It’s a great time to take a look at portfolio management software. Vendors are scrambling to attract the 278 independent advisors recently displaced by Advent’s decision to end support for Portfolio 2000, Schwab is rolling out a brand new version of its PortfolioCenter software, and new PMS companies are gaining traction.
Over the next few months, we’re going to bring you a series of in-depth reviews of PMS applications–a comprehensive look at the field of companies selling the central application advisors use to run their businesses. This month, we start with Advisors Assistant, dbCAMS, and Schwab PortfolioCenter.
The three programs are very different from one another, which is why we picked them. While it is tempting for advisors to compare PMS applications feature by feature, and look for the one with the most bells and whistles, what’s really important in choosing a PMS vendor is whether a particular program suits your business. The independent advisor market is segmented into some distinct groups and each segment has its own distinct PMS needs. Although Schwab PortfolioCenter (formerly called Centerpiece) is the most sophisticated of the three programs reviewed this month, it’s overkill for most independent registered reps. Advisors Assistant is a better solution for many of them. Similarly, financial planners who don’t need PortfolioCenter’s superior tax lot accounting capabilities can save a bundle by buying dbCAMS. The “best” PMS application may not be the best one for your particular practice.
To conduct our reviews, we asked the PMS vendors to fill out a checklist covering about 80 features. We asked about basic features: the number of standard reports that come out of the box with the software, a reconciliation tool, and the number of interfaces with B/Ds, custodians, and other account data sources. The checklist also asked about more sophisticated capabilities: support for multiple billing schemes, tax lot accounting by actual cost, and reports showing targeted versus actual asset allocations.
Each vendor filled in the checklist and I distributed it with their answers to a group of eight advisors. The eight then attended Web conferences during which each vendor spent 90 minutes demonstrating the software and answering our questions.
The eight are all fairly sophisticated in their understanding of PMS and technology. Their practices run the gamut from registered reps with an insurance background managing $20 million to operations managers at firms managing $400 million. Five of the eight are TechFi refugees–advisors searching for a PMS platform, which made them good evaluators because they are actually in hot pursuit of a solution. Here’s what we found.
Advisors Assistant is an established product sold by very friendly people. Pat Dempsey started the company in 1984 and wrote the first version of the insurance client tracking system himself. In 1986, he hired his first programmer, and in 1994 the program was rewritten for Windows, placed on a Visual FoxPro database, and investment tracking was added. Performance reporting followed in 1999. Today, 21 employees work in Pismo Beach, California, at Client Marketing Systems, including Dempsey’s wife and daughter. Advisors Assistant is employed by about 4,000 firms and has about 15,000 users.
The program is strong on client relationship management, since that was its initial focus. You can easily access each client’s contact information, create notes about each client, and record “to-dos” about your meetings or phone calls with clients, plus it is integrated with a calendar. In February, the program will be tied more closely with Microsoft Outlook, so that whenever you receive e-mail in Outlook, it will also show up automatically in Advisors Assistant.
Advisors Assistant, which has interfaces with DST, DAZL, Pershing, Wedbush Morgan, National Financial, Fidelity, TD Waterhouse, Schwab, and many other download sources, including Albridge (StatementOne), comes with 140 standard investment reports and 10 graphical reports. You can run a report for realized or unrealized losses versus gains, and apply average tax lot accounting automatically. You cannot customize a standard report; Client Marketing Systems staff customizes reports for users for $200 to $300.
The software is priced right, at the very low end of the spectrum of PMS applications. It’s $798 for a first-year license for a single user and $1,298 for up to five users. The annual license fee for a single user is $348, and $488 for up to five users. Additional licenses are just $99 a year. It costs $299 for the first download interface and $99 for each additional interface.
The functionality is geared toward registered reps who are selling products and who do not have discretion to make trades on behalf of clients. In fact, Dempsey says 80% of his user base are registered reps, while 5% are broker/dealers, and less than 1% are money managers. For registered reps, it has pretty much everything they need to form the core application on which they run their businesses, or for a branch with multiple reps.
Where Advisors Assistant falls short is in the more advanced features of portfolio reporting, accounting, and management. For instance, you cannot calculate a time-weighted rate of return net of fees, and it offers no billing capabilities. In addition, the only tax accounting method it supports is average cost. It cannot run a report showing a portfolio’s current asset allocation versus a target or model portfolio.
These are deal-killers for many planners and money managers. “I’d love to find a way to do business with them,” says Rick Reese, a sole practitioner in Madison, Wisconsin, who manages about $25 million and has been in the business for 24 years. “You can tell that these really are nice people and they have a good company, but it is not for an RIA.”
But don’t count these guys out. Dempsey has abandoned all but a few improvements on the current version of Advisors Assistant and is now programming a new version using Microsoft’s “.net” platform and SQL Server 2005. Dempsey says the new version will include a billing function, track returns without management fees, allow permissioning and security for multiple branches, and will let a user swap columns of data and customize reports without asking CMS to do it. The new version, Dempsey says, will expand CMS’s capabilities among RIAs and allow Advisors Assistant to be sold to more sophisticated advisors. The new platform will go into beta testing this spring; a production release is not expected until September 2005. The first release will not include support for rebalancing against a model.
dbCAMS is a little surprising. The program gets no respect. When I first started covering PMS applications over eight years ago, many advisors told me that dbCAMS was inferior to Advent and Schwab Centerpiece. About five years ago, the CEO of the company, Dave “Dusty” Huxford, gave me a tour of the software and it was unimpressive. At the same time, Portfolio 2000 had just been launched and was built on an SQL Server database, while dbCAMS was built on Visual FoxPro, an older database. All this, along with negative comments from high-end advisors that I know who demand the most sophisticated PMS features, led me to downplay dbCAMS in my coverage in recent years. If I could not say nice things about the software, I’d focus on Advent and Centerpiece instead. I was wrong to do that.
dbCAMS is a good program for many financial planners. Since I last looked at the software in 1999, dbCAMS and Huxford have gotten better. “A lot of dbCAMS users used to complain that the program was hard to use,” says Sandy Derato, of Planners Consulting in Accident, Maryland. “But it has improved and it calculates returns accurately.”
Derato, who was a manager at dbCAMS from 1987 to 1997, has since founded her own firm which consults to dbCAMS users, and runs a dbCAMS service bureau. She helped me better understand the roots of dbCAMS.
dbCAMS’s history dates back to 1981, when Dusty’s father, David Sr., founded the company in his home in rural western Maryland. The family business–Dave Huxford’s wife was a programmer–grew rapidly, and by the early 1990s dbCAMS was the leading program among independent planners because it handled insurance, contact management, and other client tracking items in addition to investment management.
On September 8, 1994, tragedy struck, when USAir flight 427 from Chicago crashed into a hillside near Pittsburgh International Airport, killing all 132 passengers aboard, including Dusty’s father, Dave Huxford Sr. To this day, people in the industry speak of the elder Huxford as a visionary. Dusty, his son, an engineer who had worked part-time at the company while he was in college, was thrust into the family business immediately after his father’s death. He worked his way up from tech support to CEO over the next couple of years, and has been running the company ever since. Huxford has survived one of the most difficult tasks a son could ever face: filling the shoes of a father, particularly with such entrepreneurial flair.
According to Huxford, 1,500 firms–some 11,000 licensees–use dbCAMS. He estimates that 70% of the users are fee-only planners, 20% are registered reps, 5% are broker/dealers, and 5% are money managers. Financial Computer Support, the company that sells dbCAMS, now has 35 employees.
Based on comments from advisors participating in our demo, dbCAMS provides almost all of the accounting, performance reporting, and management features needed by an advisor primarily managing portfolios of funds, and at a good price relative to its competitors. dbCAMS also lets you track contact information on clients, input notes and to-dos, track income and net worth, and supports a required minimum distribution report to tell you which clients with IRAs must make distributions. Its PMS system handles stock splits and other corporate actions on an automated basis, and comes with 38 standard client reports out of the box, six security price reports, seven asset management reports, and two dozen other reports, as well as seven standard graphical reports.
dbCAMS handles unlimited billing schemes, and up to seven billing reports can be generated. It comes with a custom report writer and allows you to remove and add columns to standard reports. A big benefit of dbCAMS is that all of the interfaces–to some 200 custodians, institutions, and other download sources–are included with the cost of a software license. The first year license costs $4,245. It then costs $1,500 annually for the first license and $225 annually for each additional license.
The application can run an asset allocation report against a model portfolio, shows time-weighted returns net of fees or gross, and lets you drill down to the transaction level from the portfolio or family portfolio level. This last feature was especially important to several of the TechFi users participating in our demos.