Orion aids advisers who want to add alternative investments

Fintech firm has high hopes for new portfolio accounting tool feature

Mar 5, 2018 @ 6:00 am

By Ryan W. Neal

Financial advisers can now use Orion Advisor Services' portfolio accounting tool to show clients their private assets as easily as their public holdings.

The company's latest feature, Alternative Investment Platform, lets advisers track and maintain investment data for client assets held in private equity, direct investments, venture capital, private real estate and REITs. AIP also tracks the unique data points for these investments, such as committed capital amounts, total cash distributions, return of capital, and commitment amounts, said Eric Clarke, Orion founder and CEO.

Advisers can create reports now that include alternative assets alongside publicly-traded assets, and apply changes to valuations across groups of clients instead of taking the time to update individual accounts. Clients can view the data through their client portal, Mr. Clarke said.

Orion plans to update AIP in May to automate the collection and maintenance of alternative asset data through an integration with the Depository Trust & Clearing Corporation and other data vendors to eliminate more manual data entry.

"Sometimes these alternative assets do not provide web access to log in and check valuations and information," Mr. Clarke said when asked why this functionality is not already available on the portfolio accounting software.

(More:Fintech looks to the future of financial advice at T3)

Another issue is the added challenge of calculating things like committed capital. For example, a private real estate investment may take years to be fully funded, and requests for capital can sometimes come in odd dollar amounts, making it a challenge to quickly show how far away they are from being fully funded, he said.

The new feature will save advisers who work with these asset classes – about 600 of the 1,500 firms that use Orion – hours in manually populating spreadsheets with the data, Mr. Clarke said.

J.D. Bruce, the president of Abacus Wealth Partners, said his firm has invested in private equity and private real estate for the last 15 years, but still handles most of the data manually.

"It's tricky to report on these assets using the same tools you use to do mutual funds or stocks or ETFs or whatever," Mr. Bruce said.

Each deal is thought of separately, so even if 10% of someone's portfolio is in private real estate, for example, it still needs to be broken down into how much is held in multi-family developments, commercial real estate or single-family homes, he said.

"Normal portfolio accounting just can't handle it," Mr. Bruce said. "I've been harassing Eric [Clarke] for four years to get [alternative data] usable."

Mr. Clarke said he hopes AIP can expand Orion's presence among family offices and firms that deal with higher-net-worth clients. Advisers are increasingly interested in alternatives as they look for more non-correlated assets during all-time market highs, and Orion will make it easier for more advisers to offer alternatives, he said.

(More: Digital marketplaces aim to ease RIA access to alternative investments)

While Mr. Bruce said AIP will certainly save hours of time in data input for advisers who invest clients in alternatives, he's skeptical that it will convince new advisers to get into the space. He said private equity requires "a ludicrous amount of time and energy," and "reporting isn't the part that should have been stopping people."

Eric Poirier, the CEO of Addepar, another accounting technology that has focused on family offices and advisers who serve large clients, said providing data on alternative investments has been a part of the company's DNA since it launched in 2009. He said this has been a differentiator for his product.

"If technology doesn't support alternatives from the foundation up, the capabilities are usually shoe-horned and leave something to be desired," Mr. Poirier said. "It's been a core competency of ours since the beginning."

Mr. Poirier agreed there is increasing demand from advisers for technology that improves access to alternatives, especially among advisers serving clients with many assets.

"A lot of folks with generally larger portfolios and a generally longer time horizon are allocating a good amount of their dollars to private equity and venture because there are demonstrably outsized returns to be had," he said.

Mr. Clarke said he welcomes the competition with other products; that it pushes the company forward along with feedback from advisers.

In January, Orion launched a direct indexing capability, and in November announced ability to execute trades in third-party apps. In October, Orion launched a model marketplace to allow investment managers to compare portfolios.

Looking forward, the company is working on a tool to help financial planners collect fees, as well as a new compliance tool, Mr. Clarke said.

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