This publication caught up with Peter Hess, Advent Software CEO, for a chat about recent strategy and developments.

Peter Hess has been chief executive at Advent Software, the wealth management technology firm headquartered in San Francisco, CA, and with a presence around the globe, since 2012. He recently swung by London as part of an international trip and this publication caught up for a chat about recent strategy and developments.

Could you explain where Advent is right now in terms of its business and growth plans? Is it on target to go where it wants to go?

Advent has just celebrated its 30th anniversary and we’re innovating technology solutions for investment managers as much now as we did 30 years ago. Our focus is on providing the technology infrastructure for professional investment managers, from small independent RIAs to the world's largest banks. We serve clients of all sizes, and we specialize in portfolio accounting, reporting, trading, and compliance.

A major part of our growth plans include taking advantage of the technology paradigm shift around cloud computing and social and mobile technologies. Many of our clients want to access our technology and our capabilities through the cloud and they want access through their mobile device. Our clients are so accustomed to using cloud, social, and mobile technologies in their personal lives that they now want to be able to utilize these technologies in the workplace – and we have been developing solutions based on these changes

Where does the firm see its business developing over the next five years or so, and how?

When I look out into the next five years and evaluate the things we are doing to grow our business, I think we are going to bring a great deal of innovation to the market. We've always been committed to investing close to 20 per cent of our revenue back into R&D and that commitment remains strong today as we continue to put out new releases that go deeper in functionality. We are also building a new cloud platform called Advent Direct that we unveiled at our client conference in September. The technology behind Advent Direct will enable us to deliver our next generation set of cloud-based solutions.

We are currently working to make our current products available in the cloud and in some cases rebuilding capabilities on the new cloud platform, which will make it much easier for people to get up and running and adapt. Advent Direct will offer exciting capabilities that marry workflows across traditional applications, both Advent and third-party – and deliver them through an attractive, intuitive user experience, making it that much easier for our clients to get their jobs done.

What does it see as the main trends in the wealth management industry in the US and outside? (Can you talk a bit about Asia, Europe and other regions as separate groups)?

In general, Advent sees the following main factors influencing the global wealth management industry:

- The globalization and growth of wealth as firms are growing by investing overseas
- Increased investor expectations for risk management and transparency
- Regulatory change and complexity (Form PF, Form 1099, AIFMD, FATCA, Suitability & RDR, MiFID II and Solvency II being the most prominent currently)
- Technology paradigm shift to involve cloud, mobile and social in end-client communication
- Expansion into multiple business lines (advisory & discretionary)
- globalization and growth of wealth

These are all important trends that we work with our client base to benefit from by developing our solutions to meet these increased requirements. The four core tenants in our continued solutions build out and development are global coverage, regulatory compliance, expanded instrument coverage, and support for cloud deployment. These core tenants ensure that we continuously focus on bringing new versions and products to market that allow our clients to run their business very cost efficiently while minimizing their operational risk.

In the US specifically, a major trend is the “breakaway” movement with brokers, advisors and teams leaving the big wire-house firms to set up their own independent advisory businesses. Another major trend we’re seeing in the US is an increasing regulatory burden on firms of all sizes.

Regulatory compliance is also one of the biggest drivers behind a lot of technology investments in the financial services industry in the EMEA region and this is apparent when we speak with our prospects/clients/influencers.

In the Asia Pacific region, we see that many industry experts are predicting that the number of high net worth individuals and total HNW wealth in Asia Pacific will surpass North America in late 2014 or early 2015, reaching over $5.5 trillion in AuM. Other trends in the APAC region include:

- A new mutual fund recognition program or funds registered in Hong Kong will allow direct access for fund managers into China for the first time in 2014; bypassing the current joint venture requirements currently in place for foreign managers. The new legislation will allow dunds domiciled in Hong Kong, and managers licensed by the Hong Kong Securities and Futures Commission, to be sold directly in China and vice versa.

- This could adversely affect the existing joint venture funds in mainland China, which have seen their market share of AuM to over 50 per cent at the expense of local Chinese fund managers.

- The relationship between ultra high net worth (UHNW*) individuals and family offices in APAC will continue to be a focus for global wealth managers. The aging of the first generation of APAC wealth creators and the growth of the second and third generations that are looking for asset diversification away from the families’ core business (the source of the wealth) in addition to more transparency and global mobility will create new opportunities for global wealth management. (Advent: *UNHW is typically defined as an individual with $50 million or more of investible assets.)

A big trend in the US, both before and after regulatory changes, has been that of people leaving the big houses and setting up on their own to form RIAs and other businesses. How does Advent look to cater to this market and what sort of strategies is it adopting?

The proliferation of the RIA and wealth management industry in the US is certainly a trend and we continue to develop dynamic solutions that help these firms both set up shop and continue to grow their businesses. We offer a number of award-winning solutions for advisors to choose from to best fit their business, such as Advent Portfolio Exchange® (APX), Black Diamond, and Axys®, including access to 800 custodial data feeds through Advent Custodial Data®.

Advent’s acquisition of Black Diamond in 2011 reinforced our dedication to the advisor community and our commitment to delivering an unparalleled combination of technology, service, and integration to help them grow. In the past two years, the Black Diamond team has more than doubled its service, operations and product development staff, and an integrated Advent/Black Diamond sales and solutions consulting team supports prospective new clients with evaluations of their technology needs.

We are also focused on being flexible, providing deeper, more seamless integrations with RIA custodians and other providers of advisor technology including CRM systems, trading platforms, and analytic tools.

Can you give us some examples of important new wealth management clients for some of your services/products?

The success of the pairing of Advent and Black Diamond can be seen through new clients representing a broad spectrum of the industry – from advisors and wealth managers to family offices from multiple parts of the industry, including independent RIA and independent broker-dealer markets. Among them are Moneta Group, H.D. Vest, Verde Capital Management, Welch Hornsby, Homrich Berg, RMB Capital, and Clarfeld Wealth Strategists & Financial Confidantes. 

In the EMEA region, some of our key new wealth management clients for Advent Portfolio Exchange (APX) include Sparebanken Vest, Al Rajhi Capital, and Atlantis Investment Management.

How do you feel about your recent published financial results? Any highlights/issues to sort out?

We had another year of record revenue in 2013. The solutions that we provide to our clients are a must-have for their businesses. We have very high renewal rates and a high degree of predictability in our business. Ninety-one per cent of our revenue is recurring in nature. It's a nice, very predictable, durable business, and that's one of the reasons I think investors are drawn to the Advent story. In addition, many of our investors actually use our products, so they’re familiar with how essential our systems are to the buy side. From a technology standpoint, I think it's one of the most durable, predictable, technology businesses out there and I think that's reflected in the attention that we get from investors.

Revenues: about a third of Advent’s revenues come from alternative investment sectors; a third come from traditional asset managers and a third come from wealth management firms.

Finally, can you reiterate what you think makes Advent unique?

Advent’s 30-year history of innovation in providing the most critical and powerful technology infrastructure for professional investment managers makes us unique in the market. We were really the big innovators in the industry from the beginning when we brought this type of technology to the PC. Advent disrupted the space, making it much less expensive to actually start an investment management firm because the technology needed to run it was no longer on a really expensive mainframe, but instead, was on much more affordable hardware.

Since then we've continued to expand our solutions and geographical presence as well as support for different forms of investment managers. We have an experienced employee base with deep domain expertise in investment management technology and operations, and we continue to focus on being innovative in order to help our clients thrive. Technology and investment management are in constant change. To lead, you have to constantly challenge and refresh your assumptions of what is possible.  You have to reinvent yourself along the way to stay ahead. We do this very well at Advent and will continue to do so into the future.