Events in the business of providing portfolio management software to independent advisors are starting to look like a bad soap opera. This little corner of the advisor world is as kitschy as “General Hospital,” “Dallas,” or some other daytime drama. Every month, another episode unfolds in this long saga, with no end in sight.
Last month, Advent Software, which advisors usually cast in the part of the slick, greedy villain, played its part with great alacrity. As if scripted, Advent said it planned to kill the desktop version of Portfolio 2000 (P2000) in 2005. So, less than a year after purchasing Techfi Corp., the tiny competitor that thrilled its fans by driving its P2000 with breakthrough SQL database technology, will be removed from the scene.
To be fair to Advent, George Seiters, an executive VP at the publicly held San Francisco-based company, is adamant in pointing out that “we are definitely not pulling the plug” on P2000; users are actually being “migrated” to the Web. Seiters says Advent will make one last enhancement to P2000 in the third quarter of this year, and is continuing to support the product. After that, however, enhancements will be made only to the Web-based version of P2000. The work on improving P2000′s contact manager module has now stopped, for instance, and all resources to develop contact management with P2000 will be diverted to the Web version of P2000, which is known as AdvisorMart.
Meanwhile, our other protagonist, the once dashing but now humbled star, Charles Schwab & Company, is playing the part of the spurned lover who now can’t do anything right. Yet again, Schwab has put off releasing an SQL database version of Port- folioCenter (PC), its portfolio management software package. Schwab had first promised to revamp PC, formerly called Centerpiece, about 18 months ago. But that was before Advent bought Techfi for $25 million, at a time when Advent and Schwab were both scrambling to respond to P2000′s SQL database version. Schwab originally said it would release the SQL database version in June 2002, but it was subsequently delayed until August, and then September. Late last summer, Schwab said it would release the program in early 2003. Now, the release has been postponed again, with no new release date.
To this we add a new plot line. Enter Optima Technologies Interactive Advisory Services (IAS), the dashing hero who is racing to rescue advisors from the clutches of the evil giants. Optima plans to launch a standalone PMS product. This SQL version of IAS should provide a viable alternative for RIAs. Suddenly, a credible new competitor will be on the scene.
And so it goes in the business of PMS, where every top executive is a character, every product has an epic story, and every day brings new drama. In fact, while I was writing this column, I received an e-mail from an advisor saying that he’d been told the SQL version of Centerpiece has been killed. Schwab swiftly denied the report, however.
Still, it is probably wise for RIAs to consider the possibility that the desktop version of Schwab’s PortfolioCenter PMS software will follow Advent’s lead and migrate advisors to the Web. It’s also probably wise for Advent Axys users to consider that, at some point down the road, Advent may want to migrate all of its users to a Web-based application.
I’m not saying this will happen–and for sure, neither is Schwab or Advent. Forcing migration to the Web for 3,000 advisors using Schwab PC, or the 3,000 small RIAs using Advent’s Axys, would cause a revolt. However, since your PMS application is so important to your practice, it’s wise to consider the possibility–especially since Advent will do just that in 2005 with 350 P2000 licensees.
What’s really going on right now is that Web-based PMS applications are beginning to supplant desktop software for independent reps affiliated with broker/dealers. Advent and other vendors say Web-based applications are the future, and they’re right. But they’re also motivated for their own business reasons.
Web-based applications are being adopted by B/Ds, and they support the business goals of Schwab and Advent. RIAs have so far been tepid on Web-based PMS applications, and, arguably, they make less sense for RIAs. If Advent and Schwab pursue their business interests and try to gain more adoption of Web-based PMS offerings, however, RIAs could be caught in a bit of a squeeze.
More Web, More Profits?
Software vendors like Advent are motivated to get RIAs to switch to Web-based versions because they can charge the same for their Web-based platform as they do for their desktop software and realize much lower expenses for support. Supporting a Web-based application sitting on one server in a room in San Francisco is far less expensive than supporting a piece of software loaded onto 7,000 computers with different hardware and software configurations in 3,000 different locations across the nation. The price you pay for the Web software and automated download service is likely to stay the same as it was for the desktop license, but software companies get to cut their costs and earn fatter profit margins on a Web-based version of their software.
The vendors would also like to have your data on their servers because it anchors you to them. A Web-based application could make it tougher for you to change PMS platforms. Schwab, which is experiencing greater competition in the RIA custody business, would certainly like that.
Meanwhile, B/Ds are adopting Web-based PMS applications because it makes sense for them. Advent is making a big push now with AdvisorMart Institutional. Using technology acquired in the Techfi purchase, this Web-based platform is powering Advent’s recent entrance into enterprise-wide solutions for B/Ds. AdvisorMart Institutional is a great new alternative to StatementOne for B/Ds. Launched in January, AdvisorMart Institutional lets B/Ds offer reps portfolio reporting packages through a centralized system. B/Ds want to consolidate technology used by branches, ensure compliance, and store rep data on their servers.
In two or three years, the great majority of independent reps will be using Web-based applications. The great majority of RIAs probably won’t, however. Consider this: An RIA version of AdvisorMart has been offered for almost three years, but has not attracted many RIAs. Most RIAs like having their customer data in their office, and they have been very slow to switch from desktop to Web-based applications that put their client data on another company’s Web server.
RIAs’ adoption of Web-based PMS has been far less successful. This is so despite convincing arguments by companies including Advent and Schwab that it is in the best interest of RIAs to outsource portfolio accounting chores to a Web-based platforms. “We do not want to place an increased technology burden on firms that do not have the resources to support automated workflows,” says Seiters. “Advisors need to spend less time on technology and more time with their clients, and the best way to accomplish that is to take the technology burden off the advisor completely.”
Your Data, Our Server
The migration of the 350 or so RIAs using the desktop version of P2000 means they will have to do their downloads into a Web-based PMS application, and Advent’s server would store their data. Alternatively, these RIAs could choose to use Advent’s AdvisorMart service bureau, which means Advent would handle their downloads, reconcile their data for them, and store the data on an Advent server for them.
The 350 RIAs using P2000 must decide by 2005 if they absolutely must have a desktop software application or if they are comfortable with a Web-based application. This is purely a matter of personal choice. The factors in this decision are clear-cut. Do you want to have your client data sitting on an Advent server? Will you be happier knowing that Advent can make upgrades to your software for you, and you won’t have the hassle of updating the software every time a new version comes out? Are you being a control freak if you insist that your client portfolio data be stored in your office and not accessible to you only over the Internet? What choices do you have even if you want to move to a different desktop PMS application?