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Portfolio > Portfolio Construction

The Gatekeepers

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Andy Brincefield has offered his clients Web-based access to portfolio reports for years. But he finds that the clients who want to see their portfolios online–and take the time to pull them up–are actually in the minority. “That’s why they come to us in the first place,” says the CFP with Consolidated Planning in Charlotte, North Carolina. “To make sense of it.” Still he’s not about to make that data unavailable.

Jim Christie, who is currently shopping for a new portfolio management program for his one-man shop, Freedom Wealth Management in Basking Ridge, New Jersey, also wants his clients to have the ability to access portfolio data and reports. But he’s also a bit hesitant. “It’s not an urgent thing right now,” says Christie. “I’ve still got clients who don’t know how to plug a computer into the wall. But I know it’s going to be critical going forward.”

Software companies are paying attention and offering advisors what they say they want: 24-hour portfolio access for investors, a paperless option, customizable views, and freedom from maintaining desktop software.

However, while many advisors want these tools, they also know that providing too much information to clients could create confusion. Some investors may not understand how to interpret the data without an explanation from their advisor. Others may pull up reports so frequently, and then react to sharp turns in the market, that they end up veering off track from the plan they had drawn up with their advisor during a calmer time.

Advisors’ preference? That they hold the key to what information is unlocked, and when. “Even I have a financial advisor,” says Bob Yacobucci, founder and CEO of the Hollidaysburg, Pennsylvania-based Portfolio Systems.

Portfolio Director: Advisor Driven

Although he spent years as an options trader–for his own amusement, he says–Yacobucci has spent the past 17 years focused solely on his own firm, and its product, Portfolio Director. After years of developing healthcare software for the Veterans Administration’s hospitals during the 1990s, Yacobucci found that his own side venture–options trading software–had started to gain a small following.

Yacobucci stopped trading on his own, and instead started selling the software, eventually expanding the platform to appeal to the broader user base of investment advisors. After nearly two decades in business, Yacobucci is still very hands on. Just five other employees helped develop the latest version of Portfolio Director Web, based in Java, and due for release this month.

While clients currently download the program from the Internet, and store it on their own machines, the next iteration of the program will be Web-based. Yacobucci plans to continue to support the desktop version, but he knows other clients are hungry and willing to pay a premium for an Internet-based, centrally supported version.

Soon he will be able to appeal to firms where partners prefer to spend their time–and resources–on serving clients rather than overcoming the bugs that inevitably hit even the best-written programs. Another attraction, Yacobucci believes, will be the ability to offer investors easier access to their reports, although for his current clients, that doesn’t seem to be the main push.

So as he spent the last three months developing the new Web-based version, Yacobucci walked a fine line between making the site user-friendly enough for an investor to understand, but was also sensitive to advisors who want control over the amount of data a client sees. An advisor will be able to load reports onto an investor-friendly side of the site–but only if he wants. Ultimately, Yacobucci understood that his advisor clients liked easy access for themselves and for the client as long as the advisor remained the gatekeeper.

PortfolioCenter: Customizing for the Client

Schwab knows very well that software tools that confuse advisors, or make them feel they’ve lost any control over their data, is a non-starter, not to mention a non-seller.

Which is why Schwab is constantly fine-tuning its PortfolioCenter platform, releasing four upgrades in just the last two years. With its advisors telling Schwab that they use the portfolio management system as their primary tool, the company focused most of its efforts in this latest release (4.3) on that piece of the software. “We notice as we talk with our advisors that this is the core technology that they use,” says Dan Skiles, vice president of technology for Schwab Institutional, based in Denver, Colorado. “So it’s got to work, and it’s got to work right.”

In 4.3, Schwab offers PortfolioCenter’s 3,300 clients more customization than ever before. Reports can be built by grouping client accounts with similar characteristics into so-called Smart Sets, the way advisors want, not according to subsets prescribed in the program. “We let them create any field they want,” says Skiles. “There’s a lot of flexibility.”

Launched in 2004, PortfolioCenter is actually an evolution of Schwab’s former platform Centerpiece, an 18-year-old program whose architecture, Skiles says, needed upgrading. The Schwab team spent five years before releasing the transformed software tool that they built on a SQL platform, an open architecture design that allowed Schwab to scale PortfolioCenter in a way it could never have imagined with Centerpiece.

In addition to upgrades every six months, Schwab holds Web-based and local training sessions, and offers networking services to connect advisors to each other so they can learn new ways of using the program. Schwab believes its advisors’ comfort with the software is paramount.

In this latest release, the firm also focused on upgrading its billing tool, giving users more options on how to charge accounts. With some simple keystrokes, advisors can choose between billing clients directly and having fees debited automatically.

Already at work on its next version, slotted for summer 2007, Schwab is pushing to make managed accounts data easier to read and display. Now both advisors and clients will be able to see which specific stocks are held in those separate accounts.


Eagle: Changeable Views

Rich Chambers relies heavily on his portfolio management software to bill clients, rebalance portfolios, and create reports. “I would call it essential,” he says. With three partners in his Menlo Park, California firm, Investor’s Capital Management, and no administrative assistant, Chambers needs all the help he can get. One thing he wishes his current program could do is directly link the portfolio report it creates to his Web site, and make it easier for clients to find the information online. “That takes a long time,” he says. “Generally 10% [of clients] can’t remember how to log in.”

Chambers might find his clients have a little more enthusiasm if they were able to have as many options and layouts to choose from as the West Hartford, Connecticut-based Eagle allows.

Launched originally as a consulting firm, Eagle shifted its focus to software in 1996 after noticing its clients were having difficulty managing data in investor’s portfolios, and also difficulty with integrating different software platforms, says John Lehner, Eagle’s president.

Its first product, PACE, a portfolio management program, is still one of the company’s primary offerings, and dovetails with the rest of the line including another product, a Web offering called Eagle Portal, which can be white labeled by clients with their own logo. “Most of our clients use it like an in-box,” says Lehner. “Their clients can go in and pull up information that’s been made available to them.”

But unlike an in-box, clients can actually customize how they see the data. While the portfolio manager determines how many reports, and what type, will be ultimately viewable to the investor, the program does allow an advisor’s client to play with what Eagle has tagged its “dashboard.” Options? Pulling up pie charts, year-to-date numbers, and quick summary charts, “That’s very popular,” says Lehner. “Clients like to see the data in graphic form.”

With the dashboard portion of the program available for the past few years, Lerner and his team are at work on the next version that will give investors even more options in how they view their data on the Web. While currently in a test run, Eagle expects to have the new version available in March 2007. “We just finished a client conference and the number one request is that we continue to enhance the portal side,” says Lehner. “As our advisors’ clients become more comfortable with the portal, they want to be able to go in and modify their views. They don’t just want to give their client a report–they want to give them flexibility.”

Highlights of the new version include allowing investors the option of choosing how they organize the way they look at their holdings. Lehner believes the additional options that advisors can offer their clients will make the investor’s experience richer–and easier–especially as reports are migrating more and more to the Web. “This is becoming the primary mechanism that advisors are using to communicate with investors,” Lehner says. “They’re not mailing or faxing reports much anymore.”

Optima Technologies: Old School

Louise Schroeder might disagree with Eagle’s Lehner. The Stillwater, Oklahoma-based investment advisor knows many of her clients spend time on the Internet, but they hire her because she can deliver more data to them in less time by building the portfolios herself. “That’s why they pay me,” she says. “They don’t feel they have the knowledge level for that.”

Many old-school advisors like Schroeder have gravitated to the portfolio management solution offered by Atlanta-based Optima Technologies. Bundled with a customer relationship management tool, the product, IAS Software, can print, e-mail, and also upload reports to an advisor’s Web site. While the software allows investors to change some of the ways they view their portfolios, there’s little tweaking allowed in terms of changing the actual report. “That came from our advisors,” says David Grace, president of Optima Technologies. “No customization.”

Instead the software firm is focusing on different kinds of tools, such as an enhancement to the billing system, allowing advisors to choose how to charge clients. Next up is a rebalancing tool for portfolios at the institutional level. Since prices for the software start at $250 a month per user, the solution is one that works for even one-man shops who can find it difficult to have both desktop and Web-based options at scalable prices.

Keith Newcomb spent six months trolling for a new portfolio management platform after he dropped his broker/dealer in 2006. While he started his firm as a fee-only practice, he is slowly moving to one that bills for assets under management. “But I’m just establishing myself on that level and it’s really hard to find a price point that makes sense,” he says.

Staying in touch with the individual user, like Newcomb, is something Grace believes is important. He wrote the first version of the software in the 1980s, sold it in the early ’90s, and has stayed very connected to IAS’s client base. It was a user group that actually contacted him several years ago and asked Grace to bring the product back, plus develop new tools. Grace knows that advisors want to have new options for the way their reports are presented, like having new fashion choices each season. But he also knows they want to be the ones who make that choice even while they want the software to actually do the work for them.

Advent: Investor Involvement

Raymond James wants to make sure its independent advisors have the option of letting their clients check reports online. For the moment, its proprietary software allows investors to access data only on a quarterly basis. Investors can’t pick their own time period for downloading reports, but that could come with a future redesign, says Joe Meyer, a technology product manager with Raymond James. Still, even if access is opened up, there are no plans to make every piece of information available to a client without an advisor’s involvement. “You want to be able to add that value,” he says. “We put up basic performance data but advisors then explain what that means. They can run a more sophisticated report.”

But how an investor experiences her time online, even if it’s just once every few months, is where Raymond James is currently focused. Starting this year, the company is beginning a large project to redesign the client’s side of its Web site.

In the meantime, Raymond James also supports Advent’s Axys software and Schwab’s PortfolioCenter if an advisor chooses to run these instead of the broker/dealer’s proprietary program.

But Advent too, is changing its portfolio management offerings. It launched a new software program, Advent Portfolio Exchange, in 2005, which can be used as a desktop download or as a hosted Web-based solution. Coupled with the firm’s WealthLine solution, in testing now, advisors will be able to create customized spreadsheets by changing the market sector they are viewing, or the way that their portfolio is grouped. “It’s a very dynamic online tool,” says William Penney, Advent’s senior director for product management in San Francisco.

Having more options to play with is always fun for advisors who spend a great deal of their time on their PCs. Giving their clients online extras can also be good for the business relationship. An investor clearly wants to feel he has some control over his money and how it’s invested. Giving him some choice in how he can view his portfolio as it grows can help him feel empowered as well.

However, it can be hard to walk the fine line between too few choices and so many that the investor grows confused and potentially dissatisfied. Even as some advisors grapple with technophobic clients, most know that investors now expect not just the option to check their portfolios online–but to also be allowed to shape the way they look at their own holdings.

“As more and more people access the Web for their banking and other transactions, they’re used to being online,” says Jim Colvin, senior VP and general manager of Windsor, Connecticut-based SS&C Technology, makers of Pacer software. “If I asked our clients three or four years ago if they wanted their investors to have Internet access to their reports, they would have said, ‘No.’ Now it’s become the norm. If we don’t offer it, we lose clients.”


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