BridgeFT Launces WealthTech API to Provide a Centralized Source for (Multi-) Custodial Data
In the early days of portfolio performance reporting, advisors would download custodial data each day to their in-office servers, then manually clean up and reconcile that data to be able to calculate clients’ portfolio performance — a process that took up a huge amount of back-office resources. It also meant that every single firm needed to download what was essentially the same asset price and transaction data, and make the same adjustments for itself (e.g., allocating basis to shares in the case of stock splits or company spinoffs, properly classifying corporate restructuring events, etc.). Eventually, outsourced back-office solutions arose to perform the data reconciliation process for several firms at once on a somewhat-more-centralized basis, but it still made for an inefficient one-database-at-a-time process.
With the rise of the internet and cloud computing, however, firms like Orion, Black Diamond, Tamarac and Addepar were able to streamline the process of data reconciliation immensely. They could essentially download all of the custodial data to one centralized database in the cloud, clean it up themselves, and create tools such as performance reporting or billing automation for their clients that were built off of the data they stored. This meant thousands of downloads and reconciliations by each firm were consolidated down into one single centralized process on their behalf. Furthermore, all this custodial data was now kept on the cloud by a firm specifically entrusted with its safekeeping, rather than on local service in an advisor’s office, significantly reducing the risk of a flood, theft or some other misfortune wiping out all of the firm’s financial data.
But for everything that cloud-based reporting solutions did to streamline advisory firms’ back-office requirements, they did have one potential downside — the RIAs no longer directly owned and controlled their own custodial data. As such, they were limited to whatever tools the third-party reporting platform made available to them to access and utilize that data. If an RIA wanted to build anything such as a customized client dashboard off that data, they had little choice other than to keep downloading data directly from custodians and warehousing it themselves.
BridgeFT has been around for several years as a lower-cost performance reporting competitor to the bigger players like Orion, Black Diamond and Tamarac, providing streamlined billing and client reporting through its core product, dubbed Atlas. But in January, it announced a major new offering, called WealthTech API, that will offer client firms access to the underlying custodial data that BridgeFT uses to power its Atlas tools, so that advisory firms or even other AdvisorTech firms can build their own tools on top of centralized and fully reconciled custodial data.
Simply put, if an advisory firm wants to build a software tool based off of custodial data — client portals, billing tools, practice management dashboards — without needing to download and warehouse all the data themselves, they can now plug into WealthTech API’s application programming interface for a direct feed to that data, while BridgeFT handles the downloading and warehousing of the data itself.
What’s interesting about this news is that while BridgeFT’s original Atlas product is primarily used by smaller firms given its lower price compared to more robust offerings like Orion, its WealthTech API seems more geared toward larger-sized RIAs and even some midsize to large broker-dealers. After all, a firm would need to be fairly sizable to have the resources to invest in building a middleware software layer that could run off of BridgeFT’s data to begin with. This is a sharp contrast to the typical firm that would be using BridgeFT’s other product, the low-cost Atlas reporting platform. This means that BridgeFT may effectively be starting from scratch in finding a market for WealthTech API although given the fairly small market share of Atlas among financial advisors — only 1.2% in the 2021 Kitces Report on Financial Advisor Technology — that may be an intentional shift in strategy toward bringing in more firms with deeper pockets than Atlas was able to attract.
Either way, with WealthTech API’s introduction, BridgeFT joins a small but growing group of platforms specializing in managing and integrating custodian and other financial data, a group that also includes MileMarker, Skience and Wealth Access. The expansion of this category of AdvisorTech reflects the growing need for solutions for advisory firms to manage data across their own expanding tech stacks. It also presents an opportunity to provide solutions for firms that want more control over their data to be able to build their own custom software layers as a way to differentiate themselves. Against this backdrop, BridgeFT might have better luck standing out from the crowd as an outsourced data warehouse and integrator of data than it did as an outsourced performance reporting platform.
By Michael Kitces and Ben Henry-Moreland