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sticky-notes-to-do-listAround this same time last year, many of us said our final goodbyes to Windows XP and Exchange 2003.  This year, Microsoft’s latest End-Of-Life (EOL) event – along with good sense – will force most of the firms that are still using Windows Server 2003  to replace it with a newer version of the Windows Server operating system (OS).  July 14th, 2015 marks the end of extended support for the 2003 product line – after that date, there won’t be any more security updates.

For those unfamiliar with the issue this raises, compliance regulation and standards related to private information and security dictate that firms must keep up-to-date with regular patches to the software and hardware that powers their businesses.  Your firm’s Written Information Security Program (WISP) should detail a policy of adherence to these standards, among many others, and in there somewhere you have almost certainly indicated that you are keeping your systems updated with respect to security.

Like Windows XP, Windows Server 2003 has been around long enough and really should be replaced, so there is not much point in delaying the switch.  Most firms have likely changed over to Windows Server 2008 or 2012, but those that haven’t made the change yet should be planning on upgrading their server(s) in Q2 of 2015.

 

rackAlternatives to Windows 2003?

Assuming your firm is committed to Microsoft Server products, you have two choices:

1. Windows Server 2008 r2 (2008)

2008 is a mature operating system, which is still in use at a large number of firms today. However, mainstream support for 2008 ended earlier this year (1/13/2015), and though extended support is available until 1/14/2020, it probably doesn’t make sense to move from 2003 to 2008 in 2015. Firms that have existing 2008 software licenses may not want to incur the additional expense of 2012 licenses, and those with significant compatibility concerns may opt to install Windows 2008 on new server hardware.

2. Windows Server 2012 r2 (2012)

2012 is the latest and greatest from Microsoft. It has a shiny new interface and a bevy of neat features like deduplication. My experience with 2012 has been overwhelmingly positive. Though worries about 2012 compatibility with legacy applications may delay widespread acceptance of this operating system, many firms will ultimately choose to make the switch to 2012.

What happens if we stay on Windows 2003?

Your server will still work, but you will not get any more security updates from Microsoft, and your firm will technically be out of compliance.

What else could happen?

Software companies and other parties your firm interfaces with will assume that you are making these updates.  Your firm’s failure to upgrade to a later version of Windows Server could cause problems that you and your staff may not be able to anticipate.

As an example of this, one of my clients that was slow to upgrade all of their Windows XP systems last year found that the latest version of Orion’s desktop software, which was automatically updated sometime in Q1 of 2014, was incompatible with Windows XP.  Unfortunately for the client, there wasn’t a way to reverse the update or use an older version.

At the time, I was surprised, especially because the customer wasn’t given any notice of the “feature enhancement.”  It didn’t make sense that a software company would launch an update incompatible with existing customer desktops that were still supported by Microsoft.  Thankfully, Orion addressed the issue quickly by providing the users affected with remote desktop (RDP) connections to Orion servers for an interim period.

About the Author: Kevin Shea is the Founder and Principal Kevin Shea Impact 2010Consultant of Quartare; Quartare provides a wide variety of technology solutions to investment management and financial services firms nationwide.

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

Earlier this year, Advent sent an alert to Axys users about Windows 8 issues and how to deal with them, as an interim solution to problems that Windows 8 users can face.  It is good that Advent is proactively alerting users, but I am not recommending that any of my clients move to Windows 8 just yet. Upgrading your office to Windows 8 is premature, unless you are willing to pay the premium and deal with the frustrations typically associated with being an early adopter of the latest Windows operating system.

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If your firm uses Axys, you may be wondering whether a new release is in the works. Though Advent hasn’t publicly set a release date for the next version yet, I expect they soon will. Based on what Advent has done in the past, users should expect a 3.9 release in the near future. That release will likely support Office 2013, and Adobe Acrobat 11, and may also feature improved Windows 8 compatibility.

Though these types of updates seem minimal, they have more substance than you might think. Axys remains a very functional and cost-efficient option for advisors. Compound reports generated in Axys 3.8.5 using Excel 2010 graphs rival output from APX at a fraction of the cost. If your compound reports look dated, find out what version of Excel you are using. Using the latest version of Excel in conjunction with a version of Axys that supports it can give your reports a newer look and feel.

Axys 4?

I would like to think that Axys 4 is in the works, but a major revision would probably mean a name change – perhaps “Cloud Axys?” Longer-term, expect Axys to undergo a technology transformation if Advent wants to keep the platform alive and decides to commit greater resources to future updates that keep pace with technology trends. While the number of APX, Geneva and Black Diamond users have continued to grow, Axys users still account for a considerable number of Advent’s clients.

Historically, Axys was the lynchpin of Advent Software’s success and center of their hub of solutions for their customers. Replacing the PMS of an investment advisor is more complicated than it seems.  It impacts many of the systems at an advisor’s office, as well as the people you need to support your business, the skills they need, and what third-party solutions are available.

It would be ideal for Advent if Axys customers moved to another Advent product in the future. Those conversions and newer software licensing agreements would generate more income, while eventually allowing Advent to phase out Axys without major renovations.  However, Axys users looking at APX, Black Diamond and Geneva don’t always see a clear path.

In the past two years, Tamarac/Envestnet and other competitors have won over some Axys customers. My firsthand knowledge of a couple of advisors who made the move to Tamarac leads me to believe that Advent didn’t need to lose these customers. Through better communication, negotiation or product positioning, they could have kept the business.  On that note, I spoke with an Axys user last week that requested an APX quote after seeing a demo in Q2 and never got one.

Perception is Reality

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“Be where your enemy is not.” -Sun Tzu

Current Axys users represent a ground of contention that will not be ignored by Advent’s competitors and should not be ignored by Advent. At stake is the perception of who provides the very best PMS platforms for investment advisors.  Advent may be willing to let some of their Axys clients go quietly, but in doing so they risk losing those relationships long-term, if not permanently, as well as other advisors in their sphere of influence.  Axys users represent a critical mass that could fuel the growth of  Advent’s competition in the near future.  Left unchecked, Advent competitors garnering Axys users now could ultimately vie for current APX, Geneva, and Black Diamond users down the road.

Obviously, Advent cannot be all things to all customers, but they can make a better effort to keep existing Axys clients in the fold.  In order to do so, Advent must improve communications with Axys users, affirm their commitment to Axys, and continue to add technology enhancements to Axys on a regular basis.

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_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.

HourglassWindows XP was a mainstay at many financial services firms for nearly a decade.  In keeping with the Microsoft Lifecycle Support Policy, support for Windows XP and similar aged software must eventually end.  You can learn more about the policy here.

According to Microsoft, extended support for Windows XP is scheduled to end on 04/08/2014.  If your office is using Windows XP, you should be working on plans to phase out XP by replacing those systems with new PCs or upgrading the PCs to a more recent workstation operating system in the next six to nine months.  There is no good reason to wait until or beyond April 2014 to perform these upgrades.

Why should you care?

Most security standards – for instance, 201 CMR 17.00 – require that you apply security patches on a regular basis.  It is the extended support from Microsoft that allows you to do this.  After extended support has ended, there is no guarantee that any security patches will be released for these systems.  In order to stay compliant with security standards, firms using Windows XP will need to upgrade to other systems.

Hasta la vista, Vista!

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Currently, we are recommending that business users implement Windows 7 Professional on workstations.  Windows 8 makes sense for home users with touch screens, but we prefer not to implement operating systems before they have become mainstream in the workplace; Windows 8 just isn’t there yet.

Vista extended support is good through 04/11/2017, but Vista has always been a dog, and any business users still using Vista should strongly consider moving to Windows 7 Professional immediately.

Server-based systems affected by the Microsoft Lifecycle Support Policy

Windows 2003 Server extended support is good through 07/14/2015.  Nevertheless, Windows Server 2008 R2 will likely be the most widely used network operating system among investment advisors by the end of 2013.  Windows Server 2012 was released on 09/04/2012 and hasn’t yet been widely implemented among SMBs we are familiar with.

Exchange Server 2003 extended support also ends on 04/08/2014.  The implications of this related to security updates are the same as those detailed above regarding XP.  If you know which version of Exchange is in use at your office, you can check Microsoft’s site here to determine when the end of extended support for Exchange will affect your firm.

Like Vista, extended support of Exchange Server 2007 is good through 4/11/2017, so there is no need to upgrade in the near term future.  Exchange 2010 adds OWA support for Firefox and Chrome.  In addition, Exchange 2010 makes better use of lower-cost disk subsystems, allowing you to get a performance boost over 2007 without spending a premium.  Those are nice features, but not nice enough to push an Exchange upgrade before a normal IT lifecycle replacement demands it.

Exchange Server 2003 will be phased out by many advisors this year, and most will move to Exchange Server 2010.  Though Exchange Server 2013 was technically released in November 2012, it may be premature for the SMBs that dominate the investment industry to adopt Exchange Server 2013 over Exchange Server 2010.  Presently, there is no direct migration path from Exchange 2003 to Exchange 2013.  A number of small investment advisors will move to hosted Exchange solutions and no longer keep Exchange servers at their offices.

With this many possible changes slated for the next ten months, now is a good time to make sure your firm has addressed the issues or has a plan to upgrade any systems affected.

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.