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THE GLUCK REPORT, Part III: Orion Rising?

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For RIAs, the choice among portfolio management software (PMS) programs keeps growing. This month, we’ll take a look at one of the newer offerings, from Orion Advisor Services, which combines a Web-based portfolio management technology with a service bureau to provide a turnkey performance reporting system. But let’s first put into perspective what’s been happening in the PMS category.

Just a couple of years ago, it seemed like the only choice for advisors among PMS vendors was Advent’s Axys or Schwab’s PortfolioCenter (formerly Centerpiece). More recently, however, new choices have arrived and older programs have been upgraded and become more viable.

So what’s going on? How will all these companies survive when they’re chasing a relatively small number of advisors? Orion Advisor Services’s business model and product may provide a partial answer. Orion is a combination service bureau and technology company that was founded by a money management firm. Its niche is with asset gatherers, breakaway brokers, and other advisors who want to use model portfolios for managing money and do little or none of the back-office work that requires support staff. Orion will find a devoted following among these types of advisors, I suspect, and is a good example of the direction that some PMS applications will be taking in coming years.

Orion is a spinoff of CLS Investment Firm, LLC, an Omaha, Nebraska, money management firm that manages about $2.2 billion. CLS creates portfolios using mutual funds and variable annuities, offering a turnkey asset management program for advisors. Initially, CLS used dbCAMS software. In the mid-1990s, when CLS managed about $1 billion, it looked for an alternative PMS system. That’s when CLS decided to create a proprietary portfolio management system. In 1999, CLS spun off its platform into a separate business now known as Orion.

Transitioning CLS from the money management to the technology business was possible because developing applications had become easier. It’s far easier for small companies to develop PMS systems now than it was a decade ago. That’s one reason why we’ve seen so many new additions to the PMS field, and why that trend is likely to continue.

So how does Orion stack up? A panel of eight advisors took a Web-based tour of Orion’s application. Four reviewers call themselves primarily money managers and four are primarily fee-only planners. Asked to rate their overall satisfaction with Orion’s application on a scale of one to 10, two rated Orion a five, one rated it a six, three rated it a seven, and three gave it an eight. These scores were in line with the average score of the other vendors we’ve covered.

With Orion charging $90 per account per year and a minimum fee of $15,000 a year (covering your first 176 accounts), some of the advisors on our Web conference said it was costly. However, when you consider that this fee would cover 35 or 40 clients–assuming each client or household has four accounts–and that it covers downloading your data, reconciling accounts, scrubbing your data, calculating your advisory fees, sending bills to clients, preparing your fee list for your custodians to debit the accounts, printing your reports, mailing reports in envelopes with your logo printed on them, and providing clients Web access to their reports, the pricing becomes more attractive for firms that do not want to hire staff to provide these functions.

In addition, Orion supports trading model portfolios. So you can make model portfolios for all of your clients at a particular custodian and trade all of those accounts at once. It contains four different permission levels, so an RIA, a B/D, a staff assistant, and your clients can log in and see only the information that you permit them to view. Advisors can update a reconciled transaction manually or e-mail Orion’s staff to make changes to reconciled data. While client data are stored on Orion’s servers, advisors use a desktop application to view reports and make trades. Orion currently serves 75 RIAs, offers 40 brokerage and custodial interfaces, and has 66 employees.

While the value proposition can be compelling for advisors who fit the business model, some RIAs will find the platform lacking in comparison to well-developed PMS applications like Schwab PC and Advent Axys. Orion currently offers average lot tax accounting only, but is now programming LIFO, FIFO, and specified lot accounting capabilities.

“I am concerned about how much flexibility I will have to customize my reports,” said Stephen Wershing of Ensemble Financial Services in Rochester, New York, who rated Orion a seven. “Overall, Orion looks like a good system but is just a little inflexible.”

“The desktop management application appears to be very user friendly,” said Jay Dasika, of Tilson Financial in Watchung, New Jersey. “The ability to set upper and lower limits of holdings on various models and automatically rebalance accounts against those models would be a huge advantage if it actually works the way they say it does. And the one main report generated by Orion would replace six reports we currently run.”

For an advisor to consider Orion, it would be wise to compare the service and cost against using a desktop or Web-based application in conjunction with a service bureau. (See the June issue for our roundup on service bureaus.)

If you’re an RIA with accounts spread among multiple custodians, are managing some assets in variable annuities, and want to outsource portfolio accounting and billing, Orion is an option to consider.

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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