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THE GLUCK REPORT, Part II: Portfolio Management Moves onto the Web

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The three PMS programs we reviewed this month, Schwab PortfolioCenter, Advisors Assistant, and dbCAMS, are desktop applications, but desktop applications are becoming less common. Most of the new PMS products becoming available are Web-based now–Albridge Solutions (formerly StatementOne), Integrated Decision Systems, Investigo. While desktop applications won’t become extinct overnight, forces shaping the industry and the fragmented nature of the independent advisor market make it likely that many more advisors will migrate to a Web-based PMS system over the next few years.

Not all advisors feel comfortable with Web-based PMS applications, however. In fact, most RIAs whom I’ve asked about it say they would prefer to keep their data on their own desktops. However, broker/dealers are embracing Web-based systems for their reps and that trend is influencing PMS vendors in the RIA market.

Companies like Albridge and Investigo are vying for enterprise-wide deals with broker/dealers. To B/Ds, the Web-based PMS vendors are compelling. Until now, the vast majority of reps affiliated with independent B/Ds have provided no portfolio performance reports to clients, instead relying solely on monthly account statements provided through clearing firms and fund companies. So the Web-based systems, while in some cases not offering the varied features, reports, and customization of a desktop PMS application, are a giant leap forward in providing rep clients a better account statement and making reps more competitive.

Business reasons are also spurring B/Ds to adopt Web-based PMS systems. Compliance is much simpler when a B/D can see all of the positions a rep puts clients into. Also, a B/D can negotiate much bigger discounts on the price that reps pay, since a Web-based PMS vendor maintains just one installation if its application is on a Web server and is not distributing and servicing hundreds of individual installations of a desktop application. In addition, having all of a rep’s client account data on a B/D’s server supports the firm’s business goal of discouraging reps from switching to competitors.

The enterprise deals are lucrative for the PMS vendors. Till now, for the most part, they were forced to sell one license at a time to succeed. As a result, the new PMS applications coming to market are almost all Web-based and not on the desktop. For these reasons, B/Ds and, to some degree, custodians are cutting deals with Web-based PMS vendors.

For reps, the trend means being tied more closely to their B/D’s platform. But because of all the NASD compliance rules, reps are already so closely tied to their B/D that relying on the B/D’s PMS system has not altered that equation too much. For RIAs, it’s another story. They are not supervised by their custodians, so relying on them for a PMS system could deepen dependence on a custodian.

Another important aspect of the trend toward Web-based PMS applications is that these systems can be integrated with other applications advisors need: CRM, analytics, financial planning. More and more B/Ds and custodians are going to be building integrated platforms, and they are likely to require all reps to use a limited set of applications. While this will limit choices reps can make, it will elevate their way of practicing. Many reps have not used any planning, CRM, or analytics applications, so by providing an integrated platform that provides all of these applications at a low cost, B/Ds will be making their reps more competitive.

RIAs not affiliated with a B/D will be in a tough spot. Many RIAs don’t like having their portfolio account data on a remote server controlled by a custodian. They also don’t like having only a limited range of choices for CRM, analytics, PMS, and other core applications for running a practice.

My guess is that over the next five years more and more RIAs will move to Web-based PMS solutions. But they will first insist on assurances from their custodian that they can download their client data on a daily or monthly basis in a database format that can be cleanly exported at a reasonable cost into another application. Meanwhile, technology companies and service bureaus that are independent of B/Ds and custodians, such as Orion Advisor Services, Investigo, Integrated Decision Systems, and others, will offer an alternative to proprietary systems run by custodians. Still, don’t count on desktop software going the way of the dodo.

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]