If the recently concluded Advent Connect 2012 conference in Las Vegas is any indication, some significant changes are afoot at Advent Software Inc. There's a new approach to product development; there's buzz about new products that will soon hit the market; there's a new openness that appears to permeate the whole management team; and there's the company's attempt to focus on its core strengths, which implies a desire to integrate with more third-party providers when it's appropriate.
One also senses that there is a strong desire to re-establish the reputation for innovation that the company enjoyed shortly after its founding in 1983, even though much has changed technologically over the past 29 years.
1983 was the era of the first portable Betamax video recorder, the year Motorola introduced the first mobile phone, the year the compact disc (CD) was first introduced to the general public, the year Lotus introduced Lotus 1-2-3, and the year that Microsoft introduced Word. At that time, PCs were not widely used by individuals, and those who did use them primarily used DOS operating systems. There was no Internet as we know it today, no Web browsers, no smart phones and no tablets. Mark Zuckerberg had not yet been born!
In 1983, Advent's first portfolio accounting software release, Axys, was revolutionary. It was the first portfolio accounting system built for the PC, and it enabled many entrepreneurs to launch their own wealth management businesses. Over the years, however, Advent software's reputation as an innovator, at least in the independent wealth management space, has waned. Although approximately 2,500 firms still use Axys, the application is still built upon a flat database structure, which limits its ability to compete in today's marketplace. The subsequent release of Advent Portfolio Exchange (APX) in 2005 addressed the needs of asset managers, but it was not a good fit for many independent RIAs.
To specifically address the needs of wealth managers and financial planners, Advent acquired Black Diamond Performance Reporting LLC on June 11, 2012. Black Diamond, founded in 2003, was widely regarded as an innovator in the field of performance reporting for independent RIAs. The firm was one of the first to introduce a robust, Web-based platform that included graphically rich, dynamic performance reporting capabilities for both advisor and client portals. The firm's founder and CEO, Reed Colley, now a senior vice president at Advent, is widely viewed as an industry visionary.
Despite the merger, many advisors were initially skeptical of Advent's ability to re-establish its reputation as an innovator and improve its image with RIAs. Many advisors voiced concern that Black Diamond would be "Adventized." But instead it feels more like Advent is being "Black Diamondized." This change in attitude bodes well for advisors and for Advent's prospects in the marketplace.
A New Advent Attitude
The change of attitude at Advent appears to be emanating from the very top. Advent Software President and CEO Peter Hess told me that Advent "wants to help their advisors be great." This is a phrase that Black Diamond has used for years, but it represents a welcome attitude adjustment for Advent. "What we do won't change," Hess continued, "but how we do it will change. We've taken a lot of inspiration from Black Diamond, and integrated it into some of the things we are doing today."
Hess went on to say that Advent does not need to broaden its footprint. It is in every market and in every region it needs to be in for the next five years. He says Advent is now going to focus on what it started by improving its current products and services.
Specifically, Hess mentioned three broad areas that Advent Software deals with: integration, refinement and presentation. He maintains, and most experts agree, that Advent excels at refinement-that is, accounting, trading and performance measurement. It has not been as good at integration. He acknowledges this and has promised to do better in the future. He also says that Advent needs to do a better job in presentation-specifically, showing the data in a more easily consumable format. This means better integrating data into appropriate workflows and delivering it in the most appropriate format for the person receiving it.
Todd Gottula, senior vice president, has outlined the changes in the way Advent designs and deploys software. He hits on all the right design themes: user-centric, cloud delivered, cross-platform, fast, reliable and open.
How will the company accomplish this? For over a year, Advent has been working on the framework of a new hybrid solution that combines the functionality of the existing server-based systems most APX and Geneva users currently deploy with a new cloud framework. This framework will take data from existing systems, process it in the cloud, and make the results available to the user.
For example, data can be sent from the server-based software to the cloud, where reports and analysis are generated. The output can then be displayed on an iPad or PC.
There are a number of advantages to this hybrid model. The main one is that all of the Advent products will eventually have the same look and feel. Since navigation and functionality will become unified over time, this should save Advent money and speed development because Advent will only have to update a given section (like the reconciliation screens) once, instead of multiple times for each product. It should also simplify cross-training among product lines. Although it was not emphasized at the conference, Black Diamond will likely be the last product line to incorporate these changes, since it is already cloud-based, graphically rich and coded differently than the other products.
Black Diamond's Blue Sky Platform
Although Black Diamond is Advent's smallest division, it's the most important to independent advisors. During a chat at the conference, Colley and Black Diamond Vice President Dave Welling both highlighted how the division is benefiting from Advent's considerable resources. Among Advent's advantages are its deep understanding of portfolio accounting, its enhanced data feeds and its human capital. The effects of the merger are becoming apparent in Black Diamond's product development.
Black Diamond also announced the launch of the beta version of its rebalancing software at the conference, a module that has been under development for some time (we viewed an early edition a year ago). This software is notable for a number of reasons. Perhaps the primary one is that unlike other third-party rebalancing solutions, this one is built right into the Black Diamond platform. As a result, it achieves a level of integration that others will be challenged to match. This makes sense, because if you were going to build a new platform today, portfolio management and rebalancing would not be separate applications. According to Colley, Black Diamond took this approach to minimize the need for training, which can take weeks for other rebalancing applications.
The current version is being offered at no charge to beta users as the company asks for their feedback. The software does not do tax-sensitive rebalancing or location optimization, but it's hard to believe the company won't add those features in future versions. Colley says the release will not change the firm's relationship with rebalancing partners iRebal, RedBlack and Total Rebalance Expert (TRX). (Tamarac severed its relationship with Black Diamond when launching Advisor 9, a platform that included portfolio management, reconciliation and reporting.)
Expect Black Diamond to remain open to rebalancing integration partners, as Colley says it will, but it's possible that the relationships may change. Much will depend on the features Black Diamond eventually adopts (such as tax-sensitive rebalancing), and the prices it charges for them. Ted Rich, of Vinoy Capital LLC, who currently uses Black Diamond for performance reporting and RedBlack for rebalancing, told me that he would seriously consider using Black Diamond's rebalancing solution if it offered superior workflow combined with the capabilities he needed at an attractive price. A number of other advisors at the conference also expressed interest in a robust, tax-sensitive Black Diamond rebalancing solution.
Advent also officially announced at the conference the launch of an alternative assets solution within the Black Diamond platform, something requested by larger Black Diamond clients. The new functionality enables advisors and wealth managers to manage and report the details of their alternative investment holdings at the transaction level, allowing them to provide a more complete financial picture to their clients. "Our clients want to provide great solutions to their clients, and their success is directly related to their ability to anticipate and adapt to their clients' changing needs," Colley said. "Support for alternative investments is an area of growing interest for many wealth managers, and this solution eliminates one more boundary for them in providing the type of information that is essential to their clients. It's a great example of where we are continuing to innovate new solutions for our clients to help them on their path to greatness."
The new functions automate many common and otherwise time-consuming workflows, including estimate entry, audit tracking and reconciliation reporting. Clients can now update information about their alternative asset holdings in bulk instead of having to key them in one asset at a time. While this is a major step forward, it should be mentioned that it's still not as seamless to deal with alternatives in Black Diamond as it is equities or mutual funds, but the clients appear to be satisfied.
"Advent has been exceptional at giving us what we need," says Christopher Casdia, compliance and operations manager at Homrich Berg. "We now have a complete snapshot of our clients' alternative investments, with security-level performance including income and return of capital distributions. This new functionality makes it much easier for us to communicate with our clients when reviewing their alternative investments and discussing performance."
The Blue Sky platform is highly focused on four areas: personalization, workflow, scalability and extensibility. For example, you can personalize the whole user experience by role. You can set up a different home page for advisors, portfolio managers, back office staff, etc. Skyboxes, similar to widgets, are like mini-pages within a page. These can be customized and positioned so that each user gets the exact information he needs.
This allows firms to customize their workflows. For example, advisors might want to view portfolio activity summaries within a skybox. They might also want to see a breakout of fees and income as well as the best and worst movers within their book of business. From a list, advisors can then drill down to individual portfolios, accounts or holdings, make notes, generate reports, etc. We expect further workflow enhancements in the future.
Scalability refers to Black Diamond's ability to manage as many accounts as necessary throughout the firm. You can alter things like custom benchmarks, security classifications and fee schedules across all accounts if you would like. You can also view maintenance statistics (new accounts, accounts not assigned to a household, etc.), track cost basis, and more. Scalability also allows advisors to measure the performance of a portfolio against other portfolios or the performance of one advisor in the firm against another, so that management can make more informed business decisions.
Extensibility means the platform can be built out to meet advisors' needs. Black Diamond plans to stick to its core competencies. For instance, Colley says the firm has no plans to produce its own CRM system, but will instead rely on deep integration with partner firms such as Junxure and Redtail. And the firm will continue its cooperation with MoneyGuidePro in the financial planning realm.
While improving usability for advisors, Black Diamond has not ignored the end client. The firm's dynamic, interactive client portal offers a rich user experience. Advisors have the ability to customize it by controlling the information their clients can see and the format. Furthermore, the firm offers an iPad app, which advisors can private label and make available to clients through the app store.
A Welcome Change
Advent Software is in the beginning stage of a new five-year plan. The management team is focusing on the right issues, the culture is evolving for the better, and the product pipeline looks promising. If the company can continue to execute its strategy, the future looks bright for it and its customers.