As was highlighted in the prepared statement from the companies, advisers use automated rebalancing because of the many complexities and decisions involved in rebalancing client portfolios. As advisers already know these aspects tend make the process extremely labor intensive, slow and inefficient if done manually. (Check out the white paper under related stories for a detailed explanation of the benefits as TRX and some case study participants sees them along with some projected ROI data).
For those unfamiliar with them, Orion Advisor Services provides fee billing, trading, reconciliation and new account set-up services to RIAs (usually fairly large ones) over its web-based platform, which currently has $70 billion in assets being managed on it in over 500,000 accounts.
TRX was launched as a product in 2010 after three years of development by Sheryl Rowling and Cheryll Lurtz.
RIA firms using both providers can now import with a single-click from within TRX all the account data, securities and classifications, transactions and tax lot data on their clients from Orion.
Once uploaded into TRX, advisers can use modern portfolio theory-based rebalancing to enable tax efficiency by avoiding short-term gains, quickly detecting tax loss harvesting opportunities, avoiding wash sales and choosing to minimize long-term taxation using location optimization features.
Oh and Orion data feeds will evidently be available from within TRX too to help with portfolio analysis.
TRX has worked on integrations with six different portfolio management system provider partners.
Unfortunately, as we have found in our last two surveys on technology usage and satisfaction advisers are not yet embracing automated rebalancing yet in a big way.
I was happy to see that only 62.8% of respondents in our survey this year indicated they don't use a portfolio rebalancing system, which was down from 70.7% that reported not using one in 2011.
Many advisers continue to regard automated rebalancing applications from third-party vendors as too expensive, and 5.8% of advisers this year reported that they create their own customized solutions for this task.
Another 4.8% chose “proprietary system,” in the survey, to me an indication that their firm or broker-dealer platform has created its own system.