The Advent Purchase Of Black Diamond: Implications For Financial Advisors
The recent announcement that Advent Software Inc. will purchase Black Diamond Performance Reporting LLC for about $73 million has created a buzz throughout the industry.

The rationale for the acquisition, Advent President Peter Hess said in a phone conversation, was to plug a gap in Advent's product line. Its Geneva portfolio management solution serves hedge funds, asset managers, family offices, fund administrators and prime brokers. Its Advent Portfolio Exchange (APX) portfolio management technology serves both asset managers and advisors.

"The advisor market and the asset manager market have become more distinctive," says Hess, adding that Advent needed a product and a team focused mainly on independent financial advisors. Hence, the decision to acquire Black Diamond.

After the deal is completed, Black Diamond and its existing management team will lead the advisory strategy for Advent and operate as an independent business group within the company. This would appear to be good news for advisors because Black Diamond has a reputation for innovation and service within the industry.

But some have voiced concerns that Advent might dismantle Black Diamond as they did with TechFi after its 2002 takeover. "If I was a Black Diamond client I'd be concerned," says Dennis Suppe, CTO at Trade PMR. "If I was an Advent client I'd be happy."

Eric Clarke, president of Orion Advisor Services, is also skeptical. "I think this will end up being another TechFi," he says. "History has a way of repeating itself. Reed Colley [Black Diamond's founder] and his team at Black Diamond have been good, friendly competitors and innovators. We wish them well."

Hess dismisses the notion the Black Diamond deal will be a version of TechFi 2.0. "TechFi was a different time, a different management team, and a different Advent," he says. "The existing team is sincerely committed to serving the RIA community. We know we will have to prove it by our actions, and we will."

Many observers believe the outcome of the Black Diamond transaction will differ from the TechFi acquisition because this combination makes strategic sense. The RIA market is growing, and Advent has recently been pressured by more nimble, innovative competitors, particularly with regard to dynamic reporting. The combined firm should have the know-how and the scale to compete more effectively.

Both Advent and Black Diamond are represented on the Fidelity WealthCentral platform, and more than 350 firms use APX or Black Diamond through WealthCentral. Some people have suggested that Fidelity might try to steer advisors to one product or the other in the future, but Ed O' Brien, senior vice president at Fidelity, says that's not so.

"The agreements are different," he notes. "With Advent, we are a distributor, so we set the price. With Black Diamond, there is a negotiated discount, but they set the price. We want the advisor to choose the product that best meets their needs based upon price and functionality. We provide the same deep level of integration and service for both products, and we will continue to do so. WealthCentral now offers two distinct platforms from a single owner. We expect the increased scale of the merged firm will benefit our clients."