Advisers opting for outsourced portfolio reporting

Sheila M. Chesney likes it when clients look at reports detailing how their portfolios have performed, and tell her that they really understand what they are looking at.

“We want to be able to tell the story of how a client's portfolio has performed in an easy-to-follow graphical display,” said the Sheldon, S.C.-based adviser, whose firm manages $75 million in assets.

Like an increasing number of advisers, Ms. Chesney is able to give her clients more of those desired “aha” moments — and cut costs in the process — by turning to outside suppliers of portfolio performance reporting.

Chesney & Co. uses Black Diamond Portfolio Reporting LLC of Jacksonville, Fla., after years of using PortfolioCenter, a product from Schwab Performance Technologies of Raleigh, N.C. Ms. Chesney said that the latter wasn't flexible enough for her needs.

The decision to switch was made easier by the anticipated savings.

“I paid $2,500 a month previously: a $1,500 license fee for PortfolioCenter and $1,000 for Assemblage [a software product used for the automated collating and filing of reports from Trumpet Inc. in Phoenix],” Ms. Chesney said.

LOWER COSTS

By contrast, when she completes the conversion at the end of this month to Black Diamond, for which her firm paid a $3,000 one-time fee, she will pay $1,666 a month.

Since the reporting software is run, maintained and backed up at Black Diamond's facilities, Chesney & Co. doesn't have to worry about hardware or software onsite or bother with updates.

Other financial advisers apparently find advantages with outsourced portfolio-reporting software as well.

“We've doubled our business in the last 15 months and now have 143 client firms using us,” said Reed Colley, chief executive of Black Diamond. “We're also seeing about quadruple the usage.”

A competitor, Orion Advisor Services LLC of Omaha, Neb., has seen a 35% increase over targeted sales so far this year.

“Time in front of clients is more valuable to an adviser than chores performed in the back office, and performance reporting is a chore,” said Eric Clarke, president of Orion.

“But on top of becoming more efficient, advisers often realize the unintended benefit of standardizing their performance reporting: That can give them more credibility, which is important to investors right now,” Mr. Clarke said.

“An external provider is always going to be doing their best to constantly improve the product,” said Dorothy E. Bossung, managing director of InterOcean Wealth Management LLC in Chicago, which manages $700 million in assets. Her firm has used the services of Fortigent LLC of Rockville, Md., for the past two years.

“A quality report that is easy to understand, is easy to access via online delivery and offers the potential to do more online communication with your client is a nice touch — and all those things are difficult to bake into an in-house system,” said Ms. Bossung, who is a certified financial planner and a certified investment management analyst.

“Keeping a reporting system in house too often becomes the step-child of the practice,” she said, explaining that other priorities seem to get in the way of spending time on regular maintenance.

Freeing up time, especially for firms that are trying to grow, is an-other area where advisers point to savings through outsourcing.

“We use Orion to generate all our client reporting, not just performance reporting, and it has relieved us in areas we used to absolutely labor over.

“We've used them for about a year now; prior to that, we were doing most everything manually,” said John Lunt, president of Lunt Capital Management Inc.

The Salt Lake City-based firm manages $30 million in assets.

“We run tactical [exchange traded funds], and Orion's flexibility let us quickly integrate our models. Now we can easily pull up our performance daily and then go from account to household,” Mr. Lunt said. “We've also been able to customize the software easily.”

The cost of using the software at the five-person firm is less than $20,000 a year.

“We've clearly seen a savings. It has allowed us to scale the business much more easily,” said Mr. Lunt, adding that it has allowed the firm's professionals to spend far more time on investment management and less on a lot of manual processes.

E-mail Davis D. Janowski at [email protected].