#taxgopher

We are very excited about our newest business agreement with Advent Software and see it as a win-win for Geneva clients (see 3/17/2014 Advent blog: The Power of Alliance). TaxGopher®, which provides accurate information on taxable gains and losses, is now the “expert” component for tax analysis within the Geneva® platform. This single, integrated solution extends the powerful capabilities of Advent’s investment portfolio management solution to include tax accounting / analysis of securities transactions — enabling users to address both year-end tax compliance and gain greater tax awareness throughout the year.

We also view this Geneva + TaxGopher integrated solution as a validation of our approach to building best-in-class software. Some seven years ago, when we started building TaxGopher, we wanted to make it possible for clients to solve complex tax analysis problems by offering them a cost-effective solution that, among other things, made use of existing IT infrastructure. At the time, Geneva was already widely recognized as the leading portfolio management system in the hedge fund space. So we made sure our tax engine could easily accept and use all the Geneva-sourced information (tax lot level detail) needed to accurately generate tax adjustments to gains and losses. Our strong domain knowledge of Geneva, and the integration of other apps to that platform, which we gained as a premier Geneva consulting firm from 2006 to 2011, made this task straight-forward.

Our body of work with Geneva has only helped grow our software business. To be sure, over the years, fifteen of our more than twenty TaxGopher institutional clients have been Geneva users. Advent’s agreement and interest in reselling G2’s tax analysis component as an integrated part of the Geneva solution set validates not only our approach to building software but the effectiveness of our product.

G2 has been awarded its 2nd IHFA award! We're very proud of this recognition. Read all about it in our press release.

At last month’s Boston CIO Roundtable Forum, hosted by Advent International, G2's CEO, George Michaels, lead a compelling discussion on "Financial Services Trends: Outsourcing & the Cloud." He touched on third-party admins, back-office shadow books, and his specialty, tax processing, in addition to the move toward the cloud in all of these functions.

In the midst of George's discourse, the topic of outsourcing IT operations became a discussion point among attendees, especially with regards to the potential inefficiency and high turnover rate associated with outsourcing to foreign countries. Another major discussion point included moving IT operations (servers) to the cloud, and the costs of colocation of servers as opposed to moving servers to the cloud entirely. 

The group also discussed the importance of finding an inefficiency or niche in the market and making a business out of it, much like George did with tax analysis of securities transactions (TAST) and TaxGopher®. The conversation dove deeper into how George became an expert in the tax analysis space and what the overall competition looks like in our space.

IBM answered my call and hired me as a computer programmer right out of SUNY-Albany. So began my career in IT. Then things changed. I found my way to the IBM Wall Street Office, embarked on a career in sales, solving problems with computers in a different way. For the past three decades, I have worked at large and small firms, helping business users within financial institutions address their needs with computer-based solutions. Throughout it all, outsourcing to a third-party provider or cloud computing, has and continues to be a consistent theme.

Over the span of my career, I have witnessed cloud-based technology (outsourcing) become a major change agent in the outsourcing of financial technology. The trend only continues to gain momentum as “…financial institutions are increasingly switching over to cloud-based services, and their reservations about the cloud are quickly being chipped away,” writes Becca Lipman, senior editor at Wall Street & Technology in Hedge Funds Increasingly Using Cloud for Back-end Computing, August 2013. I am not at all surprised that more and more alternative investment firms are embracing this technology. Take a walk down memory lane with me to see why.

During the ‘80s as an IBMer, I observed niche hardware suppliers aggressively selling to frustrated business users within the larger Wall Street firms. To that point, front and middle office functions in need of powerful analytics were going outside to the likes of Cray, an expensive specialized service bureau. The mini-computer – followed by high-performance technology that matured into the UNIX workstation market – delivered powerful processing capability that could run on-premise and largely outside the control of the IT group’s data center, the domain of the IBM mainframe computers.

IBM mainframes from that point forward were subject to the cry that they were at the end of their useful life. Not so fast! Gabriel Lowy’s August 2013 article, New Life in the Cloud for Mainframes?, points out, “The mainframe’s strongest assets – scalability, reliability, availability, security, and manageability – are the very characteristics that enterprises are most concerned about as they consider moving business-critical services to a cloud-based architecture.” Riding the introduction of the personal computer, Advent Software launched a desktop portfolio accounting application for buy-side financial analysts in 1983. These analysts could now have full control of that accounting app, PC hardware, and client data as an alternative to relying on outside accounting services available in those days, such as Shaw Data Services. This trend continued after I joined Advent as the firm added trade management software, followed by their powerful global portfolio accounting engine in the ‘90s. You could see how vital it was for the users at investment management firms to readily access these powerful application systems.

Fast forward: Advent, already hosting a number of their software applications within their OnDemand Software-as-a-Service model, just announced Advent Direct™, a new cloud platform that will complement and extend the value of their existing products with a broad range of new solutions. I believe in Advent’s expressed intent to extend those solutions by accepting app plug-ins from third party software suppliers like G2 FinTech -- make my day.

Next: on to my stint at a brokerage / technology firm – I had to go back to school, for my Series 7, 63 and 24 licenses. EdgeTrade captured lighting-in-a-bottle with its Find and Nail (FAN) algorithm during the 2006-2007 timeframe, enabling traders to find the other side of the trade by simultaneously accessing dark pools and public markets. The sales efforts were primarily directed to business users: traders and portfolio managers. This was a terrific example of cloud-based technology successfully empowering the buy-side.

My career arc has most recently taken me to G2 FinTech. G2 FinTech’s flagship software product, TaxGopher®, performs tax analysis of securities transactions, with the primary focus of serving the alternative investment community. TaxGopher is effectively enabling tax analysis to be performed by the business user working in non-traditional tax analysis functions. The combination of (1) automating the data feed from a hedge fund’s investment book, (2) tax-smart software, and (3) running on fast hardware are empowering the buy-side business user in a way not possible before.

The G2 FinTech TaxGopher story is one of delivering high-performance, cost-effective technology within the user’s control that enables on-demand tax analysis. The cloud is just one deployment option to achieve this goal.

Client-based requirements will continue to drive cloud-based technology usage as a specialized, highly-evolved flavor of outsourcing. Market-driven forces have transformed the dated paradigm of an inflexible service bureau into a readily accessible, technology-enabled service that increasingly incorporates the cloud as a critical ingredient.

Last week, the G2 FinTech Team co-sponsored the Financial Research Association’s (FRA) Private Investment Funds Master Tax Class. This event ran two tracks simultaneously: one focused on Private Equity and the other on Hedge Funds.

We listened to a slate of regulatory / tax updates, discussions, and detailed walk-throughs on hedge fund tax. We talked with players from all aspects of the hedge fund tax business at our booth. Our flagship product, TaxGopher®, again stood out in a field crowded with service bureaus & consultants, ours being a deployed software solution offering the user full control throughout the tax analysis of securities transactions process.

This year, we enjoyed face time with familiar, valued clients who have benefited from active use of their TaxGopher license for a number of years as well as time spent with brand new faces who may never have considered a software solution until now.

Our CEO and founder, George Michaels, was one of the panelists on Thursday afternoon, and participated in a lively discussion titled “Wash Sales, Straddles, Short Sales, Constructive Sales, and Other Potential Pitfalls.” The time he has invested researching the legal histories of these tax issues was on full display, providing colorful context, citing the events that moved Congress to action in closing tax loop-holes. Along with his other panelists, Greg Levy and Steve Yardumian, the panel covered a string of intricate scenarios for a range of unusual trading instruments.

This panel wasn’t the only one to mention the importance of accurately treating wash sales & other taxable events. The topic came up repeatedly in other panels such as “Your Fund’s Tax Plan in this Current Environment” as something that funds MUST have a plan for, unless they want to be penalized by the IRS. Many of the speakers also focused on the fact that the government is looking more closely at tax returns than ever before. Not only are the laws getting stricter, they are also more likely to be enforced by the IRS (as suggested by the session title, “Surviving the IRS Audit”) so getting the calculations correct is just as important as doing them in the first place.

To this financial technology software supplier’s ears, Advent offered a sweet-sounding message at its Client “Connection” Conference in Las Vegas two weeks ago.

Advent acknowledged that its end-clients are demanding complete investment management solutions that will be available sooner. Advent declared its absolute focus to finish the job it started by accelerating the “filling-in” of their functional footprint. Advent further acknowledged that relying solely on an organic build-out approach won’t get the job done – at least not fast enough to satisfy end-clients. What we then heard was Advent’s proposed approach: wherever Advent is not the best, Advent will partner with financial technology firms that are leaders in their field, and build trust with those partners by being more open and collaborative.

The fact is, G2 made that directional bet years ago. For years G2 has been an Advent Alliance Partner with TaxGopher®, G2 FinTech’s software for tax analysis of securities transactions, which “snaps” on to existing portfolio management & accounting platforms like Geneva®. G2 comes from and has continued to focus on the alternative investment community. Given Advent Geneva’s dominant footprint in this space, it’s no accident that the majority of our TaxGopher clients begin their tax analysis workflow process by feeding tax lot level data from Geneva into G2’s tax analysis engine. This strategy allows each software provider to focus on and refine its unique area of expertise and utilize the data and strengths of other systems in order to deliver best-of-breed solutions to the marketplace faster.

More recently, we doubled-down on the notion that Advent is dead serious about expanding partnerships. Accordingly, we’ve built out a second application (we will show these cards at another time -- stay tuned) for integration with Geneva as the source system. Advent has an initial client waiting for this deliverable, with other alternative investment firms, most notably fund administrators, as future prospective buyers of the software.

Win-Win Situation

What’s newly attractive to a software component supplier like G2 FinTech is the fact that a partnership approach is a great opportunity to reach end-users in the multiple markets that Advent serves. The ability to snap our code into the respective portfolio management & accounting engines Advent has aligned with each of their markets will have untold benefits for G2. Not to mention the inherent value of the Advent sales and distribution channel. The message heard in Vegas was Advent’s intent to deliver a unified experience across application components, and across their portfolio management & accounting platforms.

Closer to home, it’s important to note that G2’s software components by design have always been agnostic in their ability to integrate with any portfolio management & accounting system. It’s early, but there’s reason to believe Advent will not be turned off by working with software firms that might also supply components to their competitors, as long as the supplier is bringing best-in-class functionality to their end-clients. Time will tell.

And yes, G2’s apps will gladly run both in the cloud and as on-premise deployed software. This is consistent with Advent’s declared enterprise + cloud strategy.