Tech Tools to Build Wealth

Software levels the playing field for small advisors.


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Donald Duncan says he can create a comparable financial plan and portfolio management for one-tenth of what Northern Trust, a Chicago-based custodian and asset manager, charged when he was the institutional assets manager there. "With the Internet, I can do 90 percent of what they do,'' says Duncan, owner of D3, Design Develop Deploy Financial Counselors of Downer's Grove, Ill. "For example, there [at Northern Trust] if it cost $100,000, I can do it for $10,000."

As a direct result of the increasing sophistication of software, the financial planning and investment management firm can offer its clients a portfolio equivalent to what a large financial institution would offer.

Using Interactive Advisory Software's portfolio manager, D3 can offer clients better portfolio analysis because the technology affords the advisor the ability to integrate financial planning, and portfolio management in order to manage client's personal, financial and portfolio data in one application. D3, with $150,000 in revenue, can provide its clients services comparable to those offered by financial giants.

Partner Insights

"The trend has been prompted by financial planners becoming the quarterback for a client's financial well-being," says Duncan. "In order to be the quarterback, you must have all the information."

Duncan says the key in his decision to select the product suite from Marietta, Ga.-based IAS was that its financial planning and portfolio management software can be integrated. He emphasized the heightened level of accuracy that could be achieved if there was connectivity between the two.

There's a wide variety of information out there for financial planners to grasp, as they battle with stockbrokers and insurance salesman to manage their affluent clientele's portfolios.

Monitoring stocks, mutual funds, and hedge funds are several more indices that financial advisors must add to their crowded plate of daily checks, if they are to build their financial planning business.

The investment sector has long been served by brokers who recommend stocks, bonds, and mutual funds for high-net-worth individuals. Financial planners who migrate to this arena are being greeted by territorial brokers and increasingly savvy investors.

Financial planners looking to enhance their knowledge of specific funds and their performance can choose from a few Internet sites, including Morningstar, Thomson Financial Services, and Standard & Poor's, that research and track hundreds of funds across numerous sectors. The detailed online data offered by the institutions affords the planner with the requisite information and degree of knowledge to make educated recommendations to a discerning client about their investment portfolio.

Fortunately, the products available to individual advisors are giving them more tools with more power, whether they are used on the desktop, or increasingly through Web-based applications.

Sticking with the Old School

Those new fangled, integrated, full-of-bells-and-whistles wealth management packages aren't for some advisors.

Bradley R. Teets, president of KDT Investments, prefers to do his own research when devising a client's portfolio. "A packaged product wouldn't do it for us," says Teets. "We don't do boilerplate."

Instead, the two-person Punta Gorda, Fla.-based firm, which has $30 million in assets under management, relies on its advisors' research via print publications and the Internet. These include Investors Business Daily, Yahoo Finance, and Standard & Poor's.

Teets, a CPA who has both the CFP and the personal finance specialist credentials, then enters the data onto an Excel spreadsheet. "We try to make each recommendation unique to the individual customer's needs," Teets says.

Similarly, newer is not better in the eyes of Jason Meredith, tax manager at Horne Financial Services, who in 1996 developed what he calls the 'Budget Buster," from which he can begin preparing a financial plan for his clients.

He recalled spending almost 20 hours to create a customized Excel spreadsheet from which he can establish a preliminary assessment of a client's finances and holdings. With that, he starts building a wealth management plan.

"I've seen vendors with similar products out there since I developed mine,'' says Meredith.

Jackson, Miss.-based Horne is a $38 million firm with 10 offices throughout Alabama, Louisiana, and Texas. The firm has 26 partners and its clientele is dominated by medical practices.

Meredith, a CPA and CFP, would appreciate the comprehensive research afforded users of Morningstar's Advisor Workstation. However, he says, "Its asset allocation models are difficult to set up."

Meredith, along with many other financial advisors has seen improvements come along to help them with creating financial plans and investment portfolios for their clients. Still, he's not ready to move.

"You find something that works for you and you just stick with it,'' says Meredith.

For Brad North, a financial advisor for North Star Resource Group, Morningstar's Advisor Workstation affords him a heightened level of sophistication when making investment recommendations to his clients.

"Instead of bringing your B game, you are bringing your A game," North says, "It's got more information than you'll ever need."

For example, according to North, Morningstar's research covers hundreds of variables within mutual funds that allow him to assess, weigh, and compare funds with their risk, exposure, and rate of return. "When I look at a mutual fund, those are the three things I want to know before I dig deeper," says North.

Advisor Workstation, available in both Enterprise and Office Editions was introduced four years ago. The Web-based Office Edition is designed to offer small firms the same detailed level of research provided to large brokerage firms such as Morgan Stanley, UBS, and Axa.

According to Morningstar's Advisor Group president, Chris Boruff, Advisor Workstation caters to brokers, accountants, and certified financial planners who provide professional advisory services to individual clients. Its tools encompass four distinct categories: 1) investment research and analytical tools; 2) financial planning tools; 3) portfolio management; and 4) accounting and CRM tools.

"For some time, the Holy Grail for financial advisors has been the notion of a fully integrated system combining these four functional areas,'' Boruff says, "In order for that to have been accomplished in the past, it would have required four different vendors to agree to create a data interchange between their respective products."

The Integration Problem

Some financial planners say that previously they had to devise their own template for developing a strategy to research, monitor, and recommend investments using software programs that weren't able to communicate with each other.

Jeffrey Berman, principal in charge of financial planning at Kahn Berman Solomon Taibel & Mogol, says one of the biggest challenges he faces is moving from one software program to another. However, Berman says he has become quite proficient getting in and out of applications quickly.

"I know some planners who use 10 to 15 programs,'' says Berman, "whereas over time I have gotten it down to four. It would be nice to have one program.''

Timonium, Md.-based KBST&M, a $3 million CPA firm with 20 employees, offers fee-based financial planning services, with much of the data mined from its tax practice. Because of that, Berman says he would like to be able to tap into a single program that can integrate data with other applications in the office. Instead, he currently grabs data out of CCH's ProSystem fx Tax Planning, NaviPlan, and Brentmark's estate planning package, and incorporates the results in an Excel spreadsheet.

Depending upon the number, level, and scope of products sought, the cost of a subscription varies widely for the independent research and analysis provided by the financial research firms Morningstar, Lipper, and Standard & Poor's.

NorthStar's North says while some firms may find the $5,000 per year for Morningstar's top-tier subscription prohibitive or not cost-efficient, firms like North's can find the subscription pays for itself with just one new account.

"I could get one client to say 'yes' to me because of the objective research that I am able to include, which justifies the subscription costs,'' says North.

New tools are entering the market from both veteran and new players in the software field. During the fall, Schwab Institutional introduced Portfolio Center, a SQL-Server-based desktop system that replaces Centerpiece, the system that Schwab purchased several years ago. Schwab says Centerpiece is used by about 3,100 advisor firms. It interfaces with 40 brokerage and mutual fund companies.

That product came after Schwab replaced Junxure, its contact management and workflow automation program, with the PortfolioCenter Relationship Manager.

Last summer, Standard & Poor's, the credit rating firm, launched its Web-based wealth management and investment tool for non-institutional financial planners.

Its Portfolio Advisor provides fee-based financial planners with investment recommendations and model portfolios of individual stocks, mutual funds, and exchange-traded funds for their clients. More than 150 stock and mutual fund analysts research investments, distilling the voluminous information into briefs for review by advisors. It will also provide recommendations for stocks and provide notification of market shifts and when to rebalance portfolios.

The model portfolio allows the advisors to create a portfolio for prospective clients. When the client opens an account, the actual execution is performed by a third party, says Ken Ennis, managing director of investment services for S&P.

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