From 2012 to 2021, global assets under management (AUM) grew 118%, rising from $57.8 trillion to $125.9 trillion. A considerable portion of this wealth is managed by wealth managers for ultra-high-net-worth (UHNW) individuals, defined as those with a net worth of at least $10 million. Despite comprising only 0.6% of US households, UHNW individuals owned 30% of financial assets in the United States as of 2022. From 2010 to 2022, UHNW individuals more than tripled their wealth, underscoring the need for advanced wealth management software to oversee increasingly complex portfolios.

The Great Financial Crisis also illustrated the need for wealth management software. Prior to 2008, clients had a limited understanding of their clients’ portfolios due to data silos between financial institutions, fragmented wealth management systems, and a limited understanding of alternative assets’ cash flows. However, the limitations of existing wealth management systems were not fully understood due to general market stability. The GFC brought this problem to the forefront — as investors experienced severe market volatility, liquidity issues, and a sharp decline in asset values, the need for integrated financial data and transparent portfolio management systems became apparent.

Addepar is a cloud-based investment management platform designed to help wealth managers for UHNW individuals. It includes data aggregation, analysis, and reporting to provide wealth managers with a unified and granular view of their clients' entire balance sheets. It equips financial advisors with tools for detailed investment insights and portfolio customization, supporting a data-driven approach with a focus on scalability and data security. As of 2024, its clients include prominent companies such as Morgan Stanley, AllianceBernstein, and London & Capital.

Addepar, whose name stems from a Latin phrase that translates to “add a little to a little and you’ll have a great amount”, was founded in 2009 by Joe Lonsdale (Chairman, Former CEO) and Jason Mirra (Former CTO).

After graduating from Stanford with a BS in Computer Science, Lonsdale joined PayPal as an early employee. Following PayPal’s acquisition by eBay in 2002, Lonsdale, like many of his PayPal colleagues, decided to strike out and create his own company. In 2003, following the 9/11 attacks, Lonsdale cofounded Palantir Technologies alongside Peter Thiel. Their aim was to gather the country's top technical talent and create a system that could help intelligence services counteract terrorist networks and enhance national security.

In the aftermath of the GFC, Lonsdale saw another opportunity to solve an information asymmetry — this time between wealth managers and existing wealth management software. In 2009, Lonsdale successfully convinced Mirra, who was an intern on Lonsdale's team, to drop out of Carnegie Mellon University and help Lonsdale create Addepar. In 2013, Lonsdale and Mirra convinced Eric Poirier, who had been a Director at Palantir, to leave Palantir and join Addepar as CEO.

Addepar offers a suite of products designed to support wealth managers in managing their clients’ portfolios. The platform helps wealth managers optimize asset allocation by enabling portfolio transparency with its wealth management platform including portfolio analytics, report creation, asset trading, and billing automation. Although each of these features is housed within the same software, customers can choose which features they want to pay for.

Wealth Management

Source: Addepar

Addepar helps wealth managers understand what assets their clients own at a granular level by providing what it calls a “holistic” view of client portfolios. The company describes its product as “an open architecture, multi-product tech and data platform” that is meant to help wealth managers aggregate data into one dashboard.

For this purpose, Addepar has set up direct data feeds with service providers including custodian banks, fund administrators, and broker-dealers. Addepar’s wealth management offering consolidates client financial accounts for wealth managers across asset classes and custodial accounts and can be continually updated.

Analytics and Reporting

Addepar also provides an analytics and performance reporting feature that allows wealth managers to visualize portfolio data and show it to clients via branded reports.

Source: Addepar

In January 2021, Addepar acquired RCI, a fintech company focused on simulating investment scenarios, and rebranded it as Navigator. Augmented by Addepar’s repository of data, Navigator enables users to choose from various capital-market assumptions to understand hypothetical performance.

Navigator creates projections based on over 15K funds and 40 years of private equity cash flow history. It can be used to determine future distributions from investments, estimate returns on capital, perform liquidity modeling, codify cash flows, determine tax projections, and project the effect of accelerated capital calls. It can be used to help wealth managers inform their guidance to clients.

Source: Addepar

In addition to enabling complex investment simulations, Addepar allows users to create customized, branded reports that update in real time. Using Addepar’s pre-built templates or their own custom templates, users can create investment policy statements, reconcile assets against balance sheet benchmarks, send out investment committee reporting, or create quarterly reports that include an asset management summary.

Source: Addepar

Users can also associate up to 50K portfolios with a particular report, reducing the need for manual duplication. As articulated by a former executive at Addepar, users can “slice it and dice it in a lot of different ways to create different custom analysis”.

Family Office

Source: Addepar

In addition to its platform for individual wealth managers, Addepar also provides a family office software platform for UHNW families. The offering is intended to allow family offices to centralize their financial information with a complete view across entities, accounts, and assets.

This offering allows family offices to visualize portfolio data across complex ownership structures, asset classes, and currencies. It can also be used to produce customized, multigenerational reports. It also has a portfolio trading and rebalancing feature that family offices can use to align and rebalance portfolios across their books of business. It also allows family offices to calculate and track fees and bill clients.

Addepar acquired AdvisorPeak, a Utah-based provider of portfolio management and trading tools, in October 2021. This acquisition enabled Addepar users to natively trade and rebalance investments at scale to align with their clients’ portfolio goals. Although the two companies had previously collaborated, the integration of AdvisorPeak was intended to reduce manual workflows and technological friction.

Source: Addepar

AdvisorPeak supports all types of securities, including mutual funds, stocks, ETFs, and fixed income. Users can implement monitoring algorithms, custom trade minimums, or trading fee thresholds, as well as initiate bulk trades.

Trades made on the AdvisorPeak platform route through nearly every custodian bank and brokerage firm in the United States, ensuring that almost any trade can be executed. Furthermore, algorithmic and block trading can be accomplished using an institutional-grade TOMS system. To enable portfolio trading and rebalancing, AdvisorPeak integrates with commonly used third-party tools for forecasting and modeling,

Private Bank

Source: Addepar

Addepar’s private bank offering allows users to “design and implement a scalable technology platform” with an API toolkit that can be used to build integrations with proprietary legacy systems. It also provides a digital audit trail and permission tools for streamlining administrating workflows and meeting compliant goals. This offering is intended to help users aggregate financial accounts and provide their clients with a consolidated view of their portfolios.

Billing

Source: Addepar

Billing clients can be a tedious, manual process for wealth managers. Custom requests from clients, scattered data, and complicated billing systems result in countless wasted hours. Addepar’s billing feature automates much of this work, allowing users to accurately bill their clients for their services by managing fee structures, conducting the actual billing, and reconciling the payments received. Addepar allows users to implement unique billing structures, such as tiered or flat-fee schedules or asset exclusions.

By centralizing billing in one place, Addepar helps create visibility, which could help identify discrepancies. Fee calculations feature capital flow, manual adjustments, and proration to help everyone understand how fees are calculated. With access to past data, users and clients can quickly obtain past invoices, even if the billing structure has changed. Addepar also stations billing functions in a standalone module.

Client Portal

Source: Addepar

Addepar’s client portal is meant for clients to securely access their financial information, which is aggregated, analyzed, and presented by their financial advisors using Addepar. Clients can select from multiple portfolios shared by their advisor, view any commissioned reports, and select date ranges to view data for specific periods.

The overview tab provides a high-level summary of portfolio performance, net worth, rate of return, historic performance, and asset allocation. The portfolio tab offers in-depth insights into portfolio performance, allocation, and other relevant details. The files tab allows clients to access, download, filter, and search files shared by their advisor or uploaded by the client. The portal also allows for significant customizability, as clients can request their advisor to customize data display and organization according to their preferences. Data is updated as frequently as provided by custodian banks and broker-dealers.

To ensure data security, Addepar employs industry-standard encryption for data transmission and storage, as well as two-factor authentication. Clients can access the Portal on any web browser but can only use the mobile app through iOS.

Marketplace

In June 2020, Addepar launched a marketplace to give clients access to investment opportunities in private markets at no additional cost. Powered by Acervus Securities, Addepar’s in-house broker-dealer, the product was built to “facilitate investment analysis and execution in a unified and convenient way”.

Specifically, Addepar’s marketplace provides direct access to high-caliber private fund managers, VC-backed private companies, liquidity solutions for private investments, and more. Addepar also aims to help clients connect, making it easier for them to share information, conduct transactions, or invest together.

Integrations

Addepar’s Integration Center allows users to switch between platforms and connect various workflows. In addition to Addepar’s pre-built integrations that require no coding to deploy, Addepar’s API also allows users to build their own integrations with both in-house and third-party systems, ensuring that any legacy systems are not left behind. Example integrations include Wealthbox, eMoney, and Salesforce.

Customer

Addepar serves wealth managers, family offices, private banks, broker-dealers, and institutions. In its early years, Addepar targeted the “early adopters in the space”, particularly marketing to RIAs that had the latitude to adopt new technologies. By working with smaller clients first, Addepar was able to incorporate feedback and hone its product. As the technology proved effective and Addepar built out its data analytics capabilities, Addepar began receiving more interest from institutional clients. Since then, Addepar has targeted larger wealth managers, private equity firms, family offices, and private banks.

Market Size

The global wealth management software market was valued at $4.3 billion in 2022 and was estimated to be worth $5.3 billion in 2024. It is expected to grow at a CAGR of approximately 13.9%, to reach $12.1 billion in 2030. Growth may be driven by the continued digitization across the economy and a concurrent rise in automation.

In addition, the rising number of high-net-worth and UHNW individuals may drive the growth of the market. Despite comprising only 0.6% of US households, UHNW individuals owned 30% of financial assets in the United States as of 2022. From 2010 to 2022, UHNW individuals more than tripled their wealth, underscoring the need for advanced wealth management software to oversee increasingly complex portfolios. Since many UHNW and even RIAs use Excel or Google Sheets to track their balance sheet and performance, especially those that are outside coastal cities which tend to have greater tech adoption, there is considerable room for growth.

Black Diamond: Similar to Addepar, Black Diamond is a cloud-based service that offers robust data aggregation, portfolio management, and reporting features for HNW clients. Originally launched in 2005, Black Diamond was acquired for $73 million in 2011 by Advent Software, where it continued to operate as a distinct business unit. In 2015, SS&C Technologies acquired Advent Software, allowing it to expand its portfolio management and reporting capabilities. As of May 2022, Black Diamond managed more than $2 trillion in assets.

Orion: First launched in 1999, Orion is known for its extensive integration options and a compliance suite that scales regulatory procedures, making it especially beneficial for broker-dealers and advisors managing complex regulatory environments. Similar to Addepar, Orion offers portfolio accounting, native asset trading, and predictive analytics. Orion also has an in-house CRM system, Redtail, which allows advisors to manage client relationships directly within the platform. As of September 2023, Orion managed $3.7 trillion in assets.

Envestnet Tamarac: Founded in 2000, Tamarac was acquired by Envestnet in May 2012. Similar to Addepar, Envestnet Tamarac offers data integration capabilities, custom reporting, billing capabilities, and native trading. Envestnet Tamarac also offers an in-house CRM designed to work with Microsoft Office applications, allowing wealth managers to deliver differentiated client experiences. Envestnet Tamarac also integrates with the entire Envestnet ecosystem, enabling advisors to access a comprehensive suite of tools from a single platform. As of May 2024, Tamarac serves over 2.7K RIAs and manages more than $1.9 trillion in assets.

Addepar’s Differentiation

While there is significant overlap between Addepar and its competitors, some clients believe that Addepar differentiates itself in its ability to analyze complex ownership structures and alternative investment data. Additionally, some of Addepar’s users have described its competitors as akin to a “coloring book”, offering customization options but requiring users to operate within predefined boundaries.

In contrast, these users believe Addepar can be thought of as a "blank piece of paper," providing a higher degree of flexibility and adaptability. As a result, clients who primarily invest in traditional public market assets may not benefit as much from using Addepar.

While some in the wealth management industry perceive Addepar as offering increased flexibility and customizability, others find it more difficult to adopt. Some customers have criticized it for requiring dedicated consultants for implementation, while competitors offer "plug in and go" systems. Since Addepar is two to three times more expensive than its competitors, these additional costs have reinforced its reputation as a "premium priced product."

Despite Addepar’s relatively higher onboarding cost and fees, its ability to handle alternative assets helps provide differentiation for its product. The primary reason for this is that managing alternative assets requires fundamentally different metrics than managing traditional assets, including IRR calculations, multiples, capital calls, and distributions. Incorporating these metrics requires significant backend work and would likely entail growing pains.

For newer competitors who don’t have to significantly modify existing systems, the primary barrier to entry is scale. Addepar has spent over a decade aggregating data feeds and building relationships in the wealth management community, which may provide a data moat and a scale moat that may protect it from competition from new entrants.

Although Addepar does not publicly disclose its pricing structure, industry expert interviews have indicated that Addepar can be more than two to three times more expensive than its competitors, a price point management argues is justified by its enhanced functionality. While there may be variation between family offices, RIAs, and institutional banks, clients are typically charged between 1.2 and 1.5 basis points (bps), with each basis point corresponding to 0.01% of assets under management (AUM).

Addepar charges a fixed bps up to a specific asset threshold, transitioning to a tiered pricing model for assets beyond that threshold. For instance, in the hypothetical case of a Registered Investment Advisor (RIA) managing $1.3 billion in assets, under Addepar’s fee structure, the first $1 billion could be charged at 1.2 bps. The subsequent $200 million might be billed at 1.3 bps, and any amount over $1.2 billion, such as the final $100 million, at 1.4 bps.

Addepar also allows clients to “pre-buy” additional capacity at a lower rate. Building on the previous example, the RIA with $1.3 billion in AUM could choose to secure services for up to $1.5 billion at the initial rate of 1.2 bps. However, should their assets exceed $1.5 billion, the fee would revert to its standard rate. Some clients have complained about this arrangement, as it requires them to constantly determine their growth rate to figure out the optimal payment structure.

Although Addepar executives won’t comment on revenue figures, in December 2023, Poirier stated that Addepar had broken revenue records “in each of the last four quarters, in client acquisition, revenue growth, and client retention”. In addition, Addepar has rapidly scaled its total AUM, growing its AUM from $4 trillion to $6 trillion between December 2022 and May 2024. Addepar has also significantly expanded its workforce, adding more than 200 employees between March 2022 and May 2024, bringing its headcount to over 850. As of May 2024, Addepar served more than 1K customers in over 45 markets worldwide, processing 7 million custody accounts daily.

Addepar raised a $166.3 million Series F in June 2021 at a $2.2 billion valuation, with D1 Capital Partners leading the funding round. Over seven funding rounds, Addepar has raised a total of $531.4 million in funding as of May 2024 from investors such as 8VC, WestCap, and Valor Equity Partners. Although Addepar does not disclose revenue or profit figures, those close to the company have said Addepar has scaled ARR by more than 10x in recent years. According to Caplight, Addepar is currently trading at a valuation of $1.2 billion in secondary markets.

Regulatory Compliance Tools

Addepar could enhance its value proposition by developing a regulatory compliance service tailored to the financial industry. By leveraging its existing data aggregation and analysis capabilities, Addepar could offer a Compliance as a Service (CaaS) platform, ensuring that its clients not only remain compliant with complex regulations but also manage to do so with enhanced efficiency and reduced operational costs. Additional use cases could include real-time monitoring of transactions for regulatory breaches, automated reporting systems that compile and submit required documents to regulatory bodies, and risk assessment tools that evaluate compliance risks associated with different investment strategies.

Sustainability and ESG Investing

In recent years, ESG-related AUM has risen and is expected to reach $33.9 trillion by 2026, up from $18.4 trillion in 2021. Addepar has the opportunity to take advantage of this growth by integrating ESG data analytics into its platform alongside traditional financial indicators. Addepar could offer tools for assessing the impact of investments on sustainability goals, carbon footprint calculations, and social governance scores.

Improvements to Navigator

Addepar has stated that it is continuing to expand the capabilities of Navigator to offer a more flexible and robust projection engine that can further enhance modeling accuracy. Potential upgrades include incorporating a wider range of asset classes and allowing users to simulate more scenarios, such as accelerated capital calls. Addepar is also adding functionality that will allow users to stress-test portfolios by simulating performance under various historical market conditions, such as a debt ceiling crisis. Lastly, Addepar is working to incorporate pacing models for alternative investments, which would enhance users’ ability to forecast and manage portfolio cash flows.

Downmarket Growth

Given that there are only so many large-cap RIAs, family offices, and wealth managers, Addepar may need to eventually expand the type of customers it serves. However, some signs point to potential difficulty in downmarket growth. Because smaller-cap RIAs and family offices have less exposure to alternative assets, they may be more comfortable using Addepar’s competitors, who are less expensive and easier to onboard.

Moreover, despite positioning itself as a software company, the wealth management software industry is heavily dependent on manual processes to handle data reconciliation, which could pose a challenge for Addepar in scaling operations.

Lack of an In-House CRM

While Addepar continues to be a strong player in the wealth management software industry, companies like InvestCloud have gained market share in recent years due to their focus on design and customer interaction tools. Addepar has moved to close this gap by improving integration across existing tools, introducing more end-to-end solutions, and developing client-facing tools.

Despite these improvements, Addepar’s lack of an in-house CRM may give potential customers pause. Although Addepar integrates with third-party CRMs like Wealthbox, relying on third-party CRM solutions can introduce complexities when updates or changes are made to either platform. Using third-party integrations can also increase data security risks and limit control over user experience. Potential and existing clients may perceive the lack of an in-house CRM as a drawback, particularly since competitors such as Orion and Envestnet Tamarac possess one.

Complex Pricing Structure

Addepar’s pricing system has been criticized for being overly complex and increasingly expensive, particularly for firms that are rapidly scaling their AUM. Some users have expressed frustration over a pricing model in which fees increase with AUM but do not decrease proportionally when AUM drops. Furthermore, the complexity of Addepar’s software often requires users to hire external consultants to help manage the platform, serving as an indirect cost to using Addepar. Some clients have said that despite the complexity and the price, they continue to use Addepar due to its unique features and the high switching costs associated with migrating years worth of data. However, if a competitor were to emerge with a similar service at a lower price point or with better customer support, potential and existing clients could feel compelled to switch.

Addepar is a sophisticated investment management platform tailored to wealth managers for UHNW individuals, offering extensive data aggregation, analysis, and reporting tools. It enables a unified and detailed view of client portfolios, empowering financial advisors to manage and customize investment strategies. This platform integrates complex financial data across various asset types, providing a comprehensive toolset for in-depth portfolio management and strategic decision-making.