Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

The Advent Of Advent

Eerily reminiscent of Microsoft, one adviser software provider has created a suite of programs, seamlessly merged with proprietary Web services. Like Microsoft, it sticks to no single growth strategy, but eagerly forms distribution partnerships and rapidly buys out other providers, including rivals.

Like Microsoft, it plays tough, engages in lawsuits and attracts antitrust investigations. And, like Microsoft, it has become the de-facto industry standard.

The company, of course, is San Francisco-based Advent. And the Microsoft-like, love-hate relationship it has spawned among advisers leads to one question: Will Advent's dominance of the portfolio management software market continue despite adviser and mutual fund company fears the firm is growing too powerful? Advent, of course, predicts its own future success. The secret, it says, is that the firm has never been just about its software.

"Think about what we really do," said Collin Cohen, an executive vice president at the firm. "We enable advisers and managers to deliver more value to their clients." Along with Axys, Advent's main portfolio management engine that's widely used in the fund industry, "we have tools and capabilities [as well as] integration with a whole host of alliance partners to allow advisers to start up and manage the growth of their practices," Cohen said.

And Advent is doing that at an increasing rate, ever since its founding in 1983.

Knowing firsthand how the players in financial services operate no doubt helped the company understand its market. Chairman and founder Stephanie DiMarco had been a financial analyst and portfolio manager at Bank of America, Summit Investments and Cole Financial Group. Peter Caswell, president and CEO, was formerly with Dun & Bradstreet. Cohen is a veteran of management consultants Bain and Co. and American Industrial Partners, a buyout fund.

Most other vendors are owned by strict techies, Cohen said.

Advent, apparently, gave advisers what they wanted. In addition to Axys, Advent developed reconciliation and contact management modules that work in conjunction with the main portfolio management functions. But Advent, even with its 800 current employees, recognized it was a minor player in the advisory market. The big guys - Schwab, TD Waterhouse, Fidelity - provide the essential back-office functions advisers required. So, Advent worked with the big guys to offer Internet-based access to advisers and their custodians' accounts.

Since collaboration is a way that allows advisers to keep in continuous contact with clients, Advent developed a point-to-point interface for downloading data. Later came Advent Custodial Data (ACD), an expansion that permits data management from multiple custodians.

For true data consolidation, Advent also unrolled TrustedNetwork, a secure method by which a group of financial institutions share data through Advent to help advisers manage multiple client accounts. Fidelity and TD Waterhouse are just two of the approximately 100 institutions providing data through TrustedNetwork. Advent basically turned TD Waterhouse into an authorized dealer that provides Advent software free or at low cost to affiliated advisers in a freestanding model, or integrated with Veo, Waterhouse's proprietary system.

If You Can't Build It . . . Buy It

And when Advent couldn't build or partner, it bought. At the end of 2001, it purchased Kinexus, a leader in wealth-management reports for advisers of high-net-worth investors.

Advent is happy with its partnering model. "We're finding that sometimes advisers prefer just to deal with larger institutions, and instead of getting software through us, they would like to go through institutions and get access to software as part of broader services that a Fidelity or TD Waterhouse can offer," Cohen said. But he says Advent will always be available direct as well.

To show its pricing flexibility, it assembled Advent Office Essentials, a package of products aimed at the small adviser and priced accordingly.

Thorns in Advent's Side

Advent was looking unstoppable. Its main challenges came from just two other products: Centerpiece, produced by a Schwab subsidiary, and Techfi, a small but sophisticated upstart. Centerpiece claims to have about 3,300 licensees, as opposed to Advent, which is licensed by about 6,500 firms. Techfi has about 500 licensees.

So what did Advent do? It bought Techfi and got sued by Schwab.

Advent encouraged its Schwab customers to switch to ACD from the simpler point-to-point system for downloading data. Since ACD actually aggregates data from multiple custodians, Schwab feared data would slip from its control into the electronic clutches of a mere software company. In turn, Schwab customers feared they would be forced into the more expensive ACD if Advent stopped supporting it point-to-point, although Advent promised that it wouldn't interfere.

The conflict moved into court, as Schwab sued Advent in November 2001. This past August, Schwab settled out of court. Under the new agreement, the two companies will support each other's products seamlessly through Dec. 30, 2004. So, users basically have more than two years to decide which platform to use.