned in this article:

MacroRisk Analytics
Tech: Other
Top Executive: G. Michael Phillips, Ph.D.

Portfolio Management System
Top Executive: Eric Poirier

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