After being ‘blown away’ by AdvisorPeak’s engineering prowess, Addepar is buying the company to arm its clients with automated rebalancing software -…

The 12-year old Mountain View, Calif., performance reporter, with $3 trillion plus of adminstered assets, is buying the 18-person, third-year startup to apply to its 600 clients.

Addeparwill soon own AdvisorPeak--the third acquisition sinceits 2009 launch--to carry out CEO Eric Poirier's toppriority, arminghis firm's 600 clients and their $3 trillion of AUM with automated rebalancing software.

The deal with the three-year-oldrebalancing software startup,staffedbyalumni of RedBlack and Trade Warrior, is not quite a shotgun marriage.

Addepardid a vendor deal with AdvisorPeak earlier this year, and the chemistry between the firms became immediately apparent, their principals say.Addepar signed a rebalancing deal with RedBlack in 2017.

"We integrated and AdvisorPeak became far and away our biggest rebalancing integration," says Addepar CEO Eric Poirier in an interview. "It made all the sense to become more strategic."

The deal signed today (Oct. 22), is expected to closeas early next week.

Addepar, which has 545 employees, just raised $150 million of private equity capital in June at a $2.17 billion valuationand wasted no time deploying capital.

Damon Deru, founder and CEO of AdvisorPeak,says the decision was strategic for his firm, as well. The initial integration deal with Addepar immediately became the firm's most rewarding collaboration, he says.

He also sees the merger as an extension of what sparked him to launchAdvisorPeak in 2018 -- the quest to automateone of the least automatedand time-consuming processes in financial advice.

Rebalancing software, however, has mostly fallen short. RIAs simply don't use it nearits optimum capacity -- at least, in part, because it isn't user friendly enough.

"It's still one of the most underutilized softwarein the industry," Deru says.

"There is most definitely an intellectual moat around rebalancing software," he adds.

"Once you start factoring in real-world client scenarios such as household-based trading across multiple custodians, client trade restrictions, cash management, etc. it becomes complex quickly.

"If you look across the most successful rebalancing systems in the market today, they were all born out of an advisory practice, and AdvisorPeak is no different.

I believe part of the secret sauce that makes AdvisorPeak resonate with the advisory community is the fact that weve been in their shoes and understand what challenges they face, and we built our software to solve those back-office trading challenges that advisory firms face." Deru says.

AdvisorPeak's software stands out for a number of reasons,saysBard Malovany, Principal at Aspect Partners an advisory sub-unit of$1.5-billionAlmanack Investment Partnersin a release.

"Not only has AdvisorPeak delivered impressive trade management logic, a superior user interfaceand customized model management and trading, their entire culture is built around exceptional service, he said.

"We have experienced [it] with every single person weve worked with. They will be a great complement to Addepars client-centric platform.

Poirier believesAdvisorPeaks trading and rebalancing solution is highly scalable, flexible and cloud-basedand truly streamlines the portfolio rebalancing process.

"Also, 75% of the AdvisorPeak team has worked in the advisory space in some capacity, so they deeply understand the day-to-day challenges of growing a firm and serving clients," the Addepar CEO says.

That dream of automated rebalancingacross the RIA universe got deferredwhenformerly freestanding rebalancing software companies got buried inside bigger firms whereinnovation was a lower strategic priority, saysDeru.

Indeed, TD Ameritrade bought iRebal and gave it away free in 2013. See:TD Ameritrade will make iRebal software available free to all its RIA clients

Tamarac became part of a larger Envestnet bundle. Morningstar swallowed Total Rebalance Expert in 2015. Invesco bought RedBlack in 2019.

Deru believes the rash of merger stalledinnovation, "and we still feel like that," he says. "We have more ideas than resources to execute on them."

Deru will soon be buried in Addepar, as well,but with the opposite effect on innovation, he professes.

Addepar'sresources and culture of innovation will allow AdvisorPeak to travel a "long road map" of product innovation that it's 18-person staff can't advance on its own, Deru says

"AdvisorPeak shares our values and our commitment to R&D, and comes to us with a depth of experience in the trading and rebalancing space," says Poirier.

"We believe theyve always been in tune with and ahead of the market in their product development overall. Crypto has certainly risen as an area of interest for our clients, and the current capabilities within AdvisorPeak will continue to be offered."

Existing AdvisorPeak customers will still get service from AdvisorPeak but the decision hasn't been made about whether the AdvisorPeak brand will be maintained.

Poirior saysAdvisorPeak is currently sold as a technology integration available within Addepar, "which we will continue to do."

"However, it will transition to be offered as an add-on option as part of the clients contract with Addepar, for an extra fee.

"It is a high priority to make the transition as seamless as possible, and to that point, there will be no immediate changes to any contracts today. Pricing, terms, support and training will remain as they are today," he says.

If there's an irony to the merger, it's the dissimilarity of pedigrees between the two merger partners. Addepar started in 2009 with the proverbial piece of white paper, and the RIA software specialists coded apps in relatively backward ways.

AdvisorPeakhas its share of relative old-timers including Deru and Peter Giza, chief product officer and formerRedBlack executive.

Asked about that odd matching of old and new, Silicon Valley blue bloods and not, Poirier, who came aboard at Addepar as CEO from Palantir in 2013, chuckled and said the two firms match up where it counts..

"We've been blown away by the depth of talent and quality product," he says. "We admire what they've built."

Cashing out wasn't an option.If cashing out were the priority, Deru says he was in a position to wait because he had a list of suitors.

"We've had plenty of acquisition opportunities," he says.

The rest is here:

After being 'blown away' by AdvisorPeak's engineering prowess, Addepar is buying the company to arm its clients with automated rebalancing software -...

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