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THE GLUCK REPORT, Part I: Portfolio Management, Up Close

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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

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.

Being able to drill down into your database makes it easier to give clients answers fast when they call and ask about their accounts, allowing you to avoid fumbling and stalling when a client wants to know whether a trade went through or why you moved his money around. According to Bill Ramsay, an advisor in Raleigh, North Carolina, who taught himself programming and uses Portfolio 2000, the ability to navigate your data on screen without running reports is critical to advisors for managing portfolios.

When you run a reconciliation report in Portfolio 2000, he says, you run the report on screen and see what is out of synch. Then, you can drill down to the transaction and fix it on screen without ever running a report. dbCAMS provides a similar onscreen drilldown to fix transactions when reconciling.

“The dbCAMS interface showed by far the most innovation among the three programs we looked at,” says Ramsay. “And that’s important because the interface is designed around the database, so it tells you that the relational database is well structured, giving you that natural fit because it is designed from the bottom up.”

Which brings us to dbCAMS’s data engine, Visual FoxPro. Since Microsoft bought Fox Software in 1992, there have been rumors that Microsoft would kill Visual FoxPro. But it has not happened, and Microsoft continues to support Visual FoxPro, although innovation seems more likely for SQL over the long term because it is more stable for large enterprises.

Ramsay says it does not bother him that SQL is newer and that many programmers believe Microsoft regards Visual FoxPro as a stepchild. He says that dbCAMS’s architecture is more important than its database engine.

Programmers do say that Visual FoxPro will require that you index its tables more often than SQL to prevent data from becoming corrupted. SQL, on the other hand, because it is a more complex platform, is likely to require an outside consultant a few times a year to fix a network or database problem.

Where dbCAMS does fall short for some advisors is in tax lot accounting. While the program can automatically use first in/first out or average cost for tracking and managing tax lots, it cannot automatically track the actual cost of a lot. You must manually input that data anytime you buy or sell.

You also can’t run a custom index against a portfolio. For instance, if a client’s portfolio is 50% large-cap stocks, 25% bonds, and 25% small-cap stocks, you cannot blend three indexes to benchmark the portfolio’s performance. You can only show the performance against the three indexes arrayed individually.

Ramsay, who is weighing dbCAMS versus Schwab PortfolioCenter, says the lack of tax lot accounting depth is a big negative and he is weighing that against the benefits of dbCAMS’s superior onscreen navigation. To him, it’s a question of whether the hassle of manually inputting the tax data in the application is worth the trouble because of the time gained from the onscreen navigation.

Schwab PortfolioCenter

Schwab PortfolioCenter is the most sophisticated of the three programs we reviewed. Schwab says 80% of the firms using PortfolioCenter are planners and 20% are money managers. It does more of the things that the most sophisticated RIAs demand. It automatically records the actual cost of a portfolio’s tax lots, allowing advisors to more efficiently manage their clients’ money for tax purposes. dbCAMS and Advisors Assistant allow you to manually record the cost basis of specific tax lots, but that could be a time-consuming, error-prone hassle if you are managing a significant amount of taxable assets, if you are managing individual stock positions, or if you don’t have a dedicated administrative assistant to manually record buys and sales of securities properly.

In addition, while Advisors Assistant offers limited tax lot management capabilities, and uses the average cost paid for a lot as its default, and dbCAMs applies the FIFO or average cost method of tax management to securities positions, PortfolioCenter can apply FIFO, LIFO, average cost, highest, or lowest cost methodologies, or you can specify which lots you want to sell. For a shop trading stocks, this is even more important. Schwab PortfolioCenter also lets you run a custom bogey, and it comes with 17 graphical reports versus seven in dbCAMS. In addition, Portfolio Center is built on SQL Server.

Schwab, in September, launched the SQL-based PortfolioCenter, and began phasing out Centerpiece, which was built on a proprietary database. The database conversions of the 3,200 firms using Centerpiece will go on for at least nine months. Schwab is going through this trouble because SQL makes it much easier to dynamically link data to other applications–CRM or financial planning, for instance–and easier to integrate data with other applications. It also puts Schwab a step closer to offering a proprietary Web-based platform that combines PortfolioCenter with CRM and other Web-based applications. Many advisors would see a Web-based Schwab platform that integrates planning CRM and PMS as a way to leverage Schwab’s technology, well-known brand, and experience with advisors. And moving to SQL gets Schwab closer toward that long-term strategic goal of a Web-based PMS platform that it previously announced three years ago but delayed when its SQL conversion of Centerpiece took much longer than expected–although Schwab says it has no plans to develop a Web-based platform now.

While requiring more sophisticated support than dbCAMS’s Visual FoxPro data engine, RIAs managing $500 or $600 million or more, with hundreds of portfolios, thousands of accounts, and tens of thousands of transactions, are likely to value SQL’s more stable environment. Both dbCAMS and PortfolioCenter allow you to dynamically link their databases to other applications–such as CRM and financial planning–or cleanly export data to a spreadsheet. So, although the database engine should not be a deal-breaker for most advisors in considering dbCAMS versus Schwab PortfolioCenter, larger firms are likely to value PortfolioCenter.

PortfolioCenter has another distinct advantage in its new security and permissioning tool. While dbCAMS has some limited permissioning capabilities, a principal cannot manage his portfolio in the same database file as all of his clients and give himself and no one else in his firm permission to see his portfolio. During the demo, advisors noted that the permissioning system entailed work to maintain client by client, and Dan Skiles of Schwab acknowledged that improvements would be made in the future. While PortfolioCenter contains few other major improvements over Centerpiece, the permissioning feature is valuable to many firms and sets a new standard for PMS providers.

PortfolioCenter’s advantages–tax lot accounting, a newer database engine, custom benchmarking, and better security–come at a price. A first-year license is $6,950 for an advisor who custodies assets at Schwab, and $8,650 for advisors not doing business with Schwab. The annual license fee thereafter is $1,650, and the cost of additional licenses is $1,200 the first year and $600 a year thereafter. Interfaces–PortfolioCenter has clean interfaces to more than 40 custodians, B/Ds, and other data-download sources–cost $1,200 the first year for each interface and $600 a year thereafter. The Schwab download interface, however, is free.

Comparing dbCAMS’s value directly with Schwab PortfolioCenter, you’ll pay $4,245 the first year for dbCAMS versus $6,950 for PortfolioCenter ($8,650 if you do not have assets at Schwab). That’s a $2,705 difference in the first-year license fee for a sole practitioner. If an RIA regularly clears through Schwab plus one other custodian, it’s an additional $1,200 in the first year for the additional interface, which means you pay $3,905 more than dbCAMS in the first year.

Looking at the cost of PortfolioCenter versus dbCAMS for a larger RIA, consider this: if an RIA has two partners and one support staffer and all three simultaneously need to access the PMS system, then two additional PortfolioCenter licenses will cost you $2,400 the first year and $1,200 each year thereafter. Thus, an RIA with one custodian in addition to Schwab that needs three licenses pays $10,650 in the first year for PortfolioCenter (or $11,650 if it is a non-Schwab Institutional client) versus $4,695 for dbCAMS, and the ongoing annual fee for such a firm would be $3,450 for PortfolioCenter versus $1,950 for dbCAMS. Keep in mind that although the major difference in portfolio management capabilities between the two programs are tax lot accounting and permissioning, these are features that large firms or managers of individual stocks would value most and could be “must-haves” to many firms.

An area where our panel of advisors said PortfolioCenter could use improvement is onscreen navigation. With PortfolioCenter, you cannot reconcile on screen, for instance. You must run a reconciliation report and then go back into the transactions to fix it. And then you must run the report again to verify that the problem indeed was fixed. Having to run reports to do this or give a client who calls an instant answer about his account is cumbersome, say several of the advisors on our panel, including Reese, Ramsay, and Dean Giella, an advisor in Woodbury, New York.

One other problem with Schwab PortfolioCenter that several advisors mentioned is that Schwab owns it. “They act like their market share allows them to make decisions without input from their customers,” says Ramsay. “I trust Schwab only slightly more than Advent,” says Reese, a Portfolio 2000 user who feels burned by Advent. “Schwab showed its position in the past when it made a decision to stop selling their [PMS] products to advisors who don’t custody assets there.”

Schwab has backed off of that position in recent months because it created a client relations nightmare, causing many advisors to look upon its technology offering as a thinly veiled way to gain greater control over their businesses. Many remain skeptical, however, including several advisors participating in our demo. “Who’s to say Schwab won’t do something like that again and start putting an arm on you to get more of your assets there?” asks Reese.

Was the long wait for PortfolioCenter worth it? For Schwab the answer is yes: PortfolioCenter puts the discount broker a step closer to its hidden agenda of migrating as many RIAs to the Web as possible. For advisors, the ones to benefit so far are big firms that need more stability in the application or who value the new security, permissioning, and dynamic link to data for clean exports.

With 100 employees and 3,200 firms using PortfolioCenter, the lower-cost rival dbCAMs, with 35 employees and 1,500 user firms, still gives Schwab’s program a run for the money. PortfolioCenter has the edge with the most sophisticated advisory firms managing individual stocks and needing actual tax lot accounting. Advisors Assistant, while adequate for registered reps, is not going to give an advisor managing money for a fee all of the functions needed. But development of an SQL-based version from this established vendor with several thousand customers is promising to add a new competitor to the PMS field. These are only three of the PMS vendors vying for advisor business. Next month, we’ll look at others.

Editor-at-Large Andrew Gluck, a veteran personal finance reporter, is president of Advisor Products Inc. (, which creates client newsletters and Web sites for advisors. Advisor Products may compete or do business with companies mentioned in this column. He can be reached at [email protected].


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