It sounded like a very strange marriage at first.
I heard last month that Hanlon Financial Group was acquiring the all-in-one technology provider Interactive Advisory Software.
After speaking with Hanlon's founder I think it could end up being a good move, especially for the latter, which has grown its market footprint slowly over the years.
Hanlon, the large registered investment advisory announced their acquisition of Interactive Advisory Software Inc. on the 15th of August.
Hanlon Financial Group is an affiliate of Hanlon Investment Management, Inc., a registered investment adviser with $3.4 billion in assets under management. The firm also happens to service over 2,100 advisers, 500 plan sponsors and has 27,000 accounts.
The geography is interesting too; Hanlon's operations are headquartered in Egg Harbor Township, NJ while IAS is in Marietta, GA (where it will remain according to Hanlon).
Nathan Berk, who previously held the title of chief information officer at Hanlon, has now been named chief executive of IAS.
I had a chance to speak with Sean Hanlon, the chairman, chief executive and chief investment officer of Hanlon Investment Management Inc. prior to my going on vacation (and hence why it has taken me this long to get this written).
“We are a money manager that runs toward operations, not away from them. I'm a mechanical engineer,” he said by way of explaining that the notion of working with or developing technology is not some sort of alien concept to him or his firm.
My first question to him was about the rationale and whether part of it might be explained by Hanlon being in the market for a new technology solution for its own business.
“We already have a portfolio accounting system internally so no we are not shopping for one for ourselves at this time but basically our investment banking folks said 'hey, these guys are for sale' and we saw a nice opportunity with our experience and DNA in the space,” Mr. Hanlon added.
“The rationale is that I've been in this business for 30 years, [my firm has] been around since 1999 and we have 2,000 advisers and a 20-person technology team right here at Hanlon and we have opened up over 35,000 accounts in our history,” he said.
All that experience, he said could be applied to the IAS world.
He went on to explain that the IAS system, as it is now, was not a perfect fit for Hanlon operationally because of his firm's obligations as a turnkey asset management provider.
“We have 200 selling agreements with big independent broker-dealers, LPL, AIG group, Geneos etc. and the IAS product was not architected to serve that kind of entity,” said Mr. Hanlon.
For those unfamiliar with it IAS's Solution 360° all-in-one wealth management platform here is a bit of background.
Version five was released earlier this year after the software received a much needed interface upgrade in 2011.
To date its chief selling point has been that all its, and thereby an adviser's, core applications are powered by a single central database.
This consolidated system of applications includes homegrown client relationship management software, a portfolio management and reconciliation program, as well as financial planning, performance reporting, and online client portals, again, all running off a single central database.
IAS was started in 2001 and serves 170 RIA firms around the country that collectively are advising on over $70 billion in assets. Quite a few of those firms are individually managing more than $1 billion in assets.
The only major complaint I have ever heard among advisory firms using the platform, either currently or in the past (and mostly only from smaller shops) was that it simply was too much for their needs.
In a nutshell it was too comprehensive and too difficult for a few people at a smaller firm to master. It could also be expensive for a smaller firm as it can cost more than $2,000 a month.
It tends to resonate most with mid-size to larger firms on a growth trajectory.
I got in touch with an adviser I've interviewed in the past that uses IAS to see what she thought of the acquisition.
She is staying positive for now.
“Time will tell the contribution that Hanlon will make to the software which might marry more of the tech side of the software with the end product advisers need,” said Laurie A. Siebert an adviser and accountant with Valley National Advisers Inc.
She has long been a fan of how well integrated the system is and is looking forward to additional real world development that might come out of the acquisition.
“Software as robust as IAS which incorporates CRM, portfolio management and financial planning requires serious attention and we have been told that the Atlanta team will remain in place and that's key,” she added.