Custodian takes a short cut to outsourcing its Centerpiece back-office tech. Schwab Performance Technologies (SPT) has agreed to buy Etelligent Consulting. The acquisition is meant to give SPT the means to outsource functionalities associated with PortfolioCenter, its back-office technology. And that stands to help RIAs -- especially recent brokerage breakaways -- who want the benefits of automated portfolio accounting and data management without the bother of running a entire system in house.

"Removing back office challenges is especially critical as more advisors leave established firms and strike out on their own," says Charles Goldman, executive vice president and head of SPT sister company and RIA support agency Schwab Institutional. "By providing opportunities to outsource administrative tasks, we can help new and established advisors focus on their clients and accelerate the growth of their businesses."

The terms of the deal between SPT and Overland Park, Kansas-based Etelligent weren't disclosed. The transaction is expected to close early in 2008.

Filling a need 

Approximately 3,000 RIAs use PortfolioCenter as the engine of their back offices. SPT's main rival in this area is Advent, specifically its Axys technology. A number of firms either use Portfolio already or have looked at it say they like it well enough but would prefer not to have to operate it themselves, says Schwab Institutional spokeswoman Lindsay Tiles.

And that's where Etelligent comes in. The firm runs PortfolioCenter technology as an ASP for about 150 RIAs and a handful of broker-dealers. In all it serves about 250 offices and keeps track of about $35 billion in assets. Approximately 25% of Etelligent's client base custody none of their assets with Schwab Institional, according to Etelligent's managing director Jim Starcev.

PortfolioCenter takes data feeds from 40 broker-dealers. Etelligent brings another 100 or so to the table through an interface with State Street's data aggregator ByAllAccounts.

There are other firms that base their services on PortfolioCenter, but they tend to be newer and smaller in terms of assets under administration, says Starcev.

Mark Calhoun and Starcev put up $3,000 each and started Etelligent in 2000, initially as an information-technology consultancy. Pretty soon though, they started getting requests from clients for help running PortfolioCenter -- or CenterPiece, as SPT's flagship system was called at the time.

Calhoun figured he could come up with the coding to fulfill these requests. "Mark told me, 'We could move this to the web,'" says Starcev. "And from that web application we grew the whole platform."

Providing outsourced back-office services to RIAs is now Etelligent's sole focus. To the extend business consulting still comes into play, it's now a function of client service around its core offering.

Dan Skiles, v.p. for technology at Schwab Institutional, says SPT and Etelligent are united by "a common goal of helping advisors increase the efficiencies of their back offices." As a result, he adds, "this acquisition will enable us to help advisors achieve even greater scale across their businesses, as well as offer them greater flexibility in how they work with us."

Schwab Institutional, part of San Francisco-based Schwab, provides custodial, trading and operational services to more than 5,500 independent RIAs. -FWR

Purchase reproduction rights to this article.