Wealthtech company Addepar is spending some of the money it raised over the summer to buy AdvisorPeak, which builds trading and rebalancing software for financial advisors.
Addepar’s aggregation, analytics and reporting technology is used by advisors, family offices and large financial institutions to manage data on a collective $3 trillion in client assets. D1 Capital Partners led a $150 million round of funding in June that valued Addepar at $2 billion.
Addepar helps advisors efficiently analyze and report on client assets in an era of increasing portfolio complexity and asset diversity, Addepar chief product officer Don Nilsson wrote in a blog post. But it remains a challenge for advisors to incorporate ETFs, managed accounts and alternative investments into allocation models that can be rebalanced whenever assets move away from a client’s risk tolerance and goals because they need to use multiple different technologies.
“This has made it difficult for advisors to act at scale due to fragmented workflows and manual processes,” Nilsson said.
Addepar hopes to solve this problem by acquiring AdvisorPeak, which supports model creation, application, trade order generations and submission in a single workflow, Nilsson said. AdvisorPeak can also incorporate cash management, tax-optimization strategies and cryptocurrencies.
Terms of the deal were not disclosed, but the transaction has already closed, said Addepar CEO Eric Poirier.
While AdvisorPeak was already an option on Addepar’s third-party technology ecosystem, clients have been asking for a native portfolio management solution available directly within Addepar. When tracking which trading tools Addepar clients preferred, Advisor Peak emerged as a clear winner, Poirier said.
“AdvisorPeak has been the fastest growing rebalancer integration amongst our current clients and its trading and rebalancing solution is highly scalable, flexible and cloud-based, and truly streamlines the portfolio rebalancing process,” Poirier told Financial Planning. “Additionally, 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.
When combined with integrated data (which has also been an intractable problem) from Addepar, AdvisorPeak is the best rebalancer on the market.”
AdvisorPeak will be available to Addepar clients as an add-on for an additional fee, Poirier said. Advisors can still choose to use other trading and rebalancing tools that integrate with Addepar.
The acquisition shows how Addepar, which is best known for working in the UHNW and family office market, is making moves downstream to better serve the RIA market, said Johnny Sandquist, CEO of Three Crowns Copywriting and Marketing. “I think if you’re really going to hit the RIA market right now, you have to have some really excellent trading tech,” said Sandquist, adding that the addition of AdvisorPeak can help Addepar compete with wealtech companies like Orion Advisor Solutions and BlackDiamond.
What stands out about AdvisorPeak is a better user experience and easier-to-learn interface than other trading and rebalancing technology on the market, he said. “If you’re a smaller team where you have to do your own trading, it’s important that your technology is friendly and easy to use.”
This is the second trading and rebalancing technology that AdvisorPeak CEO Damon Deru has built and sold to a wealthtech company. His previous company, TradeWarrior, was acquired by Oranj in 2017. One year later, Deru sued Oranj and CEO David Lyon, alleging he was misled about specifics regarding Oranj’s revenue and product, was shut out of business discussions and improperly fired. Lyon filed a countersuit claiming Deru withheld information about TradeWarriors operations and liability, that Deru was terminated for “unauthorized business activities,” and that TradeWarrior responded by destroying or hiding computers and code.
“It was not a good fit, not a good partnership,” Deru told InvestmentNews in 2019 when he launched AdvisorPeak with Pete Giza, former chief technology officer of trading and rebalancing software RedBlack, and several TradeWarrior veterans. When Oranj closed down in 2020, AdvisorPeak was one of several wealthtech companies hoping to lure the hundreds of advisors still using TradeWarrior.
Deru did not respond to a request for comment.
The fate of TradeWarrior shouldn’t sound any alarms for AdvisorPeak’s acquisition, Sandquist said. Addepar is in a stronger position than Oranj was, and the recent infusion of $150 million signals a stable foundation. If anything, building and selling AdvisorPeak after building and selling TradeWarrior is a testament to Deru’s abilities.
If anything, it proves Deru’s ability to build trading software that advisors want to use and that others want to buy.
“He’s proven twice now that he can build trading technology that’s an attractive acquisition,” Sandquist said.