[This article appears in the February 2016 issue of ETF Report. This is the first of a five-part series: Tools For Stronger Messaging; Preserving Paper Trails; Solving Office Software Big Data Trading Tools]
Being an advisor is like juggling chain saws.
There’s the actual nose-to-notebook work of financial planning, portfolio management, investment research and reporting. Anybody can do that, to an extent.
But only you can stay in touch with your clients, chase new leads, connect with partners, continue your education, market your business—and make sure your office doesn’t go up in flames.
That’s a lot of chain saws to keep in the air.
Thankfully, though, you can outsource some of the heavy lifting to various next-gen portfolio management tools, freeing you up to tackle the task of building your business.
Planning Made Easy
Building and rebalancing portfolios by hand is a notorious time-sink. And it’s also unnecessary, given the range of port-folio management platforms now available.
These tools bundle together a range of functionalities that previously had to be applied portfolio by portfolio, such as modeling, performance reporting and rebalancing. Many of these platforms are also cloud-based, meaning you can access them remotely on-the-go.
Orion, Envestnet|Tamarac and Advent are some of the bigger names in the space, though newcomers like Portfolio Pathway and Addepar have gained market share in recent years.
There are also tools that streamline the process of financial planning, such as MoneyGuidePro and eMoney Advisor emX. These two software packages allow you to generate sophisticated goal-based financial plans, as well as analyze asset allocations and insurance needs, aggregate your accounts and manage your back office. Both services also feature online client portals, where you can share plan reports, investment summaries and educational content.
Robos On The Rise
If you’re looking to save time on investment management, robo advisors just might be for you.
Robo advisors like Betterment and FutureAdvisor entrust the job of portfolio construction and management to a computer algorithm in their advisor services. Generally, this means investing in a port-folio of low-cost, passive ETFs. But most robo advisors automate other services too, such as rebalancing and tax-loss harvesting.
With their super-low annual fees (0-35 basis points) and minimal starting account balances, robo advisors can also help you serve that all-important millennial crowd.
Robo investing has become so alluring that even some of the traditional investment firms have launched their own robo platforms. Charles Schwab, for example, has Schwab Intelligent Portfolios, while Fidelity offers Fidelity Go.
Tools Of The trade
Even if you don’t want to hand over the reins completely, there are still plenty of portfolio management tools to make your life easier.
For example, Riskalyze calculates investors’ risk tolerance to a 95% statistical confidence level, which you can then use to help customize client portfolios.
HiddenLevers, meanwhile, offers a stress-testing service. It uses the correlations between more than 35,000 securities to model how your portfolio would react during different market events.
There’s also Trendrating, which uses a range of price trends to test the momentum of your portfolio. You can also screen the markets for momentum plays, and optimize your portfolio to harness various momentum-based strategies.
In fact, with so many next-gen portfolio management options now available, you can feel free to concentrate on your clients and your practice without worrying about dropping the ball—or chain saw.
ZACKS' LANZA EMBRACES PORTFOLIO PATHWAY
Frank Lanza is chief compliance officer and chief operating officer of Zacks Investment Management, a wholly owned subsidiary of Zacks Investment Research that focuses on wealth management for institutions and high net worth investors. To handle its portfolio management needs, Zacks turned to Portfolio Pathway, a software suite offering performance reporting, port-folio modeling and more.
What were you using for portfolio management before you adopted Portfolio Pathway?
We started our retail division using a firm called FOLIOfn. It offered a unified managed account (UMA) structure, where you could have multiple sleeves in a portfolio attached to different models. But we were limited to only using FOLIOfn as a custodian.
We then embarked on relationships with Schwab and Fidelity, which required us to find another technology that had the same offering. At first, we partnered with Envestnet, but the product just didn’t work out for us. We just couldn’t get it to work exactly the way we wanted. That’s when we came across Portfolio Pathway. We’ve been using them for just over a year now.
What made you choose Portfolio Pathway?
It was Portfolio Pathway’s ability to do this UMA structure; that was a big driver. Also, its technology allowed us to create composites of our strategies. We liked that.
What benefits does Portfolio Pathway offer?
I think it gives us a lot of scale. Its platform is custodian-agnostic, so we can partner up with any custodian for a retail client. Right now we work with Schwab and Fidelity, but it’s available for TD and others too.
Also, since it’s a smaller player, I find I have direct access to the team there. I have a voice. I can actually tell them, “I’d like to see this functionality on your technology,” or, “Can we work on this deliverable for next year?” That back-and-forth communication, and their ability to execute these requests in a timely manner, is a much different experience than I had when working with a larger firm.
It’s like that old ad campaign for Avis: “We’re No. 2, so we try harder.”
Tell me a little about how you use the platform at your firm.
We use its portfolio management tool for modeling. All the portfolio managers provide trades to the trading desk for their specific strategies—bring Apple up 1%, say, and bring IBM down to 1%—and you can make those adjustments at the model level. Then it generates the trade across all our client accounts, and block-trades it at the respective custodian, such that all clients get an average price. So there’s no favoritism; everybody gets equal treatment.
Also, all of our retail advisor representatives have access to the platform, which they can use for client reports, to do account reviews, to provide tax information and so on. It allows us to easily review all the strategies in the clients’ allocations, to make sure we’re helping clients achieve their goals.
Portfolio Pathway’s software is cloud-based. Was that a selling point?
It is compelling, because our advisor representatives are located all around the U.S. So it was necessary for them to be able to access it from their home office, wherever that might be.
You’ve used Portfolio Pathway for a year. Do you see your relationship continuing in the future?
Absolutely. I’m even working on projects to get more data into the system, so that it can be a global system for all divisions, and provide analytics at the firm level as well as the division level.