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July 01, 2005 at 04:00 AM
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.
