Managing a Portfolio


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This hasn’t been the easiest time for vendors of portfolio management software. The boom of the Nineties brought a crush of competitive products into the marketplace, forcing companies to invest more heavily in the development of their products to keep pace with new and differing needs of investors. Almost as soon as the boom was under way, the markets went into a sustained decline that is now pushing the industry toward consolidation and causing some lesser products to disappear entirely.

Yet there has never been a greater need for serious financial planning and portfolio management. A Harris Interactive survey conducted late last year found that in the post-9/11 environment, investors have returned to the reactive style of investing that caused many to lose significant wealth at the end of the last decade. Though investors surveyed say they need help with investing, they often do not seek that help-63 percent of those who feel an increased need to talk to a professional have yet to do so.

Interestingly, the driving force in the boom and bust cycle of the Nineties-the Internet-may help professionals to remedy the problem. Sophisticated Web sites dedicated to financial planning and portfolio management are giving accountants new tools for collaboration, faster data updates, and enhanced communication with their clients, often at a lower cost and significantly better convenience. The result is that investors can both feel more confident in their understanding of the portfolio and access professional services at a lower per-visit cost.

Partner Insights

Even those portfolio management packages that remain on the desktop are moving to integrate Web services, as well as to beef up their computational power by moving to more advanced platforms such as Microsoft’s SQL Server. Across the portfolio management software industry, hard development work is under way to better capture investors in the new century.

Other Trends
Three other strong trends in portfolio management are noteworthy.

In the stock market boom of the Nineties, risk assessment was often treated as an afterthought. With a more sluggish market and the massive losses incurred over the past two years, risk analysis has become one of the central focus points not only in the creation of the financial plan but in its implementation.

Specifically, software packages are paying greater attention to the relative risk of each asset. In some cases, portfolio managers are finding that a new view of risk demands a complete overhaul of the portfolio and a return to a much more conservative investment strategy that may be as extreme as theportfolio management style of the banking industry in the Fifties.

The “graying” of the population is leading to a new interest in some assets that had declined in popularity over the past decade, particularly life insurance, long-term care insurance, disability insurance and even reverse mortgages. With Americans living longer, health care becomes a more crucial factor, and portfolios must be managed as much in preparation for eventual illness as for comfortable retirement. Likewise, portfolio managers are paying closer attention to how these assets will be passed to children, grandchildren and increasingly, great grandchildren.

The current and projected low interest rates have brought a boom in house purchases and refinancing. This has two significant impacts on portfolio management. First, it means that clients will likely retain a mortgage until their death, a departure from years past, when paying off the mortgage was a financial goal. Secondly and perhaps more   importantly, refinancing of the home is seen as a means to raise new investment capital that can be better invested in more effective assets.

The refinancing boom, which shows little sign of abatement in 2003, is driving portfolio redesign for even small investors.

The Candidates
For 2003, we’ve chosen to examine four desktop applications-Ibbotson, Morningstar, Schwab, and Captool-plus review two of the most prominent Web sites, Thomson One Advisor and eWebPortfolio products. All have significant strengths and a weakness or two, but all are well suited for use by accounting firms engaged in portfolio management.

Captool Professional Investor
Captools Company
Issaquah, Wash.
(800) 826-8082
Price: Level 2 license, Starts at $1,999
(first year); $800 (annually).
Captool portfolio management software, an investment record keeping, performance measurement and portfolio management reporting tool, is designed for professional money managers and others entrusted with managing investment assets. 

Technical strength and an impressive feature set make this a capable program that will appeal to those looking for a no-nonsense approach to portfolio management. Captool bypasses the modular approach in favor of an incremental approach-networking and electronic report distribution stand out among the features included in the entry-level program. Level 3 features enhanced Web reporting, rebalancing by asset group and by margin, and specialty broker-dealer interfaces. Level 4, the top level, increases the account participation, with large fund accounting of up to 500 participants and explicit cash/margin accounting of investments within each portfolio.

A number of features offered by Captools are unique. Comprehensive cost basis tracking using five tax lot methods and wash-sale, cost-basis adjustment can help the accountant to attract more sophisticated clients with complex investment situations. Estimated tax computations with customizable tax rate tables and tax-free options, and the ability to calculate before and after estimated tax ROIs, help to improve investment performance. And the software provides the user with the flexibility to work with 50 or more custodians.

Data import and export are available via text or comma-delimited files, and pre-defined import templates are available for popular data sources that include Waterhouse, Schwab, Fidelity, National Financial, and Bear Stearns. It also supports the broker/dealer data in Advent, Centerpiece, or dbCams import format. Price quotes and other data can be downloaded from a variety of free Web sites using Captool’s “Dataserve” utility.

Also interesting in the Captools approach are the finishing touches for unusual needs. It easily handles multi-currency portfolios and multinational assets. It offers timesaving, batch processing, and has built-in capabilities for backups and file merging, as well as data compression.

Captool Professional Investor is a program that values function over form. While easy to install and navigate, it features a straightforward spreadsheet-style interface and stodgy graphical style that is not well suited for client viewing-though the program compensates with over 70 report templates, 200 data fields and integrated graphics.

Captool Professional is priced in the mid-range, with the Level 2 license priced at $1,999 for the first year and $800 per year thereafter. There is also a $70, 60-day full-function trial that is unmatched by other vendors of portfolio management software. It is software well suited for the portfolio manager who wants to maximize control over the portfolio, and flexibility while maximizing the ability to work with tax and ROI matters.

Houston, Texas
(713) 739-7702
Price: Starts at $2,500.
eWebPortfolio, a pioneering implementation of Web-based portfolio management, represents an excellent example of the benefits available from real-time, online financial services.

eWebPortfolio is all about access. Information and reports can be accessed over the Internet from any location, and the client may be given a password-protected sub-account to access the information, as they need it. This also provides the accounting firm with a substantial savings in IT costs, since there are no requirements for additional hardware or software. The site provides more than adequate performance even over a 28.8bps dial-up connection.

The site’s portfolio management capabilities are built around trading activity, capturing trades and generating trade tickets, then modeling and synchronizing the portfolio. There is even a basic modeling system that allows a series of projected trades to be analyzed on a pro-forma basis, then transferred into the order management system.

More than 35 standard reports, all with drill-down detail to the initial transaction, allow for fast and comprehensive analysis of the performance of the portfolio and its individual assets, including tax ramifications. All reports are dynamically updated to reflect trades in real time. Overall performance of the portfolio is calculated twice each day-at 4 p.m. after the market’s close, and again at 8 p.m. Updated price information is from IDC or through broker-dealers, and includes all splits, mergers, dividends, acquisitions, and other corporate actions. All performance calculations are AIMR compliant.

eWebPortfolio is easy to set up, navigate, and use, thanks primarily to its navigation bar and text-only approach to both input and output screens. Reports can be output to Excel, and additional customized reports created as necessary. If the interface is a little Spartan-more color and graphics would make it a more effective client tool-it is also extremely flexible. It is built on a system of making and tracking trades, with simple portfolio management and client support features that are perfect for the accounting firm looking for strong capabilities rather than bells and whistles.

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