Technology Update

Finding errors in PortfolioCenter

Third-party application ReportCheck allows users to discern mistakes

By Davis D. Janowski

Feb 26, 2012 @ 12:01 am (Updated 7:19 am) EST

Financial advisers at the Technology Tools for Today, or T3, conference this month in Dallas were intrigued when told about a new product, ReportCheck, a third-party application designed to automate the process of checking for errors in Schwab's PortfolioCenter.

None of the advisers had heard of ReportCheck, but those with whom I spoke said that they welcome the idea and would be interested in hearing more about it.

PortfolioCenter is a product of Schwab Performance Technologies Inc., a subsidiary of The Charles Schwab Corp.

The application is one of the most commonly used portfolio management programs among advisers, irrespective of what firm they use as a custodian for their client assets.

But despite PortfolioCenter's widespread use, many advisers love to complain about it. One of their frequent criticisms is that they must manually review printed performance reports generated by PortfolioCenter to find errors before sending the reports to clients.

Although PortfolioCenter does have some error-checking features, ReportCheck from John Norwood Consulting LLC (norwood-consulting.com) makes it easier to discern mistakes, the company says.

"EASILY INTEGRATED'

ReportCheck is designed to automatically identify a set of common errors or potential issues that occur in PortfolioCenter and is easily integrated into your work flow,” said John A. Norwood, principal of the consultancy and a former executive at Schwab Performance Technologies.

“It notes many things, from missing prices to invalid returns or outlying benchmark returns or index returns relative to absolute high and low limits, and those relative to mean return across similar accounts, missing asset class, sector or subsector assignments, missing market value on credit, debit, transfer, and receipt transactions, etc,” Mr. Norwood said.

“The issues I most often run into with PortfolioCenter are in integrating its reports with the data we receive from LPL's [custodial] platform,” said Daniel Zalipski, a user of PortfolioCenter and now Report-Check.

Mr. Zalipski, a technology analyst with registered investment adviser Vantage Financial Partners Ltd., was referred to me by Mr. Norwood.

Vantage Financial Partners has $220 million in assets.

“There are a few transaction types that are referred to differently between the two systems, and ReportCheck provides me a very easy to-use means of checking my reports on a single spreadsheet. [It] also helps a lot with identifying outliers — for example, an account reporting a 400% gain in the last year — or cash flow changes, all of which I can sort,” Mr. Zalipski said.

He performs a monthly audit of 700 accounts, so it is important to be able to save time checking reports.

For its part, Schwab acknowledges that ReportCheck can be a companion to PortfolioCenter.

SCHWAB RESPONSE

“There are a number of different tools in the PortfolioCenter product that help firms find and correct errors with performance calculations,” Mike Williams, a managing director at Schwab Performance Technologies, wrote in an e-mail.

“Depending on the size and complexity of a firm, ReportCheck could be a nice addition to take validation to a higher level. We also continue to make enhancements and define best practices to help firms with their error-checking processes,” Mr. Williams wrote.

“One of the unique benefits of using PortfolioCenter is that we are open to having third parties write these kinds of tools. Advisers who use PortfolioCenter have lots of options as to how they want to run it: on their desktop, outsourced to Schwab or through a third party,” Mr. Williams wrote.

Pricing for ReportCheck is based on the number of accounts that an adviser runs through the system.

An annual subscription costs $1 per account per year for the first 2,000 accounts, and scales down as the number of accounts increases to 75 cents per 4,000 or more accounts and 35 cents per for 6,000 and up.

There is a minimum purchase of 1,000 accounts.

* * *

Among the most interesting new things I saw on the exhibitor floor at T3 were developments at MacroRisk Analytics (macrorisk.com).

The application, which I first wrote about in the fall of 2010, not only has a plethora of new analysis features and measures but also several interesting integration features, including one with PowerAdvisor, a portfolio management application from Cornerstone Revolutions Inc., which I wrote about in June.

In a nutshell, the integration, in the form of PowerAnalytics, combines the macroeconomic-analysis capabilities of MacroRisk with the portfolio-reporting capabilities of PowerAdvisor, a pairing that is the first of its kind, as far as I know (powerinvestmenttools.com).

There are four subscription levels, beginning with the most basic, which allows users to measure the impact of thousands of economic indicators on a client portfolio.

Higher levels allow an adviser to compare multiple portfolios and factor additional measures, including beta, into calculations.

Pricing hasn't yet been finalized.

MacroRisk Analytics itself has multiple packages available for advisers, ranging from the fairly basic Fiduciary subscription for $600 annually to the Analysis Suite, which is $5,800 annually.

Over the next few weeks, I will go into more detail regarding the many new features available, as well as several other vendors I met with and sessions I attended at the T3 conference, on my blog (InvestmentNews.com/technology).

djanowski@investmentnews.com