Tim’s note: When it was announced in January that Pete Hess would take the reins at Advent from founder Stephanie DiMarco, it was at a critical juncture in the software company’s history. Just months before, Hess had pulled the switch on the purchase of Black Diamond and the ramifications of that deal were just starting to play out. At the AdventConnect 2012 conference this week I had the chance to sit down with Advent’s president and CEO. Despite being much sought after, Hess was gracious with his time and had a lot to say about the latest on the Black Diamond integration, Advent’s cloud strategy, how far its willing to go on integration and the firm’s acquisition strategy going forward.

Tim Welsh: How far have you gotten with the Black Diamond integration and what remains to be done?

Pete Hess: Organizationally, we’ve done as much as we needed to do. We have completed the integration of some of the more common company functions such as IT, finance, HR and the like, and we’re actively sharing best practices with the team in Jacksonville.

On the technology side, we’re helping each other understand the best of both firms. For example, we’re leveraging Black Diamond’s agile methodology for product development and have built strong relationships with both product teams. On the sales side, we’ve fully integrated the sales teams so that we can sell either platform depending on the needs of the advisor. Every advisor is unique, so we don’t come into a conversation with a product in mind. We’re able to be consultative and ensure that the advisor gets the best solution. Another example of the synergies we are seeing are in making Advent Custodial Data (ACD) — the data feeds — available in Black Diamond, which gives them great data and lessens the reliance on third party data providers. See: A year after the Advent-Black Diamond deal, the merged company is making some big chess moves.

DIY screens for alternative assets

TW: What are the key areas of focus as you look at evolving your product offering?

PH: Here at the conference we announced our new cloud strategy for Advent. Black Diamond is already there, so this is really how we are going to enhance our Advent products such as Geneva, APX and Moxy. With APX, we are focused on more effectively offering it through the cloud, which will make it more flexible to host as well as integrate cloud presentation for mobile devices such as the iPad. With Black Diamond, we have developed a native rebalancing tool that is getting very positive feedback from our beta testers. Over time we’ll continue to work on making that rebalancing functionality better to include tax efficiencies. Additionally, to better report on alternative assets, we’ve added some “do it yourself” screens that enable advisors to add in positions that don’t price regularly. See: How Black Diamond is faring as a unit of Advent Software.

Adding CRM vendors

TW: In your keynote yesterday, you mentioned that Advent is willing to embrace integration with outside vendors. This seems to be a shift in philosophy. How far are you willing to go with outside integrations and what is behind this shift?

PH: Historically, we have always had a lot of partnerships, so this is nothing new. What we are announcing is that we are going to be very focused on building and enhancing our current tools to support the core accounting and reporting work flows in an advisory firm and then look to other vendors who can fill in the pieces to provide a complete experience.

We are where we want to be right now with our current footprint and are not looking to add new capabilities just for the sake of doing so. But at the same time we do see the need to bring a complete solution for complementary work flows that may be better supported in a CRM or financial planning package. So in the near term, look to us to integrate and partner with a few CRM vendors that specialize in the advisor industry. Our focus is to be more deliberate in what we do, which will help our clients plan even better. See: Can the new Envestnet-Tamarac Godzilla take on the Advent-Black Diamond King Kong?.

More Moxy

TW: What key issues are you seeing advisors wrestle with, and how can technology help in ways that we haven’t seen before?

PH: To answer that question specifically, I think we need to segment advisors into what services they are providing. Historically, the advisor working with high-net-worth clients most likely started on the investment side and performance was what they were offering. Obviously, the markets have had a big impact on that value proposition so those asset managers needed to expand what they are doing to include more of the wealth management process. This means they need broader tools to support those work flows and that is where Black Diamond can play such a key role. Advisors need to scale their businesses for both lines of business — managing the investments and providing a broader set of wealth management services. To help complete and support those work flows, I think you’ll see more and more integration of systems and platforms, such as integrating Moxy into Black Diamond, which is something we are working toward.

Custodians key

TW: Integration has been a key action item for custodians these past couple of years. What are your thoughts on where those initiatives are and what role is Advent-Black Diamond playing? Has this become a way you get clients, like on Fidelity’s WealthCentral, or are you more likely still to win them directly on your own?

PH: Without the big custodians, we’re not sure what our lead flow would be (laughs). Being a part of those platforms has made all of the difference for us. We truly look at it as a partnership and I think the custodians can’t do it with just a couple of vendors. They need to have multiple options because advisors need choice. We realize that and are actively working to be a major player in all aspects with both Black Diamond and Advent products. See: Advent keeps a $2 billion one-foot-out-the-door RIA thanks to Black Diamond buy.

Enabling breakaways

TW: How about integrations with other platforms or aggregators such as Dynasty Financial Partners or HighTower?

PH: I think they’ve got a great business model that makes it easier for the wirehouse teams to break away. Both Dynasty and HighTower are Advent/Black Diamond clients and their ability to facilitate technology for advisors provides them with a very compelling value proposition. Again, when we segment advisors into those that are more asset-management focused versus holistic wealth management, their needs are different. Particularly for these organizations like Dynasty or HighTower, they need to provide a broad set of choices as the advisor teams they are bringing on all have different approaches. For us, that means that they can tap into Advent or Black Diamond, and that is the way we like it.

No buys for now

TW: There has been quite a bit of acquisition activity in the RIA technology business. Will that continue? What types of technology players will be next, and could you be a buyer?

PH: What the market wants is the easy solution — something that is hosted and integrated, so advisors don’t have to deal with multiple vendors. So given that trend, I do think there will be more consolidation.The challenge is that there aren’t that many players left. For example, Morningstar isn’t about to give up their platform so that leaves basically the CRMs or financial planning systems. As for Advent, we are happy where we are right now and won’t be participating in any more acquisitions.

Reed Colley in San Francisco

TW: Reed Colley is a proven entrepreneur and marketer. How do you plan to utilize these skills as Black Diamond becomes a more mature business?

PH: Reed is a tremendous leader and we have actively engaged him to help us with strategy for the company, particularly as we are now moving to the cloud. Because Dave Welling has stepped up, we’ve been able to bring Reed to San Francisco to do that important work for us. Obviously with any entrepreneur you worry that they might feel constrained since they are no longer the CEO of their own company. However, Reed fits in very well with our management team, which is unique in that it is truly a friendship. I’m sure we’ll be able to keep him engaged and we’re very fortunate to have him in such an important role for the future of the company. See: Black Diamond is setting its sights on smaller advisors and other things I learned over breakfast with Reed Colley.

Facebook holdout

TW: You’ve got a pretty active Twitter presence — what are your thoughts that social media will play not only for advisors, but for RIA industry participants?

PH: I am not a Facebook user, so my perspective is a bit different. However, social-media channels like Facebook are overtaking e-mail as communication. So if you are marketing yourself or your company, you have to be doing it via social media. Additionally, to be a thought leader in the industry, you have to be totally dialed in. For us at Advent, the concept of social has relevance, particularly for all of our clients and users when they have questions. Some of our clients have been here longer than our support staff, so building that community and enabling users to share ideas, best practices, and answer questions among themselves is something we will be investing in. See: Dreamforce review: Social media enters the business cloud and why RIAs should care.

Riding the information wave

TW: As an executive, what do you read or follow, besides RIABiz, to keep up to speed on all of the developments in our industry?

PH: I start with RIABiz, of course! (laughs) Because there is so much information coming at us, we use a filtering service to be able to stay abreast of the key issues, trends and news. Sometimes I feel like I’m still in college with all of the new information and learning that is happening, but it is so critical to be informed as our industry continues to undergo change.

Banking credit on the home front

TW: What do you like doing in your spare time?

Whatever my wife tells me to do (laughs.) We have two kids, and because I travel a lot, I tend to have a negative credit balance when I am home. Thus, the family comes first. But if I do have a few minutes, I enjoy exercising, playing golf, and I’m a bit of a car nut and race sometimes. I also am proud to coach my son’s football team.

DiMarco’s big shadow

TW: What has been your biggest challenge and your most pleasant surprise since the Advent board of directors named you CEO?

PH: Actually, I didn’t officially move into the role until July 1 of this year, so it really has only been a couple of months. But since the announcement in January, I’ve been actively transitioning. I think the biggest surprise is the tremendous support I’ve received from everyone — most notably the employees, clients and investors. It’s been very gratifying. On the challenge front, Stephanie DiMarco casts a big shadow; she’s one of a kind, a cultural catalyst, so these are obviously very big shoes to fill.

Timothy D. Welsh, CFP® is President and founder of Nexus Strategy LLC, a leading consulting firm to the wealth management industry, and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.