Tools of the Trade

There’s nothing like having the right tools. Software that simplifies and organizes processes so that you can best serve your clients offers a competitive advantage. When it comes to choosing and buying practice management and investment analytic software, you can ill afford major missteps. Get it right and you boost your business. Get it wrong and you, your clients, and your business suffer.  

“We use a number of software and analytical applications, none of which is perfect. You have to do a lot of homework to get your software solution right,” says Michael Kozemchak, Managing Director for Institutional Investment Consulting in Bloomfield Hills, Michigan. 

Here are five key considerations for advisers evaluating software.  

Evaluate your practice. Take an in-depth look at your business. What’s crucial? What’s unique? What exactly do you do and for whom? “We’re doing a major evaluation of our systems. We’re looking at what we do and what’s compatible. We run proprietary reports, so any system must be compatible. We also want branded reports, not with someone else’s logo,” says Dave Richards, Investment Services Director with Pension Consultants of Springfield, Missouri.  

His firm’s practice is primarily registered mutual funds but, for those advisers who use individual equities or annuities, they should be mindful that they will need a platform that has such a capability. 

Timing is another issue. “Do you need cutting-edge technology that updates frequently, daily, monthly, or will quarterly updates do?” asks Richards. Thinking through every aspect of your business is the first order of business. “Doing this work up front will help determine what you need,” he adds. 

Figure out what you really need. What kind of functions you need depends largely on the size and scope of your business. Says Neal Ringquist, ­President and Chief Operating Officer of ASI Advisor Software, “Look at what others are using; what’s been successful for them? Talk to people who have been in a similar business longer than you; ask them to share their wisdom.”  

However, generally there are some factors that come into play, especially with investment management software. “You want qualitative and insightful software that easily allows you to screen, compare, and recommend appropriate investment managers for a 401(k) or defined benefit plan sponsor,” says Margaret Tobiasen, Senior Vice President, PSN Communications, Informa Investment Solutions in White Plains, New York.  

Depth of information counts too. “Advisers need to go beyond comparing ­investment managers based on historical performance and style. Software that can deliver detailed information that dissects performance, style, portfolio composition, and risk is of the utmost importance,” she adds. 

What kind of information can you get about expense ratios and fees? Investment managers that charge higher fees and fail to deliver performance in excess of their respective index are not worth it, says Tobiasen. Software that can deliver this line of sight into the expense side of investment management is highly important, she adds. 

Think breadth. “Breadth of investment coverage allows you to have data not only on the investments you recommended, but also those of your incumbents to provide a clear and compelling case to plan sponsors. Normalized rankings/ratings across investment types (mutual funds, insurance group separate accounts, and collective investment trusts) are required to ensure apples-to-apples comparisons,” points out Melinda Sgariglia, Vice President of Broker/Dealer Solutions for Morningstar. 

What types of reports are available? Are they client-friendly, and in what formats: Excel, PDF, or Word, for example? What capabilities are available to personalize and customize the software and, perhaps most importantly, its reporting output? “Does it offer user-defined items, branding,
and benchmarking?” asks Bennett Aikin, Communications Manager for Fiduciary360.  

Flexibility is key. “You want to be able to customize the application’s output and the way the data is analyzed. You should be able to analyze user-defined data and create blended portfolios and benchmarks. The program shouldn’t force you into a static, generic report, but allow you to create a custom report that displays the information that helps you make decisions and solve problems,” says Lauren Boismier, a client consultant with the software company Zephyr Associates. 

Compatibility is no small consideration. “Does the software allow for information exchange within its own features? Is the software able to integrate with outside software, other service providers and custodians, for example?” asks Aikin. 

Will off-the-shelf suffice or do you need a custom solution? “We looked at a lot of packages, some operational and some investment research. For us, customization wasn’t needed, as there was enough off the shelf that will work for us, and the price also precluded it but, if you have a very specialized practice, you might need a customized product,” says Richards. 

For its investment performance reports, Portfolio Evaluations sought customization. “We developed our own system, client data, plan-level data, into a single database. It accepts automated feeds. It’s a very expensive proprietary system. We toyed with the idea of doing this for several years, and we identified the benefits over the long term. It will take us three to four years to break even on the system that we rolled out early this year but, already, our analysts are seeing the value of the custom reports. We can create peer groups and have more control over the data,” says Brian Higgins, Director of Operations for Portfolio Evaluations.  

The investment performance reports can be used to automate other things, like fund searches or sorting fund manager changes. “We can do a sort of clients that have funds where there have been fund manager changes. We then can notify them by e-mail and give them our opinion about the change in management,” says Atilla Toth, Principal, Portfolio Evaluations in Warren, New Jersey.  

Put price in perspective. While you do not want price to wag the software tail, price is part of the decision process.  

“We struggled with price. The fanciest CRM platforms, those with a lot of bells and whistles, while you could find value in having them, we never opted to. The cost outweighed the value. Cost is very important. Lower-priced platforms didn’t have all that we needed, so, in terms of price, we went for the mid-price level and found what we needed,” says Toth. 

For Richards, the software itself is a minimal expense to the overall operation. “If it fits into your practice and meets your needs, then it more than pays for itself.” 

Be sure you are clear, too, on how the product fee is structured—are there license fees, pay per use (per client saved or report produced), and start-up costs, points out Aikin. 

In addition, what are you getting for your money? How secure will your client’s data be? What sort of support and training is available? Are there any stipulations or constraints on it? What is the commitment to making software updates (not just data) and improvements? 

Don’t forget to get the skinny on the provider. “Are the principals, owners, or operators experts? Who’s behind the curtain?” asks Aikin. Another thing you want to know: “What is the company’s reputation for customer service? Your IT department and reps will each have to deal with customer service,” adds Richards. 

Is it easy enough? You can have the coolest, most comprehensive software but, if no one gets it, what does that get you? Ease of use is perhaps at the top of the must-have list. “We have simplified processes so that we can spend more time on client issues. We can dive into their problems instead of worrying about working with the software,” says Toth. 

Simply put, “The look and feel has to be intuitive from the get-go,” says Warren Mackensen, President of ProTracker Software in Hampton, New Hampshire. 

Lastly, kick the tires. Don’t just rely on what you are told. Says Richards, “Get a live demonstration and have some trial time with the product. Identify any limitations up front. Remember, nothing is perfect.” However, you do want to come close.