Digitalizing the financial industry

RedBlack CEO discusses automating, strategizing assets using software


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Dan Potter, CEO of RedBlack in Bedford.

With clients including Barclays and Morgan Stanley, RedBlack, a Bedford-based management solutions software provider for high net-worth investment firms is a “garage to success story,” says founder and CEO Dan Potter.

Founded in 2007, the software was developed from the initial vision to automate the trivial task of rebalancing accounts, says Potter. Back then, advisors typically used Excel spread sheets to rebalance clients’ accounts once a year with no strategic reason for the timing.

“To rebalance a thousand accounts was taking three to six months, so by the time you got to the end to trade the account, the market had shifted dramatically,” says Potter. “We brought what took 6 months down to 60 seconds.”

Potter, a CPA, teamed up with an investment manager he knew from Fidelity Investments and two IT professionals to create the initial prototype, which they presented to Fidelity.

“We knew the value of the technology and what was necessary in the industry so leveraging technology was the vision,” says Potter.

Fidelity liked the idea, but wasn’t ready to invest yet. Then the market crashed in 2008. RedBlack went to market in April 2009, an entirely self-funded effort.

“We thought the whole world was coming to an end at that point because of the market crash, but we ended up being a solution in the industry that was a necessary thing to have, where we could actually review the portfolio and manage risk for the advisors who were in a tenuous position,” says Potter.

An advisor will take a portfolio of assets and assess the risk tolerance in a certain model. However, the market changes the next day and the model will drift away.

RedBlack’s software provides advisors with a tool that judges the risk tolerance for the firm and creates flexibility in creating restrictions for certain securities and in areas of compliance they must adhere to.

“The management of risk these days for advisors, especially with the onset of multiple changes in the marketplace was the driving force,” says Potter. “The heavy lifting compliance area is on the advisor. We’re leveraging and scaling our abilities here in the technology and SEC trading areas in order to give the advisor extra time to build assets and to trade the account in a more improved way, to attempt to get better yields, but the regulations are what drive innovation and technology to a certain extent.”

Most of RedBlack’s clients are large advisors with a combined $200 billion in managed assets. RedBlack is also expanding to offering software solutions for trust companies.

The introduction of technology to the financial industry is changing the workflow environment behind the scenes and adding jobs, says Potter, who recalled a statement from the Federal Reserve Bank of Boston President regarding how few are focused on the effect of digitalization in the financial industry.

“New England, especially the Boston area, is very strong in financial services. It’s rated as one of the top eight industries in the area,” says Potter. “The changes that digitalization is occurring, in the back office and streamlining of technology, and the credibility it adds to the transfer of data is key to the center of New England.”

RedBlack is currently expanding its Bedford office and developer office in India. 

Potter says finding talent in the area is a challenge, but will remain in the area to stay close to higher education facilities in the Merrimack Valley and Boston.  He considered moving to Portsmouth, where there are several software companies and talent, but says the area is getting crowded and expensive.

“We’re getting involved in discussions concerning entering their curriculums [with educational institutions],” says Potter. “I just left a meeting at the NH Technology Talent Partnership and had good discussions with Fidelity and other players there.” Potter hopes to provide more mentoring and internship programs with schools.

He foresees further growth in the digitalization of the financial industry.

“I think we are a catalyst for this. I think we are very well-positioned.”

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