Category: Portfolio Management Systems


iStock_000021815840XSmallAll things change – even things at the SEC.   Previously, investment managers could upload text (aka ASCII) files detailing their holdings to Edgar.  This quarter, a change was made, requiring the file to be formatted in XML.  Investors have 45 days from the end of the quarter to file their 13F reports, so Q2 reports are due today.

Some users that attempted to get these reports done earlier in Q3 expressed frustration with the XML issue and their ability to get more proactive assistance from Advent to address it.  Last week, as the filing deadline approached, Advent reached out to clients, alerting them of the change and directing them to an ASCII to XML conversion tool to facilitate the process.  In my own experience with Advent’s support team, I found them both helpful and knowledgeable in regard to the 13F reporting issues.

Though Advent’s documentation states that the 13F report and conversion tool requires Axys 3.8.5 or higher, the report from Axys 3.8.5 worked fine when we used it on Axys 3.7 with a client.  APX users can use the same utility.  The utility was simple to use and worked well;  the biggest challenge for users is finding the file they need to convert.

The 13F reporting mechanism is functional, but the setup seems cryptic and disjointed.  First-time users expecting a turn-key, intuitive solution will be disappointed.  Fortunately, the details of what is required to produce 13F reports are well-documented in Advent’s help file.

How 13F Reporting Works…

By default, the 13F report only includes the equity asset class.   It is possible to exclude individual securities through the use of the 13F.est file, but it is not possible to include individual securities.  Additional asset classes may be added.  Report-specific labels must be added to the 13F portfolio file to make the report work properly.

When the supporting files are properly configured, the report produces detailed holdings and simultaneously generates an inftable.txt file with the same information.  This file is placed in the specific user folder (i.g. f:\axys3\users\amy) of the person running the report on the network version of Axys or the root folder of Axys on the single-user version of Axys.  When users have generated a 13F report without missing data or error messages, they are ready run to the conversion utility to produce the inftable.xml file and upload the information to the Edgar site.

This quarter, running and filing 13F reports was more challenging than it has been in the past, since users were forced to correctly implement the 13F report in order to successfully generate an XML file.  Based on my experience with users, this was something they had not been doing in the past.  Most users would run the report to get something close to what they needed and then manually modify the text file, rather than keep all of the information updated in the 13F portfolio and 13F.est files.  Going forward, the process will still require that new securities and relevant asset classes be classified specifically for the 13F report, but future report runs should be simpler.

For more info on 13F reporting, refer to the SEC’s document detailing Frequently Asked Questions (FAQ).

About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide.

For details, please visit isitc.com, contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.

black coffee,glasses and newspaper on business fileI have been talking about the evolution of investment reporting for years and telling anyone who would listen that their clients will soon have other investment reporting options.  My dream or vision of the future includes me (of course) providing the interface to facilitate getting data from financial services firms to a secure data warehouse via xPort where their clients could download the data for analysis on an open reporting platform.

As I discussed this with one of my clients at a recent Schwab conference, they shared their concerns with me.   I was told, “It’s basically a problem of apples and oranges.”

My long-time client and friend explained to me that they would have concerns that data they reviewed and corrected (“apples”) might be reported as uncorrected data (“oranges”).

Though data aggregators exist and have much of the data required, they won’t have it all unless advisors participate and cooperate in the process.  Reconciliation needs to be performed and maintained on an ongoing basis with respect to assets under management, inception-to-date performance, and tax cost.  No one is more motivated and qualified to maintain that data integrity than the advisors whose decisions, service, and bottom line are impacted by the quality of that data.

Big Brother will have access to this data too – that’s not part of my plan, but just a given eventuality and perhaps already a reality.  Regulatory powers will employ predictive analytics to proactively search for potential fraud.  For example, an advisor reporting the same exact composite return two years in a row is possible, but highly unlikely and worth investigating.  When more scrutiny is applied to this data, one can only hope that the benefits of additional regulation will outweigh the compliance headaches.

Enter SigFig

SigFigAccording to their web site, SigFig was born out of the noble desire to serve the millions of investors that don’t meet typical portfolio minimums and cannot afford quality investment advice.  Your clients may be using SigFig already.  If you haven’t seen it, SigFig is to investment reporting what Mint is to personal financial reporting.  Unfortunately for investment advisors, SigFig has a similar business model, meaning that investors do not pay for the service, but instead get solicited with offers that appear relevant to their investments; for example, “this fund is outperforming your fund “or “your investment advisor is overcharging you.”

Using SigFig, investors can view a dashboard summary of investment reporting information that looks better than what many investment advisors currently provide to their clients.  However, as one familiar the details of performance calculations, client billing, and reconciliation, I am naturally concerned about possible data quality issues.  The idea of replacing the sound advice of an investment professional with algorithms designed to place ads – even though those ads are intended to be unbiased – seems inherently flawed.

To learn more, you can check out SigFig here:

www.sigfig.com

In my preferred vision, advisors would pay an interface fee and their participating clients would purchase SAAS reporting or a Droid/iOS app.  Idyllic as it might seem, this version of the future would allow investment advisors and their clients to share views of reports created by impartial third-party reporting sources.

SigFig is a step in the right direction, and should serve as warning to investment advisors that more robust investment reporting information will be delivered to their clients whether they participate in the process themselves or allow their clients to find it on their own.

The Best Investment Reports

It makes perfect sense that your firm should want to provide the best reports possible to your clients, without incurring an unreasonable expense or maintaining an unmanageable reporting process.  Unfortunately, what’s best for your firm and what’s best your client may be two different things. You want to validate your investment methodology and highlight the value continued use of your firm offers, but you also need to keep your client’s best interests in mind.  More than one advisor I have worked with in the past has chosen to shy away from slick, eye-popping reports, instead favoring black-and-white reports where simple numbers alone underscore performance.  In the opinion of these advisors, the relationship with a client is more important than fancy reporting and such reports can distract investors.

Call modern reports a prudent best practice or self-serving marketing effort designed to ensure your firm’s survival.  The truth is that they are a little of both.  Clients expect decent reporting, so substandard reports are now passé.  Quarterly report packages like those I have helped clients create for twenty years are also known as presentations, and perhaps that is a better name for them.  It describes what investors are really trying to do at quarter end.

Sample Client Reporting Presentation

Sample Client Reporting Presentation

Every quarter, advisors have an obligation and opportunity to make a presentation of how their clients’ investments are doing.  Most advisors also write a quarterly letter in which they address the near-term market conditions and reasonable expectations for the future while trying to impart some relevant wisdom to their investors.  Advisors are, in fact, presenting and remarketing to their clients on a quarterly basis.  Good presentations typically illustrate an advisor’s general knowledge of the markets, educate clients, and show how the advisor adds value.  The reports included in these presentations also present holdings analyses that provide clients with additional insight into their investments, but, most importantly, these reports provide the client with performance figures and comparative benchmarks for various time periods.

Report Development or Adoption

For some firms, proprietary custom report writing is required to meet the needs outlined above.  With this requirement comes the necessity to employ staff or contract with vendors to produce and maintain the reports.  The effort to produce high-quality reports can be daunting whether the project is handled internally or outsourced.  Many custom reports, by definition, are in flux.  In a typical quarter, custom reports may undergo additional feature enhancements and require maintenance modifications or bug fixes.  In order to maintain custom reporting systems, an ongoing commitment of time and money is necessary.

Advisors may want to create distinct custom reports that are part of their brand, but given the potential complexity and cost of creating those reports – the best investment reports for those with limited funds are the ones that already exist.

About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide.

For details, please visit isitc.com, contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.

iStock_000011255731XSmallWhen Advent first introduced The Professional Portfolio (aka Proport) 25 years ago, one feature that contributed  largely to its long-term success was the ability to get data in and out of the program easily.  Advent software has continued to make this feature a priority throughout every iteration of their original portfolio management product line.

In contrast competing products like Centerpiece, which would eventually be purchased by Schwab and rebranded Portfolio Center, appeared to be a black box.  You could see what was being calculated, but could not see the components of the calculation.

Proport files were stored in an open text format and could be easily read and written as necessary.  Axys v1.x, Advent’s premier Windows product at the time, maintained a similar open file structure.  Axys v2.x was the first version to implement a binary file format.  At the time, some users were concerned that the format change would complicate maintenance of existing customized solutions and inhibit their ability to continue to create solutions that exchanged data with Advent’s portfolio management system.

Firms were slow to embrace Axys v2.x and some never upgraded to it.  Perhaps it was concern over the new file formats.  Instead, most firms eventually upgraded to Axys v3.x. Concerns about the format change were moot since Advent also introduced IMEX, which allowed users to import and export files in CSV, tab, and fixed formats.

Exceptions apply, but the IMEX tool facilitates the ability to move data in and out of Axys with relative ease.  The features of IMEX combined with the ability to import transaction and label data through the trade blotter provide a comprehensive means to get fundemental data in and out of Advent Axys and APX.  Additional methods of importing and exporting data follow:

Axys users may write or read data directly to data files if they have knowledge of the underlying data format.  However, this is not a best practice due to changing file formats between versions.  For example, upgrading from Axys v3.7 to v3.8 requires a file conversion process.  Some of the resulting Axys v3.8 files have a different file format, so any process directly writing or reading these files would need to be updated to take the new file formats into account.

APX users may

  1. query the APX database via Excel (and other software programs).
  2. write SSRS or Crystal reports to extract data.
  3. use many other SQL based tools to export and import selected data.

Axys and APX users can

  1. export reports directly to Excel with the push of a button or create a macro that stores report output in XLS and other file formats.
  2. create custom reports via Report Writer Pro, which can easily be changed to CSV format.
  3. modify existing replang reports to build CSV, other text formats, and various Advent file formats.
  4. use third-party Extract, Transform and Load (ETL) products like xPort.

APX (v1.x to v4.x) maintains the functionality of IMEX, but the ability to generate files in a fixed format has been eliminated.  In addition, you can export data to an Axys v3 format.

Due to these capabilities and a host of other Advent features that facilitate automation and integration, Axys and APX users as well as third-party vendors like ISITC.com have developed many custom solutions utilizing Advent Software’s infrastructure to address day-to-day investment operations workflow and reporting requirements.  The building blocks of these solutions faciliate subsequent projects and allow investment firms to further enhance Advent’s portfolio management systems to meet their evolving needs with less effort and cost.

Here is a sample of some VB code we use to integrate and automate data handling of exported Axys and APX data.  The code can be used in Excel with VBA and User-Defined Functions (UDFs) to pull data from Axys and APX like Bloomberg BLP functions are used in Excel. This function is just one of the routines in our library of code that enable us to seemlessly integrate our solutions with Advent’s infrastructure.  I wrote the original source code for this routine twenty years ago and have updated it as necessary to support later releases of Axys and APX.

Using similar resources, integrators can move quickly from prototype to production when developing solutions for Advent users.  In fact, Advent’s most recent annual report continues to cite customers building their own solutions as one of their largest sources of competition.  For instance, a number of firms have created their own Order Management Systems – not that I’d recommend it.

Advisors abhor inefficiency and are typically willing to make a reasonable investment to reduce it.  Automation not only increases efficiency, but lowers risk by eliminating manual processes that may rely on individuals and their exclusive knowledge of manual or semi-automatic procedures.  Some financial services firms have customized their systems to a degree that makes staying on the Advent platform for twenty plus years possible and the thought of switching to another platform regrettable.

Thanks to the way Advent handles getting data in and out of their systems, users can continue using Axys to meet their ever-changing system requirements and leverage most solutions created for Axys on the APX platform.   Similar and potentially better tech options may exist on other competing platforms, but most of those systems lack the maturity, depth of resources, third-party relationships, and corresponding reliability of Advent’s platform choices.  Knowledge and acceptance of these competing products among advisors, employees, and third-party solution providers won’t match Advent for a long time.

As a result, even though technologically superior portfolio management platforms may emerge, many firms will continue using Advent’s best known portfolio management systems for the foreseeable future.

About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide.

For details, please visit isitc.com, contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.

iStock_000003876801XSmallFive to ten years ago, talking about Software-as-a-Service (SaaS) products with my clients would have been a very short converstation: they simply weren’t interested.  Today, however, the landscape has changed.  Investment advisors are more open to using systems in the cloud because they have begun to realize that owning technology and controlling every aspect of it is expensive.  In the past, they wouldn’t have had it any other way.

Now, we live in a different time, with newfound economic pressures and more sensitive budgets.  To those managing the operational budget, the cloud looks good.  Some of my more progressive clients have been ahead of this curve.  Instead of building and implementing systems internally, they have been using outsourced technology systems through the likes of Fidelity’s WealthCentral platform.  They have enjoyed using best-of-breed technology, without paying a premium to own it.

CLOUD-BASED SYSTEM ADOPTION GROWING

Those with experience using cloud-based services are looking to expand use of that technology, and some firms who never would have considered it in the past are taking a hard look at putting some of their systems in the cloud.  No matter which group your firm fits into, you are unlikely to find a complete solution in the cloud, nor should you.  As an example, clients of mine who effectively leveraged cloud services in other areas in the past are only now thinking of using hosted Exchange services from the likes of Rackspace or Google.  I also work with advisors who moved quickly to Google for email, but wouldn’t think of moving their portfolio management system to the cloud.

Recently, some of our clients have made the move and transitioned their servers into the cloud.  Options exist for moving workstations processing into the cloud via terminal services and virtual machines, but not many advisors have taken it to that extreme yet.  Terminal services and virtual machines are frequently used in the contingency systems that most advisors implement, so using them for primary system access isn’t much of a leap.

WHY YOU MAY WANT TO MOVE YOUR SYSTEMS TO THE CLOUD

Typically, one advantage of cloud-based systems is vendor-based redundancy that eliminates the need for similar infrastructure at investment firms.  In other words, you don’t just save money on primary hardware and software systems, you also save on redundant infrastucture and simpify the requirements of your contingency systems.

Advent offers a SaaS solution through their Advent OnDemand service.  This service is available directly through Advent and other channels, such as Fidelity.  In my experience, clients utililizing Advent’s SaaS offering give up some flexibility, but save a considerable amount of money to utililze Advent’s infrastructure rather than purchasing and maintaining their own.  It is not the right solution for every firm, but it is worth looking into.

As users of Portfolio Center and Junxure consider the necessary system upgrades to support their expanding SQL server requirements, they need to understand whether the systems they implement will continue to support their growing databases.  In some cases, these users may need to incur the expense of a full SQL server license in addition to purchasing respectable server-class hardware for their next generation server.  When looking at the price tag associated with these potential upgrades, these users will do well to consider Portfolio Center Hosted, before committing to new system expenditures.  The SaaS version of Portfolio Center is scheduled to be released in April 2013.

2013 AND BEYOND

For the remainder of 2013, advisors will continue to adapt SaaS and cloud-computing systems that spare their businesses significant expense while posing relatively low security risks.  Firms will also resist the urge to move their systems into the cloud fully.  Their perceived need to actively manage security locally is too great for investment managers to entrust to these controls to the cloud for the time being, but at this rate, 2014 and 2015 could be mostly cloudy.

About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide.

For details, please visit isitc.com, contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.

AUTHOR’S NOTE

I touch on cloud-computing briefly in this article and may seem to use the terms SaaS and cloud interchangably.  Cloud-computing apps and SaaS apps both sit in the cloud.  They are closely related, but not the same thing.   If you want to learn more about the differences, here is a link to an article that explains it.

iStock_000011903357XSmallAs quarter end approaches once more, investment advisors gather their resolve and strive to implement new system enhancements to client statements before Q2 arrives. We all wish it could be different, but it is simply the nature of the business. Even firms with good-looking statements may rush to enhance them by incorporating new features such as blended indexes or minor report edits prior to quarter end.

Most of the systems implemented at investment advisories are run on a daily basis, but client statements are typically generated on a quarterly basis. Some investment managers produce monthly statements, but they are in the minority. In the near future, these types of periodic statements will become less relevant than an investor’s ability to generate meaningful client statements on demand.

Amending the quarterly reporting process and report packages requires a disciplined process of setting manageable goals, gaining approval, implementing changes, testing systems and resolving potential problems. Those responsible for creating the reports require approval from management, and until they get that final approval, the time necessary to comfortably implement the changes continues to slip away.

“THE ONLY CONSTANT IS CHANGE” -Heraclitus

As quarter end gets closer, it is not unusual for those involved in the project to get mixed messages about what needs to be done for this quarter. Operations staff juggle various responsibilities. Ad hoc requests, changing priorities and management decision delays inevitably create the need to do last-minute work or postpone the project until the next month, quarter, or even year. With these types of delays, it is a wonder that any progress towards creating better client statements is ever made.

At most larger firms, management is comprised of a number of voices that have a say in whether a firm adapts new systems and reports. The decision to change quarterly reports isn’t made in a vacuum. It is a decision that may depend on a firm’s dedication to their current portfolio management system or a need to allocate limited budget resources to other high-priority issues. Good quarterly reports also underscore a firm’s philosophy, so deep thought and considerable discourse can play a part in determining the content and appearance of client statements.

SOME AXYS USERS DO NOTHING WHILE OTHERS THINK ABOUT MAKING A DECISION.

Before you summarily dismiss all Axys users as being hopelessly outdated and technically inept because they haven’t upgraded to APX or moved to another more recently released Portfolio Management System (PMS), you should understand that there are many decent-sized firms out there that are still using Axys to manage hundreds of millions or billions in assets.  Though a small group of firms really do fit the preceding description, most firms do not. The majority are firms that understand the current shortcomings of Axys and the potential benefits of APX, but also value the simplicity, efficiency, and reliability of Axys.  These firms may have considered Advent’s other offerings: Black Diamond and Geneva, but haven’t managed to find a solution that works for their firm.

As a growing number of these Axys users may be questioning their commitment to Advent, it is only natural that they vacillate to some degree between putting more money into their existing platform or changing the platform altogether. I suspect that many of Advent’s Axys clients now fit into two categories: those who are indifferent and those facing decision paralysis.

Those who are indifferent use Axys like a calculator and will continue to do so until it becomes apparent that they cannot use it any more. Those facing decision paralysis will also continue to use Axys – albeit with some reservations – until another vendor steals them away or Advent makes a bold announcement to continue to support these lost souls with renewed vigor.

In the end, a firm’s need to keep pace with client expectations and technology by providing innovative reporting should win out whether that is achieved by spending money on their existing platform or embracing another. For now, like many in the industry, I continue to hurry up and wait for investment advisors and Advent Software to do something.

About the Author: Kevin Shea is President of InfoSystems Integrated, Inc. (ISI); ISI provides a wide variety of outsourced IT solutions to investment advisors nationwide.

For details, please visit isitc.com, contact Kevin Shea via phone at 617-720-3400 x202 or e-mail at kshea@isitc.com.