In this podcast, Matt Fleissig, CEO of Pathstone, and Mark Wickersham of AgilLink, discuss how Pathstone became successful, and specifically, how it develops and deploys technology to achieve its goals. The use of innovative technology in family offices helps the Pathstone team deliver the best customer experience possible — but it's not only technology that’s responsible for Pathstone’s success. The strategy behind the platform has deep roots, and Matt Fleissig discusses the logic behind key decisions involved in building this wildly successful company.
Matthew Fleissig is a co-founder and serves as the CEO of Pathstone, the Modern Family Office, which serves families, family offices, and foundations and endowments. Matt is responsible for accelerating innovation and setting the firm’s overall strategic vision and direction. He is a shareholder, a voting member of the firm’s Investment Oversight Committee, a member of the Executive Leadership Team, and serves on the Board of Managers. Prior to his role as CEO, Matthew served as President at Pathstone Family Office.
Mark Wickersham is VP of Strategy, Marketing, and Business Development at AgilLink.
This synopsis is of a podcast conversation between Mark Wickersham and Matt Fleissig.
Note that the conversation has been edited for length and clarity.
HOW HAS THE IMPLEMENTATION OF LEADING-EDGE TECHNOLOGY CONTRIBUTED TO THE SUCCESS OF PATHSTONE?
Matt Fleissig says, “To us, it's all about scale and automation, and what our people can do with it. When we started the business 10 years ago, we were ~$1B, and today, we’re around $23B. The use of leading-edge technology was out of necessity, because of the dramatic growth in the first few years. As we added clients and advisors, we needed automation to scale up on things that were traditionally done in a manual process.”
He continues, “I have a computer science background, and together with our CTO and our head of operations, we made build-or-buy decisions, eventually realizing that sometimes we had to marry the two of them together to get what we wanted. While we have developers in-house, we realized that there's no way we're going to create a better multi-client bill pay and GL system like AgilLink, and there's no way we're going to be able to create a CRM like Salesforce. Understanding this, we've created a warehouse to store our data for use between the systems, creating a unique solution which works very, very well. The development was out of necessity, and the rest of the industry has yet to create the tools and software that we envisioned early on. We’ve been able to scale and grow as our client base expands, and that's been the mission and the plan for Pathstone from the beginning!”
HOW DO YOU FUND “BIG IDEAS” AT PATHSTONE?
Mark Wickersham offers the following observation: “The terminal velocity for so many multi-family offices is at the $1B mark, and some break through to $5B, but that seems to be a barrier that they can’t grow beyond. Are technology and automation the keys to unlock that next step in growth?”
Fleissig responds, “Growth requires capital and idea-flow. As the firm gets bigger, it's strategically important to understand how you are investing in technology. Innovation is part of our culture, and automation is an obsession at Pathstone. You need to have the capital to make investments in these tools, but you also need the idea-flow and the sense of how to do it using internal and external resources. I think we have the right balance of building internally, and then collaborating with the right external developers to finish the projects.”
Wickersham says, “The folks at Risclarity are great, and we work closely with them. They understand the family office, and they're really great at filling in gaps and helping disparate systems talk to each other. It's been an interesting collaboration between Pathstone, Datafaction (now AgilLink) and Risclarity, working together to create a solution that's bigger than the sum of its parts.”
THE HOLY GRAIL
Flessig states, “With our external partners like AgilLink and Risclarity, we’ve built and created a lot of unique things together, but we always thought the Holy Grail of the family office was connecting an investment performance reporting system to the general ledger. In 2017, when we were finally able to do that, it was a turning point on the technology side. Suddenly, all the work that you're doing on the tax side can be done through the GL, using AgilLink. That innovation vaulted the growth of Pathstone forward at an exponential rate.”
He adds, “I will never forget spending several days designing a chart of accounts, and then using it to marry the investment systems. We used it to prepare for a trust accounting system as well. It created the footholds of how everything's designed. We just added an idea around asset inventory, around art inventory and collectibles, and we continue to build on that chart of accounts. Having said all that, while the foundation was critical, a lot of innovation came from our technology partners in those early days, which advanced our capabilities.”
HOW DID THE PANDEMIC AFFECT YOUR GROWTH STRATEGY?
Fleissig offers this perspective: “I think what it allowed us to do is actually accelerate it. When the pandemic hit, and all of a sudden you start stress-testing the business, you look at the budget, you're having board meetings, and you're saying, ‘What does this mean for the financials?’ ”
He continues: “We were in the midst of adding some clients, and one of our independent board members came to us and said, ‘Guys, let's grow through the pandemic.’ So on the technology side, we actually doubled the budget. Obviously, we wanted to make sure everyone was safe and that we had the right protocols in place, but we made the intentional decision to invest in our growth. We looked at our plans and what was in development, and we accelerated our timelines. Then, we decided to triple the technology budget for the year. We went to our outside developers and shared our development plans and asked for their help.”
He adds, “Because of the additional investments, we've been deploying polished software that is unbelievable. So in some weird way, COVID allowed us to triple down on what we were doing with the innovation and the technology platforms.”
WHAT PROBLEM(S) DOES AGILLINK SOLVE FOR PATHSTONE?
Fleissig enthusiastically responds, saying, “There are a lot of nice features in Datafaction (now AgilLink), such as having imaging together with the GL, with multi-client bill pay, with custom rules by vendor, with repetitive accounts that are set up — even the way the credit cards are handled automatically in the GL, and the way our investment data flows in automatically into the GL. All of this has enabled us to scale and leverage our capabilities to benefit our clients, and this is what Datafaction has facilitated.”
IF YOU COULD GO BACK IN TIME, WHAT CAREER ADVICE WOULD YOU GIVE YOUR YOUNGER SELF?
Taking a moment to reflect, Fleissig says, “Looking back, the only thing I'd say that I see that would enhance my career would be to focus on some of the scale and platform stuff even sooner than we did. Where we did, it has allowed us to grow, but even in my CFO days, I remember the technology still lacked the tools we needed in 2000, when we were building some things internally. So, I probably would've started some of the automation efforts sooner.”
Pathstone is an independently operated, partner-owned advisory firm which offers families, family offices, and select nonprofit institutions comprehensive family office services and customized investment advice. Pathstone's objective is to help clients create, manage and preserve wealth across generations. Pathstone integrates smart, innovative programs with its traditional family office services to provide solutions that withstand the test of time. Pathstone has 11 locations in the US, and over 200 employees. It manages over $22B in assets for 300+ clients.
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This podcast is for general information and education only and is provided as a courtesy to the clients and friends of AgilLink. It is compiled from data and sources believed to be reliable, however AgilLink does not warrant that it is accurate or complete. Opinions expressed and estimates given are those of the speaker as of the date of the podcast with no obligation to update or notify of inaccuracy or change.
City National Bank is a subsidiary of Royal Bank of Canada. Deposit products and services are provided by City National Bank.
Pathstone is an independent company and is not associated with AgilLink, City National Bank, or Royal Bank of Canada.