Over the past 20+ years of advising clients, I have used a number of different software packages to select and monitor clients’ investments. With the number of investment options increasing and margins decreasing, the importance of doing this efficiently is critical. Add to this advisor equation the overabundance of investing information, and we could spend all day doing nothing but research, which is a luxury we cannot afford. If you’re the type of advisor who feels a responsibility to conduct some level of research, I hope the information that follows will prove valuable to both newly independent advisors who have to pick a research tool as well as more experienced pros looking to do a better job managing your clients’ assets. The four products are Morningstar’s Principia and Advisor Workstation, Steele Systems Mutual Fund Expert, fi360, and Klein’s Fund Selection Tool. “Comparing the Contenders,” a comprehensive table comparing options and pricing is included in the sidebar section.
Morningstar Principia and Advisor Workstation
Morningstar’s Principia is available in several flavors. They are Mutual Funds (includes ETF’s), Stocks, and Variable Annuities, all of which are all available in basic or advanced versions, Closed End Funds, and Separate Accounts. This tool is well suited for selecting and monitoring a wide range of investments. Within the software, there is a Research mode and a Portfolio mode.
In the Research mode, you can easily create screens to select any of the aforementioned types of investments. For example, if you were looking for a large growth fund, you might establish a screen such as an expense ratio less than 1.0%, category ranking in the top 25% for the trailing one- and three-year periods, bear market rank in the top 40%, and manager tenure greater than three years. The results would be displayed and you can save your search criteria for future use. Each fund has a detail page for printing and there are eight different graphs available.
Also, let’s say you wanted to know how a particular bond fund performed during a period of rising interest rates. With the advanced analytics, you would simply select the fund, open the advanced analytics section, choose monthly periods (other time frames are available), and view the returns. There you could easily see which months were negative.
In the Portfolio mode, you can create an unlimited number of portfolios, with an unlimited number of holdings, for an unlimited number of clients. Let’s say your client had 10 different accounts. You could aggregate any number of them into one new portfolio. You might do this by qualified and non-qualified or by spouse. You can then print a Portfolio Report which provides valuable analysis on each portfolio.
Pricing for Principia depends on the number of modules chosen and the frequency of your updates. The basic mutual funds option, updated quarterly, would cost you $550 per year. The entire Principia suite is available for about $3,300 annually. Pricing may vary according to the B/D or custodian with which you affiliate.
Morningstar offers training via the Web for a modest fee and classroom sessions for a higher fee. However, the help menu within the software is extremely useful and provides a basic explanation plus a more detailed explanation. I have also called tech support several times and they do a great job.
Exporting data from Morningstar Principia is limited. One limitation is that the correlation matrix will only allow for eight different holdings and the risk-reward graph does not identify the individual holdings. Also, the trailing period data is limited.
Advisor Workstation is Morningstar’s Web-based tool and is available in two versions. The Enterprise Edition is offered through custodial and brokerage firms to their affiliated advisors, and Office Edition is the off-the-shelf version. Enterprise Edition can be configured by broker/dealer firms to provide investment planning, research, and portfolio construction and analysis and is integrated with each B/Ds Web platforms. I subscribed to the Enterprise Edition and it included stocks, mutual funds, ETFs, variable annuities, and closed-end funds. Also included in my subscription was Morningstar’s hypothetical module where you could see how a portfolio performed during a specific user-defined time period.
The cost for Workstation Enterprise will vary depending on the features your particular broker/dealer or custodian has selected, and may range from $700 to $3,000 per year. The Office Edition costs $5,000 per year. It can be paid monthly, but will cost slightly more.
Steele Systems Mutual Fund Expert
Mutual Fund Expert from Steele Systems is available in three versions–Personal, Professional, or Pro Plus–and is a useful tool for selecting and monitoring mutual funds and variable annuities.
You can establish filters to search for mutual funds, create portfolio reports, and can create color graphs for use with clients. The data for Mutual Fund Expert comes from Morningstar, though Steele Systems adds its own twists, including its own star rating system, a rating for return, risk, and a risk-adjusted rating. One of its strengths is that Mutual Fund Expert contains data dating back to 1962. This system gives you the ability to export unlimited data into Microsoft Excel if you’d like to do additional analysis. There are other unique features, including the ability to customize a great deal of the output. Within the software are sections called Detail Reports, Graphs, and Table Reports. Let’s say you chose a fund (perhaps from your screen) and selected a “detail report” page for that fund. By double clicking on the page you can add additional funds (or indexes. In the “Graphs” section, your ability to customize the report is increased. You might want to change the type of graph (performance, growth, composition, etc.), change the selected time period, add other funds and indexes, change the display to a line, bar, or 3D graph, or change the color scheme. There’s a great deal of flexibility here. Creating portfolios is easy and the output pages can also be customized. Overall, it is a very good presentation tool.
The help menu is very good but I’ve had difficulty with the telephone help line. Pricing for Mutual Fund Expert begins at $22 per month for Personal, increasing to $62 a month for the Pro-Plus offering. Variable Annuity pricing ranges from $42 to $62 per month for quarterly and monthly updates, respectively.
One of Mutual Fund Expert’s drawbacks is that it is limited to mutual funds and variable annuities, though the company says it is close to adding an individual stocks module. Also, when you call the help line you’re referred to the Web site and if that doesn’t do it, you’re asked to send a detailed e-mail to support. I prefer speaking with a person who can answer my question immediately.