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Advisers held hostage by portfolio systems

Advisers are being held captive by their portfolio management systems.

That’s what many financial advisers have been telling me over the past few years, and apparently, providers and the advisers themselves aren’t doing anything about it.

If an adviser is determined to abandon one system in favor of another, he or she is discovering that migrating years’ worth of electronic information is a huge challenge, in terms of both time and money.

In addition to the sheer volume of data that must be transferred, advisers said, format inconsistencies mean that data stored in one program quite often have different field names in other programs.

LeGrand Redfield Jr., president of Asset Management Group Inc., feels that he has been held back by his dbCAMS+ portfolio management system — now called Principia CAMS and owned by Morningstar Inc. — for the past 19 years.

“It takes a lot to get up the nerve to make a change, but you should be able to move all this data back and forth more easily than you can,” said Mr. Redfield, whose firm manages $170 million in assets.

While not abandoning his portfolio management system entirely, Mr. Redfield recently paid CRM Software Inc., $5,000 to take a great deal of his client data from CAMS and import it into Junxure.

[Reporter’s note: we incorrectly stated that Morningstar had performed the data export/import in the print version of this story. To elaborate further, this involved a lot of detailed mapping. Mr. Redfield explained during the interview for this story that he wanted to make sure that many year’s of information he considered valuable and had collected and stored in various fields (a “to do” field in CAMS for example) was accurately moved from CAMS and into the most appropriate spots in his Junxure CRM system and retained].

That software, he said, works much better for many aspects of basic relationship management and communicating with his clients, although the core financial-engine portion of the CAMS software will remain as is.

To be sure, the issue of conflicting data is not unique to advisers; it also plagues broker-dealers, especially in regard to their portfolio and account management systems.

Darren Tedesco, vice president of innovation and strategy at independent broker-dealer Commonwealth Financial Network, explained that portfolio management data can be among the most difficult to deal with when considering a new system.

“How do you get the data back out? That question always should be asked of any software company,” he said. “It should be the most basic thing addressed in your prenup prior to signing an agreement with a software provider.”

Mr. Tedesco recently dealt with the issue when his firm tried to import data from the outsourced portfolio management system used by an adviser who joined Commonwealth.

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“The [adviser’s provider] used six or seven transaction types in their data. Ours is much more detailed and comprehensive — we have more than 100 transaction types,” Mr. Tedesco said. “Without a standard between vendors, this is very problematic.”

Extensible-markup language, commonly known as XML, remains the closest thing to a standard upon which vendors have come to agree. But XML has become unwieldy because of the thousands of position definitions that must be managed and updated. This makes its use in software clunky at best.

So what’s an adviser to do?

Hemant Moré may have an answer. I met Mr. Moré, owner of Arcons Technology Inc., at the Technology Tools for Today conference in San Diego last month. Specializing in data migration, Mr. Moré suggests that advisers should keep their options open by choosing an open system, meaning one that relies on a non-proprietary database server such as Oracle, SQL or Microsoft Access.

“By contrast, in a closed system such as the one used by Advent [Software Inc.] Axys, the data is stored in proprietary binary files. While the system provides some export tools, the data is not clean in terms of knowing what it is or how to manipulate it,” he said.
[Reporter’s note: The print version of this story stated “Advent” and not specifically the Advent Axys product. It is important to note that that Advent Portfolio Exchange is SQL-based, both the onsite version and through the Advent OnDemand service offering.]

For advisory firms using or intending to use a hosted provider of back-office services, Mr. Moré suggests upfront negotiations so that initial user agreements contain provisions requiring that the provider return all historical data if the two part company.

He also suggests that advisers track their own customizations as well as keep provider-issued documentation that describes the data. Both Advent and dbCAMS+, for example, allow advisory firms to apply customized labels to their data.

“That way, any third-party firm like us can transfer that data to a new system,” Mr. Moré said.

Alois Pirker, research director at Aite Group LLC, said that when shopping for a new system, advisers should keep in mind which other third-party vendors already integrate with the system.

“One thing we hear from RIAs is that portfolio management is one component that does not exist in a vacuum,” he said. “[Advisers] have to see the larger picture of the other systems they will work with, including third-party performance reporting, billing and other things.”

E-mail Davis Janowski at [email protected].