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Financial Technology M&A Deals: Will Advisors Win or Lose?

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Financial technology firms have been at the center of attention in recent weeks, with a flurry of transactions involving financial technology providers.  

Private equity firm TA Associates bought a majority stake in NorthStar, parent company to CLS Investments, Gemini Fund Services and Orion Advisor Services. Fidelity moved to fill a data aggregation and financial planning hole in its offering, buying eMoney Advisor. SS&C continued its acquisitive ways, buying Advent Software after prior purchases of GlobeOp, DST Global Solutions and Portia. 

Prior deals in the financial technology arena included Morningstar’s purchase of By All Accounts, Actua’s acquisition of FolioDynamix and the acquisition of Placemark by serial acquirer Envestnet. Financial technology firms left out of the merger frenzy must be starting to feel like guests wearing sweat pants to a black tie event. 

Many advisors probably feel the same way, wondering whether they’ll see any benefits from these deals.

People often talk about mergers using the same cliché often used by boat owners: the happiest day is the day you buy a boat and the second happiest is the day you sell the boat! I’ve been both buyer and seller in financial services deals, and have seen the good, the bad and the ugly of mergers. I’ve benefited from transactions that worked well, while suffering through those that were poorly thought out or failed in implementation. 

One of the most memorable moments of my career was the morning I found out that my firm was divesting a troubled subsidiary, freeing me from a transaction implementation that wasn’t working. I remember dancing a jig on the train platform that morning, which to my great relief, no one captured on film. 

Will these deals end in great success or in heartache? Advisors have every reason to be skeptical, but we see reasons to be optimistic about these business combinations. Here are our thoughts on each.

TA Associates/Northstar

My firm, Advisor Partners, has more than an academic interest in the TA Associates acquisition of NorthStar. Orion Advisor Services provides services to us and we’re also preparing to work with Gemini Fund Services on a mutual fund that we’ll be sub-advising. 

We’re optimistic about this transaction, expecting the involvement of TA to have a positive impact. This transaction provides exit capital for a co-founder who wants to cash out of the business, resolving a potential liquidity issue for NorthStar. In addition, it can be expensive to spend the money necessary to have technology offerings keep pace with tech spend from deep-pocketed competitors. The transaction may provide the funding for Orion and Gemini to retain a competitive edge.   

We view TA as a good strategic partner for NorthStar, sharing their insight as a private equity firm with extensive experience in financial services. Although TA will eventually require an “exit” from their investment in NorthStar, their track record implies that they’ll be around for several years before another liquidity event becomes necessary.

We’ll be monitoring our relationship with Orion to identify any deviations from our expectations. Given the transaction, we’ll be paying extra attention to their level of service, evaluating whether the resources allocated to our account have increased or declined and monitoring whether we have more or less access to key decision-makers. We’ll also assess strategic or financial changes that filter down to us as an advisor client.  

Fidelity/eMoney Advisor

Fidelity’s acquisition of eMoney Advisor appears to be a step forward in Fidelity’s quest to build a next-generation advisor platform, and another milestone in the industry’s competitive response to the threat of robo advisors. 

eMoney Advisor adds to Fidelity’s capabilities, providing an integrated dashboard of financial data as well as financial planning and collaboration tools. eMoney has been aggressive at building integration capabilities, linking its dashboard to a broad array of other software tools. The transparency that eMoney provides to other client assets appears to be a foundational element to this transaction. 

Advisors who use eMoney, but don’t use Fidelity as their primary custody provider, have expressed the most vocal concerns about this transaction. It’s a rational concern, given the mixed experience advisors have had with custodian acquisitions of technology providers.

Acquisitions of technology providers “fail” for different reasons, including underinvestment, poor integration or integration strategies that favor customers of the acquiring firm at the expense of customers of competing firms. We’ve heard concerns that Fidelity custody clients will be favored by future innovation at eMoney, with clients of other custodians treated as second class citizens. 

Fidelity seems keenly aware of the risks, and appears to have addressed these concerns in a direct manner. eMoney has been established as a subsidiary that will operate independently from the Fidelity custody operation, with separate funding and an open architecture commitment to its legacy client base. 

There is room for optimism, we think, though we recommend that advisors monitor the follow-through over the coming months.


The last transaction may provide the most integration challenges, but also offers considerable benefits if successful. 

SS&C is among the most acquisitive of financial technology companies, and has an extensive set of relationships with institutional clients. Advent Software gives them a much deeper presence with financial advisors, bringing relationships with 4,300 customers. This transaction ends a couple of years of uncertainty for Advent, including considerable speculation about its future. 

But before breaking out into a chorus of “Don’t Worry, Be Happy,” advisors should be wary of the challenges that await the merged firms. Advent’s acquisition of Black Diamond proved to be challenging, with many observers pointing out cultural and technology differences that never were completely addressed. Black Diamond’s fate is again uncertain. 

To maximize the benefits of the transaction, SS&C and Advent will need to make some difficult decisions. The combination of SS&C and Advent will likely require challenging decisions about personnel – who will make key integration decisions, who will lead different parts of the firm, and how staffing redundancies will be resolved.  Equally challenging decisions will need to be made about product priorities, technology direction and culture.

We recommend that advisors ask detailed questions about the strategic plan for the merged entity and evaluate their satisfaction with the answers.

And Watch for These

“Expect the worst but hope for the best”—another popular but appropriate cliché applies here. We are hopeful that each of these transactions will be beneficial to advisors, but offer a few thoughts about how to identify warning signs of a disaster in the making. 

Departures of key personnel often provide an early warning sign, particularly if the replacements fail to meet the standards set by their predecessor.  In our view, it’s also important to watch the pace of integration—does the company meet its stated plan or are there delays or material compromises in the plan they’ve presented to you?

We also find it interesting to watch for subtle changes in how the leaders of a subsidiary talk about their parent company. There are often indications of stress to be identified by paying attention to what is being said, or not said, during conversations. 

I spent part of my career as a partner in a firm owned by a large European bank. As our relationship with the parent company soured, I think it was easy to see the changes in our relationship manifesting themselves with decreased emphasis on the parent company in pitch books, more evasive answers about the parent company in client meetings, and ultimately in readily apparent friction in meetings that included representatives of the parent company. 

The other side of the coin requires less detective work: happy and committed workers, faster and higher quality turnaround time on client initiatives and rapid innovation will provide the evidence that advisors need to judge these transactions as winners.


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