Morgan Stanley teams up with data-aggregation company Addepar to get insight into clients' holdings

The deal is the latest example of the finance industry working with technology firms that provide services the old guard can't easily replicate

Jan 10, 2017 @ 11:57 am

By Bloomberg News

Morgan Stanley, among the world's biggest brokerages, is partnering with a Silicon Valley startup better known for helping rivals at independent advisory firms and family offices manage the assets of the ultra rich.

Software from data-aggregation company Addepar Inc. is now used by the bank's largest private-wealth teams, according to Eric Poirier, the tech firm's chief executive officer. Addepar's ability to give money managers insights into complex client holdings has fueled rapid growth, almost doubling the assets on its platform last year to $560 billion.

It's the latest example of the finance industry working with technology firms that provide services the old guard can't easily replicate. JPMorgan Chase & Co. announced agreements last year with Virtu Financial Inc. and On Deck Capital Inc., upstarts in electronic trading and online lending, respectively. Morgan Stanley is first among big U.S. brokerages to sign with Addepar, whose gains until now have mainly come from registered investment advisers — the smaller independent shops that battle with banks to manage assets of the wealthy.

“We've proven it out with clients who are competing with the banks,” Mr. Poirier, 34, said in an interview. “Now the banks are adopting it because they felt they were at a disadvantage.”

CODE CRACKING

Addepar, whose investors include tech billionaire Peter Thiel, has created “an innovative platform” that will help Morgan Stanley advisers better serve clients, Chris Randazzo, the brokerage's chief information officer, said in a statement.

For big banks — which employ thousands of programmers — taking on a high-profile technology partner is a tacit admission that, in some cases, it's the outsiders who've cracked the code.

Addepar's software tracks and analyzes exposures across a portfolio, allowing asset managers to spend more time tending to their clients. Gaining access to this technology helps banks retain employees who might otherwise start their own independent shops, aided by new tools like Addepar, Mr. Poirier said. Some Morgan Stanley teams using Addepar manage more than $10 billion, and additional teams may adopt the platform this year, he said.

The startup is in talks with other wirehouses, a category that includes Bank of America Corp.'s Merrill Lynch and Wells Fargo & Co., Mr. Poirier said. At the current growth rate, Addepar's platform will reach $1 trillion in assets by year-end, he estimates. Next, he wants to bring on pensions, endowments and sovereign wealth funds.

OUTDATED SYSTEMS

The problem that the Mountain View, Calif.-based firm says it solved: The ultra wealthy typically have assets in trusts and partnerships spread over several institutions, making simple tasks like figuring out a client's net worth a time-consuming affair. Advisers traditionally used decades-old systems and Excel spreadsheets to keep track of client holdings, a disadvantage during upheavals like the 2008 financial crisis.

“It became clear to me there was a much broader opportunity because there's really no common infrastructure or data standards for $100 trillion in assets managed globally,” Mr. Poirier said. “There's people using spreadsheets and old accounting systems.”

Mr. Poirier met Mr. Thiel, a founder of PayPal Holdings Inc., while an undergraduate at Columbia University. A few years as a bond-department coder at Lehman Brothers Holdings Inc. convinced Mr. Poirier that finance needed better technology systems, a topic he said he brainstormed with Mr. Thiel.

In 2006, Mr. Poirier joined big-data firm Palantir Technologies Inc., which Mr. Thiel co-founded, and left for Addepar in 2013. Some of Addepar's first algorithms were written by engineers from Palo Alto, Calif.-based Palantir, a company that scours data sets to find patterns beyond the ability of humans to discern.

Mr. Poirier's ultimate goal for Addepar is to build “the operating system for finance” and banish its inefficiencies, in the same way Facebook Inc. and Google transformed marketing and advertising.

“We're playing for the long game here,” he said. “We have a really ambitious vision in mind.”

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Jul 10

Conference

Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

INTV

Surprises when reporting on Morningstar

Assistant managing editor Susan Kelly speaks with senior columnist John Waggoner about the interesting discoveries he found in speaking with the analytics giant.

Latest news & opinion

Morningstar evolving well beyond its origins analyzing mutual funds

Led by CEO Kunal Kapoor, firm is moving way past ratings — and financial advisers are paying close attention.

Focus Financial IPO could be a sell signal for RIAs

The $100 million stock offering will fine-tune RIA valuations.

Ex-Edward Jones broker sues former firm, alleging racial bias

Complaint alleges the firm's policies limit African-Americans' 'income and advancement opportunities'

Piwowar defends SEC's best-interest rule

SEC commissioner says the Department of Labor rule set up an 'unworkable, impossible set of standards for people to comply with.'

RIA in a Box acquired by private equity firm Aquiline Capital

New owners plan more growth for the software service provider.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print