Brooke’s Note: Investment analytics is an area of software that, for RIAs, is still a stepchild compared with CRM, planning, reporting and rebalancing. But as the software and data get better and cheaper and RIA firms get bigger and richer, there is more to talk about here. We see companies such asHiddenLevers, MacroRisk Analytics and StatPro Inc. making headway in this world. In the case of Zephyr, it’s also a case of advisors from the high-net-worth advice world discovering software that was previously the domain of the pension guys.
Zephyr Associates Inc., which counts financial advisors as about 50% of its 900 customers, is being acquired by Informa Investment Solutions of Westborough, Mass., the U.S. subsidiary of Informa PLC. Its CEO is based in Switzerland. A zephyr is a light wind.
The Zephyr Cove, Nev.-based company is being sold by a group of family offices that served as the private-equity buyer that acquired it five years ago from its founder, Steve Hardy.
Will Clemens, who becamse CEO of Zephyr in 2009, will stay on as the head of the unit, which has 55 employees and serves pensions and asset management sales people in addition to financial advisors. Clemens was the head of one of four departments that Advent Software Inc. had at the time that included custodial data and the delivery of Advent software over the web. He joined Zephyr from Advent in 2009 and took it from about 40 employees to 55. See: Advent and Black Diamond are looking like soul mates but the Axys-to-BlueSky 'Easy Button’ is still on the to-do list.
Sharpe mind, sharp products
Zephyr software has its hard core of believers who like its approach to analyzing the returns of managers as the key data point in developing portfolios. It’s an investing philosophy developed by Bill Sharpe and commercialized as a side business by Hardy starting in 1994. People appreciate the simplicity and effectiveness of the approach.
Hardy was an institutional salesman who a started the business as a sideline, not expecting it to take wing as much as it did.
When a customer uses Zephyr, it typically pays about $10,000 per year, including a data stream from a company such as Morningstar Inc. that fuels it. A typical account pays $15,000 to $20,000, Clemens adds. One of the data services that customers end up buying is from Informa, so this deal may help the parent company. “It’s a great deal for our customers.”
Though Zephyr was originally big in the pension world, it has gained currency with retail advisors over time — partly because it has been used fairly widely by wirehouse brokers. After a breakaway, an advisor often prefers to keep the technology. See: RIAs are set to capture chunks of the $26 billion that GM is spinning out of its pension plan.
“An independent advisor will call us and will buy it out of his own pocket,” Clemens says. At the wirehouse, the fee was paid for by various means, sometimes the advisor and often the wirehouse, that was generally determined at the branch level, he adds.
Clemens, a history major at the University of Virginia, became aware of, and admired, Advent Software after becoming a stock analyst for Morgan Stanley. He was with Advent for nine years.