Portfolios in Real-Time


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Managing investments isn't a part-time thing

By Dave McClure

The field of portfolio management is being rocked by three sweeping forces, including the Internet, the drive to outsource back-office functions, and the baby boomers.

Financial planning and portfolio management are the two elements of wealth management, a growing practice area for most accounting firms. But whereas in the past clients might be content with a static planning system and periodic reports, today's client is demanding access to real-time data and instantaneous snapshots of today's markets.

Partner Insights

The shift from static to interactive portfolio management is due in part to the maturity of the World Wide Web, which evolved into a platform suitable for such real-time management and reporting. But to an even greater degree, the change was brought about by the advent of day traders--individuals who grabbed headlines and notoriety in the late 1990s for their ability to move quickly and reap the benefits of instant knowledge. While the majority of high-wealth clients may not wish to be day traders, they are now aware that such instantaneous knowledge can help them make better financial decisions.

Equally important is the fact that clients are demanding both simple views of their current position and the ability to drill-down into the data, simultaneous capabilities that are relatively simple for a Web site but extremely difficult for a printed report.

At the same time, accounting firms are reconsidering how they manage back-office functions that include server support, data storage, and software updates. For many firms, a quick cost-benefit analysis has shown that these functions are better managed if they are outsourced, reducing the need for in-house IT staffs while offering online collaboration tools, rapid central updating, and better security in a centralized data center that can be more easily protected. For firms that outsource these functions, the result is less time spent in administration, more time spent in billable hours, and higher profitability for the firm.

Finally, there is the problem of serving the most affluent generation in American history, the baby boomers. America's 77 million boomers are woefully unprepared for retirement and what comes after. Though they have had more opportunities, more earning potential, and the most overall wealth of any generation in history, the American Association of Retired Persons (AARP) notes that 59 percent of people between the ages of 24 and 64 have no retirement plan. Nearly two-thirds of today's workers don't even know what their goals should be, because they haven't even begun to figure out how much they will need.

Serving their needs is likewise more challenging, as they are likely to have more immediate needs and greater concerns, both of which contribute to the need for more rapid and more detailed portfolio management information.

For 2004, we review four software packages and two online sites for portfolio management. Those that are not purely Web-based have adjunct Web services, and it is likely that these will complete a move to an all-Web architecture over the next five years.

Captool Professional Investor
Captool Professional Investor is a straightforward program for record keeping, performance measurement, and portfolio management aimed at professional money managers and others entrusted with managing investment assets.

Captool bypasses the modular systems used by competitive products in favor of an incremental approach on three levels: Level 2 provides networking and electronic report distribution; Level 3 features enhanced Web reporting, rebalancing by asset group and by margin, and specialty broker/dealer interfaces; and 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.

Tuning CRM for Accountants

Captool Professional Investor
Captools Co.
Issaquah, Wash.
(800) 826-8082
Price: Professional Investor Level 2 license (3 users), $1,999 (first year), $800 (annual renewal; $70, 60-day full-function trial.

(713) 739-7702
Pricing: Minimum $2,500 per year.

Portfolio Strategist 8.4
Ibbotson Associates
(312) 616-1620
Pricing: Suite prices begin at $2,400 (annual subscription).

Morningstar Principia
(312) 696-6000
Pricing: $615 per module per year for monthly updates.

Schwab Centerpiece 5.6
Schwab Performance Technologies
Raleigh, N.C.
(800) 528-9595
Pricing: $3,495 (single seat, single computer); $750 annual

SunGard Online Investment Services
Wayne, Pa.
(484) 582-2000
Price: PlanningStation $200, $300, or $400 (per quarter).

More streamlined than most portfolio managers, Captool nonetheless provides a host of special features. Comprehensive cost-basis tracking using five tax lot methods (FIFO, LIFO, Avg, Avg/2, specific) 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, helps to improve investment performance. And the software provides the user with the flexibility to work with 60 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 any 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.

Captool Professional Investor is a working tool rather than a presentation tool. Its interface presents a vast array of data for quick review by the accountant, then provides a flexible report generation engine with more than 100 templates and integrated graphics to summarize the data for client presentations.

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. Priced at about midrange for its class of products, Captools does offer a $70, 60-day trial of the software that will enable accountants to determine its fit with their client base.

Though most of the major portfolio management software companies now offer some level of Web-based functionality, eWebPortfolio was the first to demonstrate the benefits of real-time, online financial services.

eWebPortfolio was built on the concept of accessibility, by any person in the firm, and by the client, with real-time and updated information. 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 needed. 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 28.8kbs 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, and 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. The overall performance of the portfolio is calculated twice each day--at 4 p.m. after the markets 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 Microsoft 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.

eWebPortfolio has a clear advantage in being the first full Web portfolio management system. The company has had more experience, and more time to tweak its services. It is an excellent Web implementation that will appeal to accountants seeking a straightforward portfolio solution, or those that are unhappy with the modular approach taken by most of the rest of the industry.

Portfolio Strategist 8.4
Portfolio Strategist from Ibbotson, a software suite of five products, automates and streamlines the task of integrating a client's holdings with planned financial strategies, and then optimizing all of the assets in a way that creates and maintains an efficient portfolio.

The five modules of the suite are the Security Classifier, the Portfolio Strategist, the Fund Strategist, the Portfolio Strategist, and the Analyst.

Client and account set-up is handled by the Security Classifier. This module is one of the strong points of the suite, as it allows existing assets to be converted into one of 13 asset classes for better integration with recommended funds, securities, and variable annuity sub-accounts. The Security Classifier draws on Ibbotson's database of more than 6,100 mutual funds, 8,350 individual securities, and 7,200 variable annuities.

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