CUSTOMER Q&A: Addepar

A Q&A with Don Nilsson of Addepar

For investment professionals, trust has always been at the center of the client relationship. In early 2023, when panic-induced withdrawals led to the collapse of some of the nation’s top financial institutions, the impact rippled across the entire financial industry as asset owners looked to their advisors for real-time visibility into their financial holdings.

Addepar, a leading software platform for investment professionals, was quick to respond. Founded in 2009 by Joe Lonsdale in the wake of the financial crisis, Addepar was designed to help advisors weather turbulent market conditions by providing previously unattainable transparency, no matter how complex the portfolio. Today, the company serves 900+ firms and hundreds of thousands of users–including family offices, independent advisors, private banks, and broker-dealers–in over 40 global markets with more than $4 trillion in assets managed on its platform.

We recently sat down with Addepar’s Chief Product Officer, Don Nilsson to discuss the recent market turmoil and how Addepar is partnering with Plaid to create a more transparent financial system–starting by helping investment professionals serve their end-clients through an ability to link their financial accounts and view their cash balances across each account, all in one place.

Plaid: In your view, what are the biggest challenges and opportunities facing investment professionals today?

Don: The global investable asset pool sits at over $250 trillion according to a recent report by the Boston Consulting Group. Most of that is still managed with rudimentary spreadsheets and legacy platforms like Excel. As the pace of technological change and innovation continues to increase, leading investment professionals must adopt and leverage technology in order to remain competitive. Client expectations are also evolving, and firms are tackling new hurdles to exceed those expectations and evolve their practices. These challenges are paired with navigating very difficult market conditions with high volatility and geopolitical uncertainty – the industry is seeing massive change, and it’s a lot to manage.

For those that do embrace technological innovation and take a tech-forward approach, there is tremendous opportunity. Technology drives efficiency by decreasing manual tasks and streamlining processes. It enables investment professionals to make faster, better informed decisions for their client’s portfolios, and is the key to scaling operations. The Addepar platform helps firms navigate the ever-changing environment by providing a holistic view into the more than 225,000 portfolios they manage, enabling them to make better investment decisions on behalf of their clients, while also offering tools to efficiently operate and grow their businesses.

What are some of the ways technology–or fintech in general–can help address those challenges?

Don: First and foremost, fintech firms can help investment professionals aggregate and organize their client’s data in a way that empowers them to provide better financial advice. Fintechs provide durable, resilient, enterprise-scale technology that can be relied upon not just in the good times, but during moments of extreme turmoil and volatility. We’ve also found that an open platform with a robust suite of APIs is key to enabling clients to seamlessly connect disparate solutions to optimize their workflows and maximize operational efficiency.

Can you talk about Addepar’s partnership with Plaid and why that matters?

Don: Addepar and Plaid came together to solve an important problem at a particularly turbulent point in time. Addepar has direct feed connectivity to more than 350 data providers including banks, custodians, fund administrators, alternative platforms, aggregators and market data providers around the world, but during the bank run in early 2023, advisors needed additional visibility into retail accounts to understand their client’s cash holdings. Addepar’s clients manage some of the world’s largest pools of capital, so arming them with the very best data is critical and is true to our purpose to maximize the positive impact of the world’s capital.

How do these insights made possible through Plaid help create value for Addepar clients?

Don: Advisors can make data-driven decisions about the performance of their clients’ cash positions in order to provide the most complete, informed, precise guidance to their clients. This is critical at all times but particularly in the current interest rate environment and for managing exposure risk. This most recent banking crisis reminded everybody of the importance of FDIC insurance, and provided evidence for the value of line of sight into accounts across every asset class.

What near-term and long-term opportunities has this helped unlock for Addepar?

Don: In the immediate term, the Plaid integration provides investment professionals and their clients with seamless access to over 12,000 financial institutions. The visibility into cash balances is essential, particularly during this period of market turbulence. Longer term, I expect the value proposition for our clients will only continue to grow as Plaid continues to expand its network of financial institutions, particularly outside the United States, to serve Addepar’s increasingly global client base.

When it came to implementing Plaid, what surprised you the most?

Don: The thing that stood out to me initially is our shared values around an innovation-driven culture and our client centric approach. Given the market circumstances, we were looking to fast track the integration, and the Plaid team was immediately responsive and collaborative. We jumped on a kickoff call on a Sunday afternoon, and an hour later, we had a joint Slack channel going and were actively developing the integration. From an implementation perspective, it was incredibly easy – the Plaid APIs are very well designed and well-documented.

What has some of the early feedback been from clients using Plaid?

Don: The feedback from our beta users has been extremely positive, especially with RIAs, as the visibility into cash balances in retail accounts has been incredibly important for advisors at this time. The user experience is seamless and saves hours of manual work by eliminating the custodial paper trail and the hassle of credential management. We’ve also gotten feedback that advisors want to see transactions as well, so we are actively working with the Plaid team on that.

What trends do you see shaping the future of the wealth management industry, and how is Addepar positioning itself to stay ahead of the curve?

Don: There are several themes that are coming together to inform the future of the wealth and asset management industry. The first is a massive transfer of wealth to a younger generation – according to a 2021 WealthX report, HNW individuals are expected to transfer a combined $18.2 trillion to the next generation by 2030 – that is technologically sophisticated and increasingly focused on value-based investments. This generation of investors bring a different set of expectations, particularly when it comes to technology. The other force is technological innovation itself, as this industry is highly competitive and operational efficiency is critical. Technology is what drives that efficiency, and allows advisors to scale their business.

The recent market turmoil has reinforced that it’s never been more important to have a trusted financial advisor that leverages cutting edge technology, and Addepar’s platform provides advisors with just that. Our open architecture allows our clients to design the tech stack that is optimal for their business. With more than 60% of our employees dedicated to R&D, we are investing heavily in our platform, building to support massive scale as we continue to add more than $15B in assets to the platform every week on average, as well as developing new workflow solutions and data products that provide our clients with the competitive advantage they need.