Wed, 10/02/2016 - 09:48
Beverly Chandler interviews Bill Stone (pictured), founder, CEO and Chairman of the USD6.3 billion firm SS&C Technologies.
SS&C Technologies Inc was famously founded by its then and now CEO and Chairman, William C (Bill) Stone in the basement of his home in 1986, and while it has grown exponentially over the intervening years, there is still something of the homespun in what drives him to keep building his USD6.3 billion firm.
The satisfaction he gets as an entrepreneur is very much on a personal level. “I get to see people grow, learn, get promoted, be able to gain some wealth and buy a better car or house, send their kids to better schools – this is the success the business is creating,” he says. “I want to make sure that my employees have every opportunity possible.”
For the aspiring entrepreneur starting out now with an idea and a small amount of money, Stone advises that your heart and head must be in it together. “If they are not, you are going to run into adversarial situations – things sometimes happen that are negative, and you are not going to be persistent enough to get through the difficult times and you will give up,” he says.
The second most important thing is the idea – it has to be one that will work. “It doesn’t matter how hard you work if your idea doesn’t work,” Stone says. “You can make a great buggy whip but it’s not going to do well because people drive cars. It has to be relevant – imagine being the manager of Sony Walkman when iPods came out: the latest figures showed six billion music titles have been sold through the iTunes store.”
For a firm that is at the cutting edge of technology, old technology and the advances made since he founded his company fascinate him. Asked about the various corporate stages the company has been through – listed, private and listed again – Stone says: “You start to see things in a different light as you go through time and you learn from your mistakes and try to capitalise on your successes. The world is a different place from 1986. You had car phones that were unique and now look at how ubiquitous the iPhone is.”
“It is so different from how it was. People’s expectation of access to information is insatiable. In financial services, as a supplier of support services to money managers of all types, we have to have extreme up time reliability and be flexible, and those things are often in conflict. So we are constantly on guard, making sure we comply with regulatory requirements and that we are very secure from a cyber security standpoint. Thirty years ago there weren’t too many hackers – that has now changed and SS&C have moved pretty quickly to stay at the forefront of what people want and demand.”
SS&C first started talking to its latest acquisition, technology firm Advent, in December 2014, with the deal announced in February 2015 and done by June of that year. Acquisition is a preferred route to growth for the firm. Since 1995, SS&C has acquired 40 businesses with products, services and technologies in existing or complementary vertical markets.
“Advent is a strong business with strong products and great people and it works well for us,” Stone says. “The excitement around the combination of our organisations has been tremendous and we are very pleased. Advent brings us the Geneva platform, a world renowned investment accounting platform across a wide range of asset classes and vehicles, and Black Diamond, a cloud based portfolio management product for registered investment advisers. This is a growth business.”
The firm had a relatively calm experience of the global financial crisis. “You could start to see stuff was happening. We had our best quarter in history in the second quarter of 2008, but the depth for us was the first quarter of 2009 – revenues dropped 12 per cent from roughly USD72 million to USD64 million. A bit of a shock when, as a company, you are used to growing 10 per cent a year.”
SS&C moved quickly to align its expense base with what its revenues would be and survived well. “We pay attention and react as quickly as we can to information that we receive,” Stone says.
The biggest changes he has seen since founding the firm in 1986 are the increases in mobility and 24 hour constant information processing.
“Cable TV, movies on demand, anything else that you want is available to you 24/7 and then there is market news and world news any time you want. That’s a sea change. All the media people are in such a competitive environment that getting original interviews and information that isn’t 24 times baked over is a real challenge. Our clients want to be updated on a day to day basis whether they are travelling or in the office.
“The communication environment has changed so dramatically over the last 30 years – even the likelihood of this interview happening, between the US and the UK, in 1986 was very low.”
Turning to the future, Stone believes that the recently underperforming hedge fund industry is going to be just fine going forward. “The hedge fund industry is a resilient industry full of very bright people that won’t be held down for long. There will be new launches and new firms. There are always periods where performance isn’t as good as it could be, but at the same time, there are a lot of bright people and that also applies to the private equity and funds of funds sectors.”
An area where he predicts growth over the coming years is in small financial planners and financial counsellors, who manage the affairs of between 100 and 1,000 customers. Stone believes that this sector will continue to grow more and more as people transition out of the big institutions and look to set up their own firms. “Sometimes people like to be on their own,” he says, in an echo of his firm’s own origins.
“Some of it will become automated – the robo adviser is not going to go away as systems get smarter and smarter. Passive investing into indices will grow. If you don’t have the expected performance then you don’t want to pay the fees that come hand-in-hand with active management.”
So can technology help fund managers find alpha? It’s no surprise that Stone believes it can. “Technology allows you to have a wider horizon, so you can maybe find a great company in Manchester or Sheffield, Seattle, Shanghai, Sydney or Hong Kong, and technology allows you to look at more things and have a richer environment in which to select the best assets. Without it you have to go back into the library to do your research, and the number of options you can look at is limited. With technology you can screen the growth of thousands and thousands of different investments and whittle it down to what you can look at in depth.”