Apr 26, 2017
The venture capital firm owned by FMR, parent of Fidelity Investments, just bought itself a chunk of Quovo Inc., an upstart data firm in the account aggregation business. See: Quovo rakes in $4.75 million from VC backers and a triumvirate of angel RIAs: Carson, Bicknell and Lockshin.
F-Prime Capital Partners of Cambridge, Mass. and New York-based Napier Park Global Capital, an alternative credit company, paid $10 million for an undisclosed stake in the New York-based startup that trumpets, with some irony, its later-to-the-game advantage.
"We've got the second-mover advantage," says Lowell Putnam, 34, who co-founded Quovo in 2013. "The first movement of account aggregation is 20 years old. Being able to start fresh has given us a big advantage."
In the world of account aggregation you'd better find an advantage because it is a crowded field that has never taken off as vigorously as anticipated. The hype is that it represents the central technology of wealth management because it puts financial advisors in a position to see all assets held by a client -- and give advice based on that sweeping 360-degree view. See: How Blueleaf sees itself taming the RIA's two betes noire -- and how it is being challenged on that
Early players like CashEdge (purchased by Fiserv), Yodlee (acquired by Envestnet Inc.) and ByAllAccounts (bought by Morningstar Inc.) specialized in the discipline. Others like SS&C Advent of San Francisco did it and its Advent Custodial Data enjoys a reputation for high-quality data. See: How SS&C muscle might be just what the Black Diamond and Advent Software doctor ordered
First mover disadvantage?
The advantage of being a first-mover is that such firms have established relationships with thousands of institutions for mutual sharing of data and they have gained experience in analyzing the data on behalf of clients. See: How Joe Mansueto's purchase of ByAllAccounts is mostly a show of faith in the Morningstar brand, global reach and the future of asset-quarterbacking as a billable service. Not only have they had time to iron out wrinkles but they can provide service at a competitive price.
But Quovo has worked to convince the marketplace that these old players are stuck on legacy systems that make their use cumbersome.
"We built everything ourselves," Putnam says. "We were the first in the cloud."
Still, there is an apples-to-oranges aspect when comparing data aggregation software, says Will Trout, London-based head of wealth management research for Celent. The value in these older brands is plain to see by how readily they have been snapped up by big players -- especially Yodlee.
Envestnet acquired the Redwood City, Calif.-based firm for a price in the $600 million range. It was a controversial price point -- the share price of Envestnet plummeted and has not fully recovered. With Envestnet shares deeply depressed, analysts cut Jud Bergman little slack on 4Q earnings call.
"Yodlee is more of a banking aggregator, says Trout. "ByAllAccounts has always been a player in the RIA space: reliable and comprehensive and a pioneer in terms of providing reconciliation-ready data. But as with Yodlee, I feel their brand has been subdued a bit by their partner organization."
The first movement of account aggregation is 20 years old. Being able to start fresh has given us a big advantage.
Lowell Putnam, co-founded Quovo