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.

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.

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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.”