Portfolio management, reporting spawning new players, products

For the past decade, many players in the portfolio management and reporting industry have believed in the notion that one size fits all

For the past decade, many players in the portfolio management and reporting industry have believed in the notion that one size fits all.

That idea is being challenged by a fairly rapid transformation — rapid by the standards of the financial services industry, anyway.

The good news for financial advisers is that there are new players entering the portfolio management and reporting arena, and that will result in new product offerings and competition. That, in turn, will affect costs.

Don’t get me wrong.

We aren’t at the point of having an Apple Inc. App Store for portfolio management and performance reporting, but the situation is improving. Advisers on the prowl have choices beyond venerable offerings such as Advent Axys and Schwab PortfolioCenter.

MORE OR LESS

Take, for example, the demonstrations of two portfolio management and reporting systems that I received last week: PowerAdvisor and Atom Align Cloud Service.

PowerAdvisor, from Cornerstone Revolutions Inc., has 200 clients, most of which are registered investment advisers. A differentiator for this system is the depth in which it can do compliance reports.

“I would say that re-balancing is one of our key differentiators,” said Mary Hepler, Cornerstone’s chief executive. “One of the unique things about Cornerstone is that we do everything in-house — back-office services are in-house and our re-balancing engine was built in-house.”

The number of compliance reports that the platform can generate and their level of comprehensiveness are other differentiators, but it was the system’s billing reports that often clinched deals when in competition with other platforms, she said.

The application also has built-in trading and re-balancing features that, while not attaining the depth of, say, the dedicated re-balancing engine of Tamarac Inc., can get a firm 80% to 90% of the way there for less money.

Although it isn’t a true apples-to-apples comparison, an annual seat license for PowerAdvisor will run $4,000 a year, while a firm license for Tamarac’s re-balancing module will cost $10,000 at a minimum.

The firm has all the usual suspects when it comes to competitors, including the platforms of the major custodians: Schwab PortfolioCenter, Advent Software Inc. (Black Diamond, too), Orion Advisor Services, Asset Book, Interactive Advisor Software, Portfolio Director and Investigo, Ms. Hepler said.

“A few advisers want some unique integration, which we can often accommodate at lower development cost than competitors,” she said.

Building customized reports is another offering that Ms. Hepler touted. Her firm could build them for as little $700 per report, she said.

DUAL DELIVERY

The other application I had an opportunity to review is Atom Align from Blaze Portfolio Systems LLC.

The company has just 12 clients, and the program grew out of development of a platform specifically designed for Sawtooth Asset Management.

That firm, a dedicated asset management firm with $100 million in assets under management, is also a turnkey asset management platform with $400 million in assets on it.

Atom Align is a web-based modeling and trade order management system for custodians. It is designed for (and being marketed to) investment advisers, wealth managers, trusts, broker-dealers and multifamily offices.

The trading and order management capabilities in the system were tailored to advisers from the start, rather than pure asset managers, as many systems have been in the past.

As was the case, investment advisers had to choose either a re-balancing system or an order management system. More often than not, investment managers used order management systems, while advisers chose re-balancing systems.

Think of Atom Align as a hybrid order management system and re-balancing platform. It is designed to bridge the gap between the complex modeling capabilities of a dedicated re-balancing system and the trading features of a more typical order management system.

“The custodians know the limitations of their own platforms, and all have some limitations, and are recommending us to certain clients,” said Bryson Prouw, founder and president of Blaze Portfolio.

“For example, a lot of firms work with multiple custodians and want to be able to do their trading and model [portfolio] work in one interface and platform,” he said.

The two systems aren’t the only harbingers of change.

Last month, Advent Software announced a $73 million deal to acquire Black Diamond Performance Reporting LLC, largely as a way to diversify its offerings and appeal more to smaller registered investment advisory firms or breakaway brokers entering that market.

Then there is FinFolio, the web-based portfolio management application launched last year by TechFi founder Matt Abar. The firm apparently continues to land clients.

As a reminder, TechFi Corp. was purchased by then-rival Advent for $23 million in 2002. Three years later, Advent discontinued development and support of the application.

Advisers, especially those in the RIA business, should take heart that the state of portfolio management and reporting applications is shifting in their favor.

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