Not every advisor was pleased in May 2011 when Advent Software announced it was buying its smaller, younger rival, Black Diamond Performance Reporting.
Some felt they’d been down this road before nine years earlier when Advent purchased another smaller competitor, Techfi, only to shut it down in 2005, leaving the advisor users of its portfolio management software in the lurch. Would the past be prologue again?
A year after the Black Diamond deal, one of its top executives says the business is growing briskly, and the marriage is doing well.
“There were a number of skeptics about the merger,” concedes David Welling, 44, formerly the firm’s chief solutions officer and now effectively the chief operations officer at the headquarters of the Jacksonville, Fla.-based business. “I think the biggest surprise for the market is the fact that the Black Diamond they knew and loved is still alive and well.”
Founder Reed Colley, who launched the portfolio management software firm in 2004, has left Jacksonville and moved into Advent’s corporate offices in San Francisco—where he’ll help advance the firm’s efforts to further penetrate the registered investment advisor market. (Welling says there are no plans to move BD’s workforce of 100 to California.)
One perhaps telling detail about the dynamic between the two firms can be found on Welling’s new business card.
“Black Diamond Performance Reporting” and logo are printed in large letters across the length of the top, while its new owner’s name and logo occupy a fraction of the space buried in the bottom right corner.
Welling joined the company in 2009 after 12 years at Charles Schwab, where he held various roles in strategy and practice management and was vice president at the custodian’s RIA unit, Schwab Advisor Services.
Business is booming, he says.
About 85 percent of BD’s clients are RIAs, with the rest independent broker/dealers or the wealth management divisions of banks or large asset management firms. BD has more than 330 clients, up 30 percent since the acquisition, while assets under reporting have risen 70 percent to $110 billion. More than 12 advisory firms with $1 billion or more in assets have signed up for Black Diamond’s services in the past year.
Would Black Diamond have done those deals anyway, without the merger?
“I think we’ve stayed on the curve we’ve been on. Being part of Advent has absolutely added fuel to our engine,” Welling says.
It’s easier to migrate clients from Advent to BD software than it is to compete directly with Advent, he says; more than 40 Advent clients have shifted to Black Diamond products in the past year.
One of the arguments for Advent’s $73 million purchase of Black Diamond was concern among Advent clients about its ability to produce software that could keep up with growing industry demands within the financial advisory sector.
Two years ago Black Diamond launched Blue Sky, its web-based portfolio management reporting platform. Welling says some new applications are on the works, including a rebalancing tool it hopes to roll out in the third quarter, and an alternative investment reporting function that’s currently in beta testing.
Advent has strong presence in the software markets for asset managers and hedge funds, but advisors had qualms about its long-standing Axys portfolio management system.
“For years Advent didn’t have a future technology platform that was purpose-built for the advisory market,” Welling says. “Those clients now feel like there is a future path for them at Advent.
“People ask us all the time, ‘Are more Axys clients shifting over, are you trying to move Axys clients?’ The simple answer is, not really. Axys is a great product. There are a lot of folks who are very happy using it,” he says. But the merger gives clients more options now, he adds.
Chris Casdia, chief compliance officer and operations manager at Homrich Berg, an Atlanta RIA with $2.3 billion in AUM, said the firm had been an Axys user for years but began looking at Black Diamond in 2010.
The firm had ultra-affluent clients with complex reporting needs that Axys couldn’t meet, such as the handling of assets that weren’t being held by traditional custodians such as Schwab and Fidelity, he says. Homrich Berg also was looking for portfolio reports that could be prepared faster, he adds; reports that in the past were sent out in the mail would quickly become outdated by the time the client received and opened it.
“There’s no reason not to have daily access,” Casdia says.
Homrich Berg was in the middle of its due diligence on Black Diamond when news of the deal with Advent broke. Casdia had heard the stories about Techfi and wanted to know more about what was ahead. He called Colley and Advent President Peter Hess and asked them what was up; after he hung up the telephone, he had a “high comfort level” with going ahead with the Black Diamond software.
“I thought it was a very wise move by Advent. The products and services that Black Diamond offered were clearly better. It was just more complete and more appealing,” Casdia says.