While The
PNC Financial Services Group's announcement last week that it is set to acquire Albridge Solutions Inc. was applauded by many in the financial advisory industry, some raised concerns that the planned merger might prove less than a panacea.
Pittsburgh-based
PNC Financial Services announced a definitive agreement to acquire Lawrenceville, N.J.-based Albridge, a provider of portfolio-accounting and enterprise wealth management services. Financial advisers who use the Albridge platform's features are able to generate an aggregate view of their clients' assets and performance reports, as well as conduct portfolio analysis.
"Clearly, for PNC, [Albridge] is a great franchise to get; it's a business that's well thought of. For [registered investment adviser] firms, I think this should be of huge interest," said Alois Pirker, a senior analyst with Boston-based Aite Group LLC.
Robert Testa, an analyst with Cerulli Associates Inc. a Boston-based market research firm, agrees with that sentiment but expressed some concerns.
"It looks like a great strategic move in terms of RIAs generally but not such a great move for those advisers seeking the upper tier, high-net-worth individuals," he said.
Mr. Testa explained that data for this segment are often acquired on paper documents such as quarterly statements and are entered manually for the most part or by means that don't fall into Albridge's core competency.
There is another hurdle to overcome, he said.
"Any new technology coming out of the merger will also have to be extremely flexible and scalable to attract advisers going after that top tier. Ultrahigh-net-worth clients are investing in very different vehicles from the masses," Mr. Testa said. "Private-equity deals and
unified managed accounts require at a minimum $200,000 to $300,000."
PFPC Worldwide Inc., a subsidiary of PNC Financial, has more than $2.5 trillion in assets and is a provider of processing, technology and business solutions to the investment industry. Specifically, PFPC offers subaccounting, transfer agency, managed-account, alternative-investment, fund-accounting, administration and custody services, among others.
Officials from both firms in-volved in the merger declined to elaborate on any specific future plans, but several industry analysts suggested that combining the companies would provide Albridge with easy access to expand its core offerings to a much larger customer base. While the financial terms of the agreement were not disclosed, the acquisition is expected to be completed by the end of the first quarter of 2008, barring any unforeseen regulatory or other hurdles.
"Our hope is that RIAs will consider this as nothing but good news in that Albridge is now going to be backed by a very large stable organization with a lot of resources behind it and that they'll only expect even bigger things from us in the future," said Greg Pacholski, president of Albridge Solutions. He said neither company has plans for management changes.
Mr. Pacholski said Albridge will operate as a division within PFPC and will continue its current work with other vendors it is already supporting.
He said that it is too early to discuss new product offerings, but he did say that one natural area of focus might be further integration between the Albridge platform and that of PFPC's ADVISORport unified managed account platform.
In a press release announcing the deal, PFPC chief executive Timothy G. Shack said that the merger will provide PFPC's asset manager and broker-dealer clients with an important distribution avenue in the rapidly growing independent-financial-adviser channel.
Albridge currently has more than 100,000 financial advisers using its platform with total assets under management in excess of $1 trillion. The company maintains relationships with 150 financial institutions.
Edward C. Goldstein, a financial adviser with Liberty State Wealth Management Inc. in Cherry Hill, N.J., expressed some concerns about the announced deal.
"One potential negative that could develop down the road would be if PNC were to someday decide to 'privatize' Albridge, making it available only within their system or network," he wrote in an e-mail. "As the RIA business becomes more competitive and is experiencing rapid growth, this would be a fine way for them to capture advisory relationships of groups that already have committed to using Albridge and are not seeking to convert to another system."
Chip Kispert, owner of Denver-based Beacon Strategies LLC, said he sees it as another example of the industry's move toward
consolidation in a bid to increase margins by providing more services. His firm is a consulting services provider to broker-dealers and clearing firms.
"I think to a certain extent, it's going to lend some instability to the market," Mr. Kispert said. "We've seen really two or three independent players [in the consolidated-data space] Albridge, Investigo [Corp. of Edina, Minn.] and a few others. What [this deal] will do is draw some firms to take a look at other independent providers, whether they are in the data
consolidation space, [customer relationship management] space, work flow and document imaging."
Mr. Kispert added that what it will ultimately mean is a ratcheting-up in terms of the demands for firms such as Advent and Investigo that are wrapped around data aggregation.
"With change comes change," he said. "But at the end of the day, there are a lot of wonderful opportunities here."
Davis Janowski can be reached at [email protected].
