What Is Black Diamond?

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This is the Transition To RIA Vendor Profile Series where we take a look at the solution providers powering the RIA model. On this episode:

Vendor name:

Black Diamond

Vendor category:

Portfolio Management (tech)

Episode host:

Brad Wales

Episode guest:

Alex Frantz

Vendor contact info:

Website

Full Transcript:

Brad Wales – Hi, I’m Brad Wales with Transition To RIA, and this is the Transition To RIA Vendor Profile Series where we take a look at the solution providers powering the RIA model. On today’s episode, we’re answering the question, “What is Black Diamond?” To help us with that is Alex Frantz. Alex, thanks for coming on.

Alex Frantz – Thanks, Brad. Yeah, thanks for having me. Happy to be here.

Brad – I’m excited. I think this is going to be a good episode for a couple reasons, but one of them is I think in my experience in all my years in the industry, most advisors out there have at least heard of Black Diamond, right? So obviously folks in the RIA space are probably fairly familiar with it.

But in the wirehouse world, they’ve probably never heard of it. If an advisor’s only ever been in that captive environment with proprietary technology, they probably have not had the opportunity to be exposed to what exactly something like a Black Diamond does. And so I look forward to answering part of that here on today’s episode and dive into that a little further. So again, thanks for joining.

How would you describe that in that kind of a high level, we’ll get into more details later on, for that person who’s heard of Black Diamond but doesn’t know a whole lot more beyond that. How do you kind of start that conversation?

Alex – Yeah, no, thanks, Brad. Yeah, I would say Black Diamond is an all-in-one solution, right? We touch kind of all aspects of an advisor’s business from the traditional kind of performance reporting where people thought of us back in early 2000s to now where we really touch every other aspect from trading, billing, CRM, compliance, trust. We really touch every part of their business. But the main focus of Black Diamond is really around the portfolio accounting solution, which is the back office for advisors. It’s a client portal. It’s how they trade. It’s how they collect fees.

So if you’re thinking of a wirehouse advisory, right, like they’re in a captive environment where this is all done for them. Obviously when they go independent, they have to have a tool that can do that for them. That’s really where Black Diamond steps in.

Brad – I typically use the term portfolio management, I think you used portfolio accounting, which is tricky. I remind advisors particularly when I use the term portfolio management that that so-called portfolio management tool does several other things beyond just helping you manage portfolios. It can include billing, maybe client portals, or that sort of thing. Is that typically the macro term you use, portfolio accounting tool, to try to capture it? I guess there’s no perfect term. Maybe call it an all-in-one tool at some point, or how do you typically describe it if you had to give it a phrase?

Alex – Great question. Honestly, I hear both, right? Portfolio management tool and accounting tool. I feel like sometimes a portfolio management tool can be more centered around like a institutional trading tool, right? I feel like sometimes that can be used with that. So that’s why I use accounting.

Obviously we have trading built in, we have a rebalancer built in, but kind of the core of what a system like Black Diamond does is we’re an accounting tool that takes all of your data from whatever the source may be, right? The big advantage is we connect to over 900 different custodians.

So whether you’re using a traditional RIA custodian like Fidelity, Schwab, Goldman Sachs, or you also have, let’s say, some clients that maybe have accounts still at Morgan Stanley, Ameriprise, wherever it may be, we connect to all the custodians and we bring all that data in every day. We do full reconciliation on it. So that’s why I use the term accounting. But there’s a lot of different acronyms for it out there.

Brad – Indeed. I always tell my advisors, as long as you know what the person’s talking about, they can call it whatever they want, but make sure you understand what that terminology is.

And so how would you position this in the so-called tech stack? So I typically tell advisors that are exploring an RIA model, particularly for the first time, there’s different ways to go about doing this from a technology perspective If you’re building kind of a traditional tech stack, there’s usually three main pieces and even those worlds are colliding further. There’s a portfolio management tool, a portfolio accounting tool, a CRM, and a financial planning tool. That portfolio management tool is where the bulk of the technology lies.

How do you normally coach an advisor that’s again not in the RIA world now but is thinking about transitioning into it and thinking about building a tech stack? Is building or piecing like a Black Diamond into the stack the first step they should take and then they worry about these other tools or how do you usually coach advisors on that process?

Alex – Yeah, that’s a great question. I mean, I basically tell them, especially breakaways when I talk to them, is the last thing that you want to be doing on break day is learning a new technology, right? So if you kind of think about that day, there’s going to be a lot of incoming calls from clients. There’s going to be just a million things going on. And if you have to learn a brand new technology on that same day, it’s not going to be great.

So typically what we do is we work with breakaways is usually about 30, 60 days prior, we’ll start engaging with them. We’ll start setting up the shell of the system and we’ll start training them on the system because we want them to be able to feel comfortable with it when they go live and when all that data moves and the clients transition.

We want them to be able to log into Black Diamond, tell their clients what to do, have the client portal set up, and have the clients be able to log in to see their accounts. That’s what’s really important to us, right? It’s what really ensures us a smooth transition. That’s what we coach firms to do, you know, sign with us prior to the break date, right, and get things going.

Now, a lot of them also have already made a decision around financial planning. We work with, you know, the best financial planning tools out there. We have great integrations with eMoney. We actually just rolled out a two-way integration with them recently, which is our first one out there. We’re really excited about that. We’ve got a great integration and partnership with Right Capital, which is also a two-way integration.

And by the way, what I mean by a two-way integration is obviously we share all the data with the planning tool, that’s just a normal integration, but we also pull all that planning information back into Black Diamond, both from a firm standpoint and a client standpoint so that way the client has one portal they log into with Black Diamond. They obviously see all their accounts but they also see all their planning information, right, so they’re not having to log into two separate portals, which is obviously really key.

Brad – Yeah, and I’ll get into it in a moment, there’s obviously some setup that is involved in making all those things talk to each other. I’ll circle back to that here in a moment. Black Diamond has a lot of cool features and back to your point about what’s important from the jump.

I’m a big believer that while there’s a lot of cool things in there, you’ve got to be patient and you have to focus on what are the most important core pieces that you need to transition to a new firm.  After you catch your breath, after the transition’s done, you can maybe figure out some of the additional features of the tool.

What would you say are the main things advisors need to get set up from the jump? So obviously like client fee billing and how they’re going to maybe do their trading. So what are the kind of core variables that are not only important, but that are also what they should be focused on primarily when they’re looking at like a Black Diamond?

Alex – Yeah, if you think about the first two really important steps, number one is going to be billing, like you mentioned, right? They want to make sure that they can bill right away. And depending on the transition date, they literally may want to bill, you know, within the first 30 days of starting, maybe even sooner. So that’s really number one when we transition with RIAs. So we always put that at the forefront. We make sure that we get their billing set up right away.

And then the rest is kind of a foundational setup, right, like we have to set up your households. We have to set up your asset classification so that you can report on things the way you want to report on them. That way when the client logs into the client portal, they see things the way that they’re used to.

So setting up those foundational pieces allows us to use other pieces of the platform like the client portal, like PDF reports, the more standard things. Those are the first two really important steps. Everything after that, we can prioritize based off of how they want to do it. If they want to wait to maybe roll out trading, if they want to wait to set up our business intelligence dashboard, whatever they want to do in whatever order will work for them. But those are usually the first two really foundational pieces that are very important.

Brad – I was going to ask you here in a moment, but maybe I’ll just ask you right now because they’ll go well with what you just said. So how do you help new users of the tool get trained on that stuff, both initially from, hey, here’s everything we need to know at least for the jump, and then on an ongoing basis, hey, how can I best maximize the tool? Do you have folks on the team that help with that? And what does that kind of look like from a training perspective?

Alex – Yeah, I mean 60% of Black Diamond employees are service. So our service team is huge. We really prioritize service. We have over a 97% renewal rate and that’s in large part to our service team. So that’s a big deal for us.

So the way that it’s set up is there’s an implementation consultant, which I call the quarterback, right? That’s the day-to-day contact that an advisor will deal with that will make sure they’ll put the project plan together, they’ll bring in other people as needed, like a report consultant, you know, other people within the org to help them. But they’re the one driving the implementation, ensuring that it’s successful. So that’s their main point of contact. Everybody gets an implementation consultant when they come to Black Diamond.

And everybody gets a custom project plan based upon their firm needs and their priorities, because everybody has different needs and priorities. Some people are bringing over transactional data, some people are not. Everyone’s different, right? So that’s the service structure at the gate.

And then once you graduate out of implementation, you have a very similar structure in the service team. You have a service contact who’s your day-to-day contact. You pick up the phone, call them. 90% of, I think, our services are here in Jacksonville, Florida. That is where I am today, we’re all here. And so they call their team and their team helps them. So there’s never a moment where it’s, I don’t know who to call, I don’t know who to email. You have the name of a person that you can contact at any time.

Brad – And I’ll back that up. I would tell you and you’ll probably be glad to hear this. And we’ll talk about how you’re different from the other options out there. One way of course, is I think Black Diamond does have a reputation on that service front. Now, that’s easy for anyone to say so I’ll just try to reinforce. It’s easy for you to say that. I will tell the viewers that is feedback that I do hear.

So I think it’s very valid what you just said, because, we’ll get in to the cost here in a moment, these things are not inexpensive. But these are very important parts of a practice. You need to have good service to be able to make sure you’re using it correctly. So I commend you and the team for that reputation that’s out there with that.

So where does this make sense? Is there a size practice, and maybe this dovetails into how it’s priced out as well, where a practice maybe is just too small for this robust of a tool, and then kind of where does it start to make sense?

And then I assume there’s kind of no cap. I assume you have RIAs with very, very, very large billions and billions in assets that use Black Diamond. Do you have kind of a range where you typically say, hey, this is where it’s going to be a best fit?

Alex – Great question. I mean we work with every size advisor. We work with advisors that are startups, have no assets. We work with very long tenure, family-run, multi-generational RIAs that are billions. And then we work with the biggest aggregators in the business that have 50, 70, 100 billion plus. So we work with every type of client.

We have different service structures based upon the client and the client’s needs to ensure that we’re covering their needs because the needs of a hundred million dollar advisor are not the same needs as a billion-dollar advisor, as they are a $50 billion advisor. So we try to make sure that we have a service structure for every type of firm.

But no, we love to work with startups. A lot of our biggest clients started as really small advisors, which has been amazing to see. And they’ve stuck with us through every part of their journey, right? From a small advisor to maybe an advisor gaining more steam to a full M&A advisor that’s going out there and buying 10 to 12 firms a year, right? So we are fully scalable from startup all the way to the biggest aggregators out there.

Brad – Okay, that’s got to be great to see some of your clients over their lifetime go from maybe modest beginnings to quite impressive paths down the line. That’s cool.

How do you price something like this? This is an important part. I do tell people of the tech stack pieces, this is generally by far the most expensive because in part it does so much. It’s not just a kind of a siloed stand-alone tool. How do you price something like this?

Alex –  We have a lot of options, honestly, when it comes to price, right? We understand that the firms are different and that the makeup of firms are different, right? You’ve got massive fluent advisors, you have ultra high net worth advisors, you have family offices. So everyone has a little bit different of a makeup. So every pricing model doesn’t necessarily make sense for one firm or the other. So we take a really like relationship-based price approach.

We have a traditional per-account model, which would just be based off of how many accounts you’re bringing on the platform. There’s basically a firm minimum. You commit to the firm minimum. The higher the firm minimum, the lower the per count price is. Pretty simple concept. We recently rolled out a new pricing model which is more AUM-based. Basically the price will be set based upon however much AUM you have with you know really no cap on accounts.

So really we look at each individual book and we kind of decide which pricing model is best for the advisor and by best in this case I mean which one costs them the least amount of money We’ll present multiple options for them just so they can kind of see but we really want to work to make sure that the pricing model makes sense for them and that they’re okay with it.

Some people are like “I don’t want a per-account, not going to do it. I don’t like it.” Some people are the other way. They’re like “Hey, it’s easier for me to account for growth and for increased expenses on a per-account model. It’s easier for me to predict.” So they want the per-account model. So we really work with each firm to understand what makes more sense for them.

Brad – Okay with that flexibility, I think that’s good. And price is not the very first thing that will be discussed if someone reaches out, obviously. Just like a client going to an advisor wouldn’t say hey, how much are your services? You want to understand what’s the value I get out of this resource and then we of course talk price.

So I always like to set the tone to help advisors out and we will end here in a few with how folks can have this kind of conversation, but for advisors that reach out to your team, if you could walk us through what that very first conversation looks like? What can they expect having that conversation?

And I know there’s different scenarios, so I’ll give you one. Let’s assume this is a potential breakaway advisor who doesn’t currently have any third-party technology. They’re going to have to build everything themselves. They see this episode, they say, wow, maybe Black Diamond is the right solution for me. They reach out. What can they expect in that first conversation with your team?

Alex – Yeah. Great question. So the first conversation for us is just really about getting to know the firm. So understanding them, where they are, where they want to be, what’s important to them, priorities. So it’s really just much more of a hey, let’s get to know each other. Tell me about you. We’ll tell you about us. Let’s make sure it’s a good fit. That’s really the first conversation. We want to make sure that we have a baseline understanding of each other. So let’s just have a conversation and make sure we’re on the same page.

It’s also a good chance for us to kind of build a relationship together. And our team really sees this process as a relationship-based process, right? We’re not looking for transactional kinds of deals. We want to build long-term relationships with our clients where they trust us. And so that’s really the first step in that it’s us having this conversation and getting to know each other.

Brad – You said your retention rate, I think is 97%, if I remember that correctly. It is a big important decision on the front end. In the case of Black Diamond, obviously you’ve done a great job retaining folks. I assume it starts with that kind of relationship, build a conversation, get to know each other, and that leads to demos, I assume, with subsequent conversations or Zooms type of thing.

How long is the process? How long would you prefer? I know your team, if there’s some kind of fire drill situation they could do things quicker, but from a timeline perspective, could you help set expectations about two things. How long generally is a good length of time from that first conversation to maybe when they are making a decision on what vendor to use? So that’s one timeline.

Then from that point, and I alluded to this earlier, your team needs to help them get trained to make sure things are going to be integrated so everything’s good from day one. How much lead time do you generally like from that point as well? So if you don’t mind just kind of breaking those out.

Alex – Yeah, good questions. So I mean, it obviously depends, right? It depends on the scenario of the advisor, whether they’re coming from maybe another provider or they’re an established advisor. Those timelines are obviously very different. If it’s a breakaway, right, coming over new, not bringing anything with them, the timeline’s a lot different.

I would say a typical kind of evaluation process for a breakaway, it depends. Some of them started really early. But I would say, you know, give yourself 60 days really to go through that process of evaluation and make sure that you’re seeing demos, you’re asking the right questions. You’re really kind of diving in fully. So you’ll have 60 days.

Our process is, hey, once you sign the contract, we’re kicking off implementation within the next seven to 10 days. So there’s no delay. We get going right away. So then once that happens, if you’re a breakaway, you obviously have no immediate assets. What we’ll do is we’ll plug in demo data into the system so that we can start building out the infrastructure of the firm prior to your accounts actually coming on-site. So that’s a way that we can do that.

Now, once you go live and you have a master at, you know, Schwab, Fidelity, wherever, it’s quick from there, right? Accounts start feeding in and then we can really get going. We’ll start training you right away. We’ll start doing everything. So that’s probably a three-month process.

You know a lot of it also depends on the time constraints of the advisor. Some have more time to dedicate. Some are like hey, I’m busy. This is going to take me a little longer. So we work at whatever speed you know the firm is comfortable with. If they want to go fast, we’ll go fast. If they say, hey, I need to slow this down, then we’ll slow it down.

Brad – Good. I’ll add to that and say with the three months for advisors that have not made a transition, there’s multiple things you’re working through all at once. There’s multiple unrelated vendors and solutions that you need to put into place.

And so to the degree someone looks at that and is like wow, it takes three months to do this, it’s like well, no, there’s a lot of things that are going to take multiple months to do to be able to do it at a measured pace. Part of that is for an advisor’s sake because they are juggling multiple things at once.

It’s not like they can get on the phone every day with just the Black Diamond people to work through this. There’s multiple things that are being handled all at once. So I appreciate that good kind of timeline and like I said, obviously, with a fire drill situation you could do things a little quicker, but it’s good to go at a measured pace where possible.

Before I get into just how folks can reach out to contact you, maybe a parting question for anyone that’s seen the Kitces Tech Map and it’s overwhelming and there’s seem to be a gazillion options and so it is what it is.

There are multiple options in the proverbial portfolio management or portfolio accounting, whatever we want to call it. How do you explain to advisors or teams that they know of Black Diamond, they know of some other ones, but they don’t know beyond that. Hopefully this episode is helpful. How would you say that you guys are different or where it’s a good fit versus maybe some of the other alternatives that are out there?

Alex – Yeah, I mean, honestly, I would say our business structure is a big advantage, right? So I’ll back up a little bit. Black Diamond was founded in 2005 here in Jacksonville, Florida. In 2011, Black Diamond was acquired by Advent Software. Advent Software was the first really tool in the game, started back in the ‘80s in San Francisco. They were kind of more of a desktop solution and more legacy solution and also meant kind of more for the asset management space. But they bought Black Diamond. And then in 2015, SS&C, which is a publicly traded company on the Nasdaq, purchased Advent software which included Black Diamond.

So that’s our business structure. We are a publicly-traded organization. Our financials are out there, they are public, right? So we are investing 20% of our revenue back into the product and it’s out there for everyone to see.

So the way that I always say it, especially for a firm breaking away, is hey, we are the steady ship, right? We are a publicly-traded company. We’re not going to go through any sort of acquisition or getting acquired, right? Or have any sort of business disrupting things to you, right? We are just here to continue to get better, to continue to reinvest in the business and be that steady ship for you, which is what you need for this solution, right?

Like this is the backbone of an advisor’s business. This is how they get paid. This is how their clients, you know, log in. This is how they differentiate themselves in the marketplace, right? Which is, hey, I’m logging into this client portal. It’s way better than the client portal that the Ameriprise guy down the street is giving to his clients.

So to me that’s our one of our best advantages is just that we are a very stable, publicly-traded organization that is reinvesting actively in the business.

And so I think that’s for advisors who are going through a really rocky transition, right? You want to land somewhere that you know that hey, ten years from now this company’s gonna be here. They’re going to be doing the same thing and they’ll have continued to evolve over those last ten years into, you know, an even better company than they are right now.

Brad – I always liked being a champion for the little guy and the entrepreneur out there. The tough thing is, and there’s a lot of new tech companies and whatnot, that when you’re an advisor and a team, you’re going through a transition. This is your livelihood. This is your clients‘ whole financial lives. It’s sometimes good to rely on the blue-chip solution, right? That one that has been around the block that has the steady rudder.

And again, no disrespect to any newer entrants out there, it’s sometimes, particularly the core piece of a tech stack, there’s just comfort in knowing that there’s a whole track record here. No one’s charting new territory, signing up for Black Diamond. This is a tried and true process you guys have been doing for a long, long time. So I would echo how important that is as well in the conversation.

So for those folks that are listening to this or watching this and want to learn more, what is the best way for folks to reach out and to connect with your team?

Alex – Yeah, you can go to sscblackdiamond.com and there’s a contact us button there that’ll come directly to our team and we’ll reach out to set up a conversation. So happy to do so.

Brad – Perfect. I will put that in the show notes as well. And I always encourage advisors, you know, at some point you just have to start dipping a toe, right? And having that first conversation doesn’t commit you to have to do anything, but it does give you the opportunity to see what a tool like Black Diamond does. And to begin that process just requires that first step and to reach out. And so like I said, we’ll put that on the website and encourage folks to take a look.

But Alex, I appreciate you coming on and helping us. I know we only did this at a high level. We could have talked for another 40 minutes easily with all the different bells and whistles that Black Diamond has, but hopefully this has given a good overview of why folks, advisors, and teams should be taking a look. So thanks again for coming on.

Alex – Thanks, Brad. Appreciate it. Great to be here.

Brad – Appreciate it.

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