How Blueleaf sees itself taming the RIA's two betes noire -- and how it is being challenged on that

The new-ish Cambridge-based company has big deals with Redtail and MoneyGuidePro and hopes, amid skepticism aplenty, to literally change wealth management

Monday 2.11.13 by Kelly O'Mara

Brooke’s Note: Have you heard of Blueleaf? I hadn’t either until it appeared as part of a MoneyGuidePro deal last month. Fortunately folks like James Carney and Joel Bruckenstein are more attentive to rumblings on train tracks than I am and so we were able to not only get an idea of what Blueleaf does but just what to think of the bold claims about what it can do. Blueleaf founder, John Prendergast, comes by this start-up honestly in the sense that it arose out of a need he heard expressed by friends. He exudes a teflon confidence that is a much a part of this article as anything else.

Aggregation of data and integration between technology platforms has long been a problem for advisors, who are forced to call each custodian every time a feed breaks and weave together multiple technology systems for their specific needs — creating even more contact points for error and time wasted.

While plenty of companies have tackled the aggregation issue, such as ByAllAccounts, they’ve thus far been bulky or hard for advisors to use, says John Prendergast, chief executive of a portfolio accounting service called “It’s like buying copper pipe when you want a finished bathroom. Blueleaf is the finished bathroom.”

He believes his Cambridge, Mass., firm, with more than 100 advisors onboard — and big deals brewing with MoneyGuidePro and Redtail — has found the answer.

Open API

While Blueleaf offers simple portfolio reporting and accounting, a client portal and bundled account aggregation for $450 a month for up to 100 households, what Prendergast really thinks is going to change how data are aggregated and delivered is the company’s open API — “not common in this industry,” he says. Salesforce and TD Ameritrade Institutional’s Veo are the two products currently known best among RIAs for this approach of letting vendors see under their hood to form interconnections from outside. Competitors lie Schwab who prefer to do all the wiring themselves say that the approach is flawed because customers may suffer more bugs than is acceptable in this relatively haphazard process.

By running an open application programming interface as opposed to a closed one, Blueleaf is hoping other programs will write products using that code that integrate directly with Blueleaf. This, ultimately, will allow advisors to access all their needs in one place, like an Apple store or “lots like Salesforce for wealth management integration,” says Prendergast. for Advisors

But, there are plenty of skeptics saying Blueleaf isn’t anything more than a glorified version of for advisors — a comparison that Prendergast, himself, makes as well but which he clarifies isn’t entirely accurate, since Blueleaf does deliver SEC-compliant performance reporting.

“It’s basically doing what does, but for advisors,” says Joel Bruckenstein, founder and co-chair of Technology Tools for Today. “It’s more like a portfolio snapshot.” That certainly provides some value for some advisors, he says, but maybe not as much as Blueleaf would have you believe, particularly when it’s hard to prove that their aggregation is better than others. See: Envestnet unbundles portfolio management software for RIAs and it won’t be a sideshow.

James Carney, president and CEO of ByAllAccounts, says that it’s hard to say if Blueleaf has better aggregation than anyone else, since they’re using his firm just like everyone else.

James Carney: We're just the chip inside. Nobody's designing their own chips.
James Carney: We’re just the chip
inside. Nobody’s designing their own chips.

“We’re just the chip inside. Nobody’s designing their own chip,” says Carney. Most data and technology companies, he says, are using his. What makes any one offering different than another is what makes a Dell different from a Vaio: how it’s implemented, presented, and the quality of that packaging.

The value that Blueleaf adds is in the beautiful, well-designed client portal and the easy-to-use reporting for advisors, he says.

Not as easy as you think

Prendergast, however, says, Blueleaf uses BAA, Yodlee, direct custodial data, manual data input and other tools for off-line data to obtain a complete picture of a client’s account. See: Fiserv purchase of CashEdge could affect account aggregation space.

Truly getting all the data in one place to provide total performance reporting is actually not that easy — and isn’t as solved a problem as might be widely assumed. “That’s been harder to achieve than people would like,” says Prendergast.

That’s something Bruckenstein can agree with. “Nobody has totally solved aggregation,” he says. While ByAllAccounts has gotten better in the last few years, he says, it’s still hard to reconcile all the data and make sure it’s 100% accurate coming from so many different sources. And, if it’s only 95% accurate, that can really be a problem for those 5% of clients.

“Keeping data clean is not nearly as easy as you think it is,” Bruckenstein adds.

Opening the doors

The objective that’s been harder to achieve — and a long time coming — is the open architecture necessary for companies to write products to a particular system. An open API encourages innovation, says Prendergast, because it allows individuals to write code with little overhead and allows companies to build off one another. “It’s hard to overstate the importance of an open API,” he says.

Traditionally, open APIs have been common in Silicon Valley, but have not been as popular in the financial or advisory space. That is starting to change. Open APIs are “becoming more common,” says Bill Winterberg, the principal of Most notably, TD Ameritrade recently opened up its system to sharing in a controlled way. See: TD Ameritrade showcases what API can do with slick Veo-iRebal harmonization.

Joel Bruckenstein: What's in it for Redtail to write something to Blueleaf?
Joel Bruckenstein: What’s in it for
Redtail to write something to Blueleaf?

The question, then, is why would someone want to write a product to easily add on to Blueleaf? It takes time, money, and, while it can be beneficial for the company to access Blueleaf’s clients, it may not be worth it.

“What is in it for Redtail to write something for Blueleaf?” asks Bruckenstein, when Redtail has 50,000 users.

Redtail, MoneyGuidePro jump on Blueleaf bandwagon

In January, MoneyGuidePro completed an integration with Blueleaf, which Prendergast says was done easily in just three days because of the way the open API is set up. And, last week, he says, Redtail Technology finished an integration with Blueleaf, which hasn’t been announced yet and which will make the Redtail product available directly through the Blueleaf system. The idea is that ultimately advisors will be able to access everything in one place without any wasted time. See: MoneyGuidePro back on a roll after the.

“There’s a whole ecosystem here being built,” says Prendergast, who says the firm has plans to add more financial planning, customer relationship management and portfolio accounting systems to the Blueleaf arsenal via integrations similar to previous ones.

“We seek out companies like Blueleaf,” says Tony Leal, CTO of MoneyGuidePro, because it’s important for a financial planning tool to have someone else able to do the aggregation and then integrate smoothly and quickly.

When Prendergast approached MoneyGuidePro about a year ago with his ideas and a demo, Leal says they were “so impressive.” He wasn’t too concerned that the portfolio reporting company was young and small — “That’s where the creativity comes from,” Leal says — and was won over by Blueleaf’s ambition and plans and by Prendergast’s experience. “We wouldn’t have just done it willy-nilly,” says Leal.

Bruckenstein points out, though, that it’s yet to be seen how many advisors will use these products that have been written to Blueleaf, how well it works, or how profitable it will be.“The devil is in the details,” he says. But, Leal says he’s not worried. It’s only been a few weeks and already there are a handful of customers on the system.

“So far, it’s been really positive,” says Leal.

Little guy with big plans

Whether or not Blueleaf is really solving the problem of data aggregation and integration “depends on how you define the problem,” says Winterberg. “If you define the problem as: do clients really understand their performance reports? Blueleaf has a solution where reports have a little more value, more meaning.”

At $450 per month for up to 100 households — with prices scaled for different advisor sizes — Blueleaf isn’t hoping to replace Orion or Performance Center. In fact, a number of clients run Blueleaf in addition to Orion and Performance Center because it provides an extra tool, says Prendergast.

The idea is just to offer a simple reporting system and client portal for the little guy, who, Prendergast hopes will grow with them. Since rolling out to advisors in late 2011, he says, Blueleaf has attracted more than 100 advisors with about 3,600 end-clients. Though his firm offers a free 30-day trial, Prendergast says all the advisors it counts as customers pay for the system. And, Blueleaf expects that number to more than double in the next year.

Once there is a tipping point of advisors on the system, the plan is to become a hub for wealth management data systems.

“Our goals are modest: to change the world of wealth management,” said Prendergast.

Who is this guy?

Prendergast, a former advisor who is also the co-organizer of the Lean Startup Circle in Boston, received calls from dozens of friends during the 2008 crash looking for help and advice. It turned out that one of the biggest problems, as they tried to get a grip on their finances, was they didn’t even know exactly what all they owned or where it all was.

“I thought someone has already solved that problem,” says Prendergast.

Since he was looking for a new venture at the time, Prendergast figured: Why not solve this problem. After receiving his MBA from Northwestern in 2003, Prendergast has worked for Jeffries and Co., been an entrepreneur in a number of ventures, and currently serves as an advisor to three financial startups.

As he describes himself on LinkedIn:

“In my career, I’ve learned to put chicken on a spit four at a time, turned around a software company, memorized the perfect formula for brewing coffee, sold businesses for half a billion dollars, and had the pleasure of working with fantastic people.”

Up next? Fixing financial reporting.

Joel Bruckenstein | John Prendergast | James Carney

MoneyGuidePro | Redtail | Blueleaf | ByAllAccounts