To Help Wall Street, Tech Needs the Right Tone: Addepar CEO

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Mentioning Wall Street to Silicon Valley technologists often invokes the reflex portrayal of an industry hazardously stuck in the past, like a sooty coal-powered factory.

Few could advance that idea better than Eric Poirier. Having spent three years with Lehman Brothers, he saw first-hand the legacy systems in play that cost millions in upkeep but provide little innovation.

But Poirier -- Columbia computer science grad, mentee of noted venture capitalist Peter Thiel and early member of intelligence software firm Palantir -- chooses a different tack.

The CEO of Mountain View, Calif.-based Addepar, which says its portfolio analysis platforms currently serve $300 billion in AUM, views technology development as complimentary to the work of financial advisors and doesn't buy into the robo versus human debate.

But he acknowledges that technological development can be intimidating to those not involved in it. So he works with advisors and firms to get at the most important challenge he says faces the industry: building trust with the end client.

In a conversation with ReinventWealth, Poirier discusses the tone fintech firms should strike in developing innovative technology for the industry and how thoughtful engagement can bridge any divide between Silicon Valley and Wall Street.

People want tech solutions that don’t threaten them. How do you approach that challenge?

There are lots of people in this industry who do want something that's better. People don’t want to be living in inertia or in a world where technology isn't serving them. I think people have just become accustomed to solving problems the old way because they've been solving the problems that way for such a long time. It's just really hard to deliver that thing that's better.

Some of the robo advisors are changing their tune, which I think is appropriate and good, where an RIA can use a robo advisor as an onramp for new client relationships in a cost-effective way, but the RIA owns the relationship for a longer term. That's a sensible business strategy. If you're coming out of the gate saying, 'We're going to build tech to replace a whole bunch of people,' then sure that's threatening and I also think that's counterproductive.

At the end of the day wealth management is built on trust, understanding nuance, the goals and objectives that people have. That requires a person-to-person interaction in my experience.  Especially as your goals and objectives become complex.

If your goal is to minimize fees and taxes, then of course the best option is robo advisors. But more complexities in your situation create the nuance that makes wealth management important and something that needs to be a person-to-person thing.

This is similar to the relationship a patient has with their doctor. You're looking to your doctor for expertise, perspective and a frame of reference. But, you want your doctor to have the have the most modern tools. You want your doctor to be continuously evolving. If you go to your doctor's office and they have a dot matrix printer, it should be a signal: "Is this the best care that I could be getting?"

I think that's the more appropriate analogy. We see ourselves arming large and small investment managers, wealth advisors and so forth, with modern tools so they can do their job better.

Some advisors fear that robos are meant to replace them. Is that a valid concern?

Because some of the newer tech to hit the scene, where the motivation is to replace people, I think that's what can create that type of fear. But, again, you don’t need to be afraid of technology, you need to be aware of what is possible today that wasn’t possible yesterday so you can be on your front foot serving your clients.

It's your responsibility to understand that and employ that. And it's not a threat at all. It's saying the struggle from the day-to-day is retaining clients. It's becoming an increasingly competitive space and you're disadvantaging yourself if you're not steeped in the new thing out there that can actually help you better serve your clients today.

Isn't there a point where robos could become complicated enough where they could replace people?

I don’t dispute that. I think that's a very reasonable way to think about it, but I am disputing whether that takes the human out of the equation all together. It's not clear to me that it takes the human out of the situation. [Robos] just arm the human with a better set of tools: now you can actually scale your operation much more effectively because the system is suggesting to you and to your client that they should be doing this differently that they weren't do before. They can also suggest the conversations you're having with your clients might be sub-optimal, allowing you to build a stronger practice.

For me, the human versus tech battle doesn’t ring true. Maybe that's because my frame of reference has always been building tech that augments humans and makes them better.

You're a service provider. What about firms that want to keep their tech in-house because they view third party providers as a weak link?

I've worked with larger firms to great success, both at Palantir and at Addepar, and there's a lot of nuance there. Larger firms need to have a really strong point of view: "What strategically is important to us? What do we want to control and own?" But there's also this recognition that they are not a software company. That's not their skillset. They are trying to run their business.

There is this willingness for independent companies to partner with institutions that are in different stages of rethinking their innovative tendencies. I'm actually finding that more often than not the big institutions are saying, "We have a problem that we very clearly can't solve. It would be foolish for us to go try to sink five years into building what you already built because we don’t have the talent base you have."

Our engineering team is absolutely unbelievable. One of our guys just won the most coveted programming contests in the world this past year in Taiwan. It was like the Olympics of programming.  We have 50-plus engineers that are just the best, of the best, of the best, and they really want to build software that makes really hard things effortless to do. Some of the big institutions see this and they say, "Whoa, that's really cool. How do we get it?"

Yet there are some firms still struggling with how to put together a website that is easy to navigate and is regulation compliant.

Every big institution now has a digital strategy group. I'm spending a lot of times with those guys. What they’re doing is thinking in a pretty ambitious way – how does their website become the way that we communicate de facto with all of our clients?

That's very different from having a website with this nice veneer across the offering that you provide. It's more taking, not just one page, but many pages about what just happened in this massive transformation in the consumer Internet space, where the purpose of a website is not just about listing content. It can be really engaging with clients in a meaningful way and in a deep way.

That problem is more nuanced and harder than the more mechanical problems of how to comply with new regulations. It's a more creative process and a more dynamic process. You need to segment your client base and you need to really understand how you want to engage with clients. It's a collaborative process between the digital strategy group and the people running the business, the people powering the technology, the vendor community and so forth.

A number of executives are behind the idea that their online presence and platforms have to replicate the Amazon experience.

Exactly. I'm a client of a wealth manager, I show up to my quarterly meeting. On my way there I'm on Google, Amazon, Facebook or Twitter, and I'm on my iPhone. I show up at the meeting with my iPhone and they show up with a binder of reports. I think, "This is stupid. Show up with an iPad and let's go through my portfolio together. I want to zoom in on different parts, and ask questions, and I want you to come prepared with good answers and make that hour of my time that's well spent, where you know it's your job to come up with the right stuff."

The bar is absolutely increasing, as it should. The quality of service that people are providing I think has been very mixed and I think that's what has eroded trust with clients. If I'm paying you for a service I want to actually get that service.

Money is emotional. How do you marry that human aspect of money management with the technology that you are developing?

That's why you need people in the loop. Technology makes the people who have those trusted relationships more prepared to answer questions on the fly. Those end-clients work hard for those assets. The number one rule in investment management is don’t lose the money, so if markets get bumpy, or the way you allocated turned out not to work out, that person who is affected by that wants to understand, they want to ask questions and they want you to be honest with them.

Sometimes people lose money and that's the way that it goes, and that's not pleasant, but if you can question the person that's advising you about what happened, that's a productive relationship. That's actually how you build trust.

When I'm looking at a piece of software, and we lost money because the allocation model said do this, and it really didn’t understand me when I said what my goal was, I'm frustrated because the planning software doesn’t know me. It can understand quantitatively how I might try to model my situation but it doesn’t know me in the way that a person can.

In terms of innovation in the financial advice space, what hasn't happened yet?

People on the tech side of the equation need to be a lot more thoughtful in the way that they're engaging this area of business that's been around forever, so that the tone and tenor of the engagement between tech people and non-tech people is much more like, "How do we solve problems together, how do we want to serve our clients, how can we augment people with better tech so we can better serve our clients?" 

That's how you actually start bringing trust into this space. Right now I don’t think markets are trusted by people and that's a big problem. A big part of the solution is bringing tech to bear in the right ways. If we're having an open and honest dialogue about what problems tech is good at solving and what problems people are better at solving, we can step it up and better serve the end client.

I see tech as cutting across everything, so we need to work with regulators to ask, what role can tech play, or what role should tech play? A lot of the regulators don’t have modern tech; how do you then right-size regulation and roll it out in a way where you have a clear understanding of the problem you are trying to solve and the most cost-effective way for people to comply?

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RIAs Technology Compliance Law and regulation Financial planning