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After being 'blown away' by AdvisorPeak's engineering prowess, Addepar is buying the company to arm its clients with automated rebalancing software

The 12-year old Mountain View, Calif., performance reporter, with $3 trillion plus of adminstered assets, is buying the 18-person, third-year startup to apply to its 600 clients.

Friday, October 22, 2021 – 3:03 PM by Brooke Southall
Eric Poirier: We admire what they've built.

Addepar will soon own AdvisorPeak--the third acquisition since its 2009 launch--to carry out CEO Eric Poirier's top priority, arming his firm's 600 clients and their $3 trillion of AUM with automated rebalancing software.

The deal with the three-year-old rebalancing software startup, staffed by alumni of RedBlack and Trade Warrior, is not quite a shotgun marriage.

Damon Deru: We have more ideas than resources to execute on them.

Addepar did a vendor deal with AdvisorPeak earlier this year, and the chemistry between the firms became immediately apparent, their principals say. Addepar signed a rebalancing deal with RedBlack in 2017.

"We integrated and AdvisorPeak became far and away our biggest rebalancing integration," says Addepar CEO Eric Poirier in an interview. "It made all the sense to become more strategic."

The deal signed today (Oct. 22), is expected to close as early next week.

Addepar, which has 545 employees, just raised $150 million of private equity capital in June at a $2.17 billion valuation and wasted no time deploying capital. 

Damon Deru, founder and CEO of AdvisorPeak, says the decision was strategic for his firm, as well. The initial integration deal with Addepar immediately became the firm's most rewarding collaboration, he says.

He also sees the merger as an extension of what sparked him to launch AdvisorPeak in 2018 -- the quest to automate one of the least automated and time-consuming processes in financial advice.

Underutilized

Rebalancing software, however, has mostly fallen short. RIAs simply don't use it near its optimum capacity -- at least, in part, because it isn't user friendly enough.

Peter Giza
AdviserPeak chief product officer Peter Giza brings his experience to the deal. 

"It's still one of the most underutilized software in the industry," Deru says.

"There is most definitely an intellectual moat around rebalancing software," he adds.

"Once you start factoring in real-world client scenarios such as household-based trading across multiple custodians, client trade restrictions, cash management, etc. it becomes complex quickly.

"If you look across the most successful rebalancing systems in 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 advisory community is the fact that we’ve been in their shoes and understand what challenges they face, and we built our software to solve those back-office trading challenges that advisory firms face." Deru says. 

Flexible, scalable

AdvisorPeak's software stands out for a number of reasons, says Bard Malovany, Principal at Aspect Partners an advisory sub-unit of $1.5-billion Almanack Investment Partners in a release.

Bard Malovany
Bard Malovany: "Their entire culture is built around exceptional service.'

"Not only has AdvisorPeak delivered impressive trade management logic, a superior user interface and customized model management and trading, their entire culture is built around exceptional service,” he said.

"We have experienced [it] with every single person we’ve worked with. They will be a great complement to Addepar’s client-centric platform.” 

Poirier believes AdvisorPeak’s trading and rebalancing solution is highly scalable, flexible and cloud-based and truly streamlines the portfolio rebalancing process.

"Also, 75% of the AdvisorPeak team has worked in the advisory space in some capacity, so they deeply understand the day-to-day challenges of growing a firm and serving clients," the Addepar CEO says. 

Digging out

That dream of automated rebalancing across the RIA universe got deferred when formerly freestanding rebalancing software companies got buried inside bigger firms where innovation was a lower strategic priority, says Deru.

Indeed, TD Ameritrade bought iRebal and gave it away free in 2013. See: TD Ameritrade will make iRebal software available free to all its RIA clients

Tamarac became part of a larger Envestnet bundle. Morningstar swallowed Total Rebalance Expert in 2015. Invesco bought RedBlack in 2019.

Deru believes the rash of merger stalled innovation, "and we still feel like that," he says. "We have more ideas than resources to execute on them."

Deru will soon be buried in Addepar, as well, but with the opposite effect on innovation, he professes.

Shared values

Addepar's resources and culture of innovation will allow AdvisorPeak to travel a "long road map" of product innovation that it's 18-person staff can't advance on its own, Deru says 

AdvisorPeak, for instance, recently launched a way for RIAs to trade 100 different cryptocurrencies alongside more bread-and-butter stocks and bonds. See: Envestnet, Orion and Schwab will all launch crypto capabilities soon enough, insiders say, but Damon Deru just beat them all to market with more than a hack

"AdvisorPeak shares our values and our commitment to R&D, and comes to us with a depth of experience in the trading and rebalancing space," says Poirier.

"We believe they’ve always been in tune with and ahead of the market in their product development overall. Crypto has certainly risen as an area of interest for our clients, and the current capabilities within AdvisorPeak will continue to be offered."

Matching up

Existing AdvisorPeak customers will still get service from AdvisorPeak but the decision hasn't been made about whether the AdvisorPeak brand will be maintained.

Poirior says AdvisorPeak is currently sold as a technology integration available within Addepar, "which we will continue to do."

"However, it will transition to be offered as an add-on option as part of the client’s contract with Addepar, for an extra fee.

"It is a high priority to make the transition as seamless as possible, and to that point, there will be no immediate changes to any contracts today. Pricing, terms, support and training will remain as they are today," he says. 

If there's an irony to the merger, it's the dissimilarity of pedigrees between the two merger partners. Addepar started in 2009 with the proverbial piece of white paper, and the RIA software specialists coded apps in relatively backward ways.

AdvisorPeak has its share of relative old-timers including Deru and Peter Giza, chief product officer and former RedBlack executive.

Asked about that odd matching of old and new, Silicon Valley blue bloods and not, Poirier, who came aboard at Addepar as CEO from Palantir in 2013, chuckled and said the two firms match up where it counts..

"We've been blown away by the depth of talent and quality product," he says. "We admire what they've built."

Cashing out wasn't an option. If cashing out were the priority, Deru says he was in a position to wait because he had a list of suitors.

"We've had plenty of acquisition opportunities," he says.


Related Moves

Pete Giza and Damon Deru go for Holy Grail of portfolio rebalancing with software that shuffles stocks, bonds... and asset classes; Believe it?

The RedBlack and TradeWarrior executives see old systems as 'archaic' yet know that the Black Diamonds, Morningstars, Orions and Tamaracs see rebalancing as a loss leader

June 11, 2019 – 9:49 PM

Joe Lonsdale is prepping Lonsdale Investment Technologies for launch 13 years after founding Addepar -- with the new business model too cannibalistic for comfort, some say

The Austin, Texas, serial entrepreneur is still executive chair of, and a big stakeholder in, Addepar but may need a fresh start to manifest his hyped vision of creating high bandwidth financial flow between retail investors and vast private markets.

February 23, 2022 – 12:09 AM

Surfing a $15-billion-a-week asset growth meteor, Addepar CEO Eric Poirier hires an owner as president to achieve 'escape velocity' and keep operations from flaming out

Addepar is fast nearing $3 trillion, it says, after a 50% RIA asset spike in 2020. Now an Addepar owner through Valor Equity Partners is stepping in to safeguard or supercharge his investment depending on the point of view.

April 9, 2021 – 11:03 PM

Addepar hires Advent genius then launches 'Advent Converter' to court the RIAs still on Axys and APX ; PortfolioCenter 'easy button' comes next

The tactic by the Mountain View, Calif. firm and Advent co-founder and code avatar Steve Strand comes a decade after Orion, Black Diamond and Tamarac began feasting on the legacy corpses, but Addepar insists meat remains on the bone.

March 3, 2020 – 5:05 PM


Mentioned in this article:

RedBlack Software
Trading/Rebalancing
Top Executive: Daniel Potter

Addepar
Portfolio Management System
Top Executive: Eric Poirier




Tom Van Horn

Tom Van Horn

October 23, 2021 — 10:59 PM
I love seeing when good things happen to good people. I've know Pete and Damon a long time and there is no better duo around when it comes to understanding the challenges a professional investment adviser faces in the Portfolio Rebalancing and Trading arena. Congrats to the entire team! I can't wait to see you take things to the next level.
Brian Murphy

Brian Murphy

October 24, 2021 — 8:00 PM
Congrats to the team at AdvisorPeak. May the best days be ahead of you!

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