ByAllAccounts Raises $5 Million, Goes Private
ByAllAccounts provides data aggregation and reconciliation services to investment advisors; they were owned by State Street but State Street recently began seeking bids to purchase the ByAllAccounts unit. After reviewing offers from larger more established companies, State Street sold the business unit back to the ByAllAccounts management team, CEO James Carney, Martin Dickau and Ellen Dickau.
The team went to Commonwealth Capital Ventures to raise money for the buyback, coming away with $5 million–enough to purchase the company, and still leave ample funds to cover operating expenses. State Street remains a ByAllAccounts client.
Congratulations to the ByAllAccounts team, with a shout out to State Street for engineering a great solution. I’m sure they could have gotten more money selling to other buyers, but they took the best deal for ByAllAccounts’ clients.
Bill said,
February 20, 2008 at 10:48 am
I recently adopted the use of BAA and have been fairly impressed with the overall functionality. I’m glad to see that a favorable deal was made, but to some extent preferred to see a large firm like State Street as an umbrella to BAA. BAA is not for everyone, and the interface is not as appealing as it could be, so I see challenges continuing ahead on the wide adoption of BAA in advisory firms. With State Street formerly backing BAA, I had more confidence that the service would continue uninterrupted for years to come.
James Carney said,
February 20, 2008 at 2:35 pm
Bill thanks for the kind words with regard to the BAA service. Some of your concerns are valid when looking at the face value of this transaction without any additional information. One of the biggest resaons for “spinning” the company out of State Street was to allow us to accelerate the delivery of new functionality, increased usability and greater breadth of coverage. While State Street was very good to us on a day to day basis, at the end of the day they have an institutional focus when it comes to investing in a market. While the business is growing at a great rate, the Advisory market was not an area that State Street would invest in since it was not part of their institutional business strategy. We strongly believe that by partnering with Commonwealth Capital Ventures we maintain strong financial backing as well as gain the opportunity to invest in areas we believe to be important to our clients. State Street is also a user, thus if they were not completely comfortable with our financial partner (they did plenty of due diligence) they would not have gone ahead with the deal. I believe that over the course of this year, our clients will see the benefits of this transaction. In addition, the management team has made a long term commitment to the business with the goal to develop the company into the market leader for “reconciliation ready” financial data.
Bill Ramsay said,
February 21, 2008 at 8:47 am
With the difficulties involved with consolidating financial data, I’ve wondered how much of the problems are attributable to intentional incompatibility vs. unintentional.
For many reasons, blindness to some user groups is inevitable, particularly when an organization’s systems are highly focused on internal users.
I’m sure legacy system issues also play a major role.
Still, it seems there could be conscious business decisions made by market leading custodians to not make the job any easier. After all, they’d prefer for advisors to custody all client assets with them. However, for advisors who are client centered rather than account centered, it is currently impossible to single custody all client assets. IMO, for RIAs, there are also significant fiduciary questions raised by a too cozy relationship between an advisor and a custodian.
Custodians also have concerns about the potential power of data vendors. I seem to recall that Schwab’s decision to purchase Performance Technologies may have been partially influenced by Advent’s ACD push.
While independence of advisors seems to me to greatly benefit clients, it does lead to a fractured user group with only sporadic organizing into a single strong voice. Vendors like ByAllAccounts can potentially be a more consistent voice, perhaps even more so with an organized communications effort with their advisor users. Would a custodian be more willing to listen if a vendor enlisted a “write your custodian” campaign if a custodian was unresponsive or obtuse?
Matt Abar said,
February 21, 2008 at 1:40 pm
My sense is that 90% of the incompatibility problems are unintentional. I have some hope that Your Silver Bullet may sort it out with an independent generic file spec, although that’s not their current focus. If there *was* a generic spec somewhere, then letter writing campaigns and other types of leverage could eventually force all the custodians and software vendors to adopt it.
What we really need is to form an independent non-profit standards body to create a generic spec. Once we have that, all the rest of it should fall into place.
Vendors like ByAllAccounts are a good Plan B, and I’m glad they’re around. But due to the added layer of fees, portfolio management systems still have to maintain a large library of interfaces to be competitive. Data vendors also don’t address the problem of system-to-system interfaces, which can be almost as onerous as custodial interfaces.
Bill Ramsay said,
February 21, 2008 at 9:07 pm
There has been at least one standards body- ofx.net, though I’ve never really taken a look at details until today. Specs are pretty involved- 665 pages worth.
Wonder what adoption by custodians is like. Banks seem to be on board, of course accounting for bank accounts is much simpler than investments. Aggregators are certainly relying on it, though it may be working much better for bank accounts.
Matt Abar said,
February 23, 2008 at 1:23 pm
Ofx is great, but not well suited for advisor data feeds. The aggregation is a step in the right direction, but (I believe) it still requires individual client interaction and passwords for accounts to be included in the consolidated data feeds. That’s appropriate for held-away accounts, but the main data feeds from the advisor custodians shouldn’t be dependent on individual client approval.
I think an independent standards body for the wealth management industry may decide to piggy-back on OFX, rather than write something from scratch. You could easily create a consolidated OFX feed that could be sent out by advisor, without client permission. I’m still a bit hopeful that Your Silver Bullet could spearhead this, but I’m not holding my breath.
Once we get an industry standard in place, everything would change. Interfaces will get much cleaner, reconciliation becomes easier, and the barrier to entry into wealth management software virtually disappears. All we need is a generic spec that everybody agrees to support.
Bill Ramsay said,
February 25, 2008 at 9:21 am
I think you’re right about accounts held with an advisor relationship. There’s no need for the client to do extra work when the accounts are already set up with the advisor relationship as part of the application. There may still be some value for the aggregation for clients’ aggregated views, but I agree it would not likely be a good idea to drive the data through the aggregator before coming to the advisor.
However, in addition to about 500 accounts with Pershing’s advisor division, we also manage another 244 accounts, $21 mil of assets, spread across over 50 custodians that cannot be linked with an advisor relationship. These are mostly 401k accounts. With qualified plans, the custodian considers the plan to be the owner of the accounts, and therefore will not take instructions from the pariticipant in assigning any kinds of servicing rights to an advisor- they require the plan to give the permission, which few plans are going to do- too much hassle and potential liability. For the custodians/recordkeepers like Fidelity, this setup also provides them with increased ability to try to create a strong relationship with the participant, so they can roll 401k balances to their retail IRAs when the employee leaves their employer. So, these are the types of accounts where an aggregator can provide value for advisors for investment accounts. From the custodians’ and plan administrators standpoint, they don’t have to worry about providing rights to every employee’s personal advisor, just the aggregators- and if its only a few, (right now I think there’s only 3- BAA, CashEdge and Yodlee), then it is much more manageable. From a Fidelity standpoint, they may still prefer not to help, but if the aggregators have enough clout it would be hard to resist.