Sometimes it seems as if the wealth management industry is about 20 years behind when it comes to technology, which is why there are dozens of firms all seeking to bring better “solutions” to advisors and clients around asset aggregation, performance metrics, investment planning and transparency.
But few have the engineering firepower of Addepar, thanks in part to its co-founder Joe Lonsdale.
Lonsdale is a denizen of Silicon Valley, not the wealth management industry, which immediately may give him an advantage. He studied computer engineering at Stanford University and interned at PayPal. After graduation he joined Clarium Capital, the investment management company founded by Peter Thiel, and saw its assets grow to $8 billion.
In 2004, he co-founded Palantir Technologies; the idea was to create software that found connections, patterns and trends in databases of seemingly unrelated information. While a number of firms attempt to do this, Palantir’s strong suit is understanding "the human element," or, the way human beings make sense of the information in context. The interface claims to make finding data relationships easier, more intuitive and, in the end, useful. Starting with a handful of employees, mostly engineers, Palantir now has a staff of 1,000 and is reportedly narrowing in on $1 billion in sales. The federal government uses Palantir’s technology to sniff out irregularities, fraud and possible criminal activity.
Lonsdale and his Addepar co-founder Jason Mirra saw a similar need to make sense of data in the financial services space. “Virtually all of my friends with family offices had complained to me about how bad the software was in this industry and the problems this caused,” Lonsdale wrote in a recent post on Quora. “Many RIAs, family offices, banks, insurance companies, pension funds, SWFs and others managing trillions of dollars of wealth all have a specific set of issues around aggregation, reporting, billing, liquidity management, document management, all while dealing with difficult issues like multi-currency, partnership accounting, etc…”
While initially targeting family offices and advisors to the ultra-wealthy, if Addepar gets the formula right, there is no reason Lonsdale and his cohorts can’t scale the software and lower the price to bring the same kind of number-crunching firepower to advisors of the mass affluent. Good for clients, but bad for the dozens of smaller firms making a go at the same market.