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First Look: Portfolio Director
By Joel P. Bruckenstein
Mar 8, 2007
Deciding on a provider of portfolio management software is a difficult decision, and one loaded with pitfalls. Most advisors decide to use a product from one of the two dominant forces in this niche: Advent or Schwab. Some advisors buy software from these two providers directly, while others got through a third party.
Advent and Schwab are not for everyone, however. Many advisors balk at Advent's reputation for high prices and indifferent service. While advisors generally praise Schwab's PortfolioCenter for its performance and value, some are hesitant to purchase their performance reporting software from a custodian.
Those advisors looking for something beyond Advent and Schwab have a number of alternatives. They include long established smaller competitors such as CapTools and dbCAMS, as well as newer entrants into the marketplace, such as AssetBook, Black Diamond, Orion, Portfolio Director, PowerAdvisor, and Morningstar.
All of the above have their strengths and weaknesses, but one of the more intriguing offerings, particularly for small to mid-sized forms, as well as those making their first portfolio management software purchase, is Portfolio Director. Portfolio Systems, the developers of Portfolio Director, is one of the few firms that offer a reasonably priced portfolio management software package for the desktop and the Web. In this article, I'll discuss both versions.
Portfolio Director Desktop
Portfolio Director Desktop is a competent, reasonably priced portfolio management software product. The program supports most major RIA custodial interfaces, including Schwab, TD Ameritrade, Fidelity, and Pershing. (Here's a complete list.)
While Portfolio Director does not have all the bells and whistles offered by some more expensive competitors, it does a fine job tracking the types of assets most often employed by financial advisors: mutual funds, ETFs, individual stocks, and simple fixed-income instruments. It is also strong in tracking listed stock options.
Pricing is fair and straightforward. Single-user licenses cost $300 per month in the first year; $200 per month in subsequent years. That's it. No extra charges for interfaces, add-ons, and upgrades. The first year's fees includes an hour of training and up to 35 support sessions.
Portfolio Director, like most new portfolio management packages, uses a SQL database to store your data. The use of an SQL database is good news because SQL is fast and scalable. Since SQL is becoming a de-facto industry standard, the use of a SQL database is a plus. Where Portfolio Director differs from many competitors is on the front end.
While many competitors use a Microsoft platform, Portfolio Director is built on Java. According to Portfolio Systems President Bob Yacobucci, Java offers a couple of advantages. First, the use of Java keeps the cost of the program low. Second, Java offers compatibility with operating systems other than Microsoft's, meaning Portfolio Director can be run on Apple and Linux operating systems.
Installing the program is straightforward. For those advisors using a portfolio management system for the first time, a default database is provided. Assuming you already have some accounts at a custodian that is supported by the program, you can use an import application provided by Portfolio Director to get client data from your custodian. You can then initialize the database and begin performing daily downloads from your custodian.
If you are currently using another portfolio management system, it is likely that you will need to engage a third party to convert your data because Portfolio Systems does not offer that service. If you use a third-party provider to convert existing data, it will provide you with a database containing your data. Then, you simply replace the default database with your own (it is easy to do with the instructions provided), or you get your provider to install your database for you. Data conversion costs vary greatly depending on the format of your data and the amount you are converting, but you should budget a minimum of $4,000 for data conversions.
Once you are ready to begin using the program, you will find the interface easy to navigate. Tabs running along the top of the program are thoughtfully organized by task: Admin, Preferences, Actions, Summary Reports, Specialty Reports, and Help. When you click a tab, you are brought to a navigation page containing multiple hotlinks. These hotlinks in turn take you into the work areas of the program.
Much of an advisor's daily work will take place under the Actions tab. This is where you initiate common tasks such as the daily custodial downloads. In some cases, you might need to import data from the Web, an OFX file, or a tab delimited file. Those actions also originate in the actions area. The Actions area is also the place that you can manually input trades, initiate options strategies, and perform price file updates. In addition, you can edit account categories and investment classifications here.
The result of all the data entry is the reports, and Portfolio Director offers an ample collection of standard reporting templates. These reports are not the most visually stunning ones on the market, but they are clear and effective. Performance reports and asset-allocation reports can be found under the Specialty Reports tab. These include standard performance reports, performance against a benchmark, fixed-income distribution by coupon/maturity, fixed-income maturity schedule, asset allocation, asset allocation vs. a model, and various option/futures reports.
Most other reports reside under the Summary Reports tab. These include account summaries, account transactions, position reports, billing reports, realized gains/losses potential wash sales, and various client reports.
A batch reporting feature allows advisors to combine a number of individual reports into a client report package template. Once these templates are created, advisors can print them, save them to PDF files, and e-mail reports to multiple clients in one simple process.
As mentioned earlier, Portfolio Director can run billing reports. Advisors can create their own custom billing schedules, save them as templates, and then apply a given template to one account or many accounts. For those who require the capability, it is possible to exclude one or more assets within an account from the billing process. It is also possible to apply different billing templates to subsets of assets within an account. So, for example, you can apply one template to equities and a different one to fixed income.
Portfolio Director offers a lot more. You can set alerts to remind you of upcoming events like a bond maturity or options expiration. You can store client notes. In addition, for those who worry about entrusting their data to software produced by a relatively small company, Portfolio Director offers a unique "business security guarantee." The guarantee in essence provides that users will receive a free version of the software that they can use until an alternative is found. Since the program uses a non-proprietary SQL database, converting the data to another system should not prove to be a technological challenge although it will, of course, entail an additional cost. Full details for the guarantee can be found here.
Overall, Portfolio Director Desktop offers a good value for the money. It is not the most comprehensive portfolio management and reporting system on the market, and it does not offer the most stunning reports. It does, however, offer accurate reporting on stocks, mutual funds, ETFs, and straight bonds. It offers a good selection of informative standard reports that are more than sufficient for most advisors needs. Navigation and ease of use are better than average for a program of this type. Portfolio Systems' unwillingness to provide in-house data conversions make this product best suited to new advisors or those with a limited history to convert. But anyone looking for a good basic portfolio management and reporting package that won't break the bank should take Portfolio Director Desktop for a test drive.
Portfolio Director Web
More and more advisory firms are discovering that there are better things they can be doing with their time than downloading custodial data and maintaining portfolio management software. If Portfolio Director Desktop sounds like it might be a good fit for you, but you want the ease and simplicity of an online portfolio management system, Portfolio Director Web may be for you.
Portfolio Director Web is brand new. Only TD Ameritrade and Scottrade support it. Since Portfolio Systems is not yet marketing the product aggressively, there are only a few advisors working on the platform. Based on my initial visit, however, this product is promising enough to warrant our immediate attention.
"When we designed Portfolio Director Web, we wanted to make it as easy as possible for advisors to use," says Yacobucci, president of Portfolio Systems. "Many of our clients do not want to perform downloads or maintain software. They simply want to go online and run their reports. Portfolio Director Web is for them."
Like Portfolio Director Desktop, the pricing for Portfolio Director Web is reasonable and easy to understand. All users pay a $295 setup fee. This covers a basic collection of initial set up tasks such as customizing reports with the advisors name and logo, tweaking existing report templates, and uploading client data to their servers. After that, advisors pay a flat fee of $400 per month for up to 100 accounts. Additional accounts cost $2 per month, with volume discounts available for larger installations.
Navigating Portfolio Director Web is slightly different from navigating the desktop version, but in some respects it is even easier. Almost every action an advisor might want to perform goes through the home page
This makes sense because the whole idea of moving to the Web-based interface is to simplify one's life. In most cases, advisors will come to the Web to run a report. This might be a performance report, an allocation report, a rebalancing report, or a billing report. Reports are generated in real time on the Portfolio Systems servers, so if you run large number of performance reports covering a long period of time, it can take a while for the reports to be generated.
Advisors can choose to run reports in one of two ways. They can report to PDF, which brings up a fixed report in PDF format, or they can display a report on the screen. The advantage of working with on screen reports is that it allows advisors to manipulate the reports in various ways. The intuitive interface allows advisors to easily filter information in various ways. For example, if you want to run a realized gain/loss report, you can do so by selecting all clients, one client, or a group of clients. Once you have the on-screen report looking the way you want it to, you can still create a PDF file of the report by clicking on the appropriate icon. As an alternative, you can export the data to Excel for further analysis.
If you only want to run a report on one account owned by one client, it is easy to do so. It is also easy to run gain/loss reports across all accounts by investment type. Let's say that you want to see gains/losses on fixed-income investments firmwide. You can easily do so with a few mouse-clicks. If you only wanted to see the results for the corporate-bond portion of the fixed-income portfolio, that would be easily accomplished as well.
Clicking most column headings allows you to change the sorting order. One addition I'd like to see is the ability to drill down for more details. For example, on the Account Summary page, I can see a composite value of all stock holdings within the account. I'd like to be able to click that number and see all of the individual stock holdings along with their respective values. I suspect that this functionality will be forthcoming, but it is not there yet. Portfolio Director Web offers a limited amount of this drill-down type functionality on a few screens, but there needs to be much more of it for it to have a positive impact on advisor's productivity.
A key to an advisor's satisfaction with this product will be the initial setup and customization. The setup includes such things as the creation of billing templates and the headers on reports. You can request simple alterations to standard report templates. For example, you change the placement of rows and columns in a report template or remove them. If you want a report that's not offered, you can pay a fee and Portfolio Systems will create it for you. Prices for custom templates will vary based on the programming work required.
One very important aspect of the online platform is that it offers advisors the ability to provide online reports to their clients as part of the base fee. In fact, advisors can choose from a number of reports that they would like their clients to be able to run. These reports can then be customized at the client level if necessary. This means that if a report contains 10 columns of information, you might decide that one client only gets a report displaying columns one through five, while another client gets to view all 10 columns on his report. Advisors assign an initial user name and password to each client granted access, then the client can go on and change the credentials if necessary.
Like the desktop-based version, the Web version offers a Business Security Guarantee. If for some reason you are not satisfied with the service, you can download a desktop-based application, connect it to a copy of your database, and use the desktop software until an appropriate alternative is found.
My initial impression of Portfolio Director Web is favorable. While the front end of the online program uses a different technology that the desktop version, the back-end database and calculation engine are the same. Over time, the Web version should be able to do anything the desktop version can. Pricing is reasonable when you consider that you are getting downloads, reconciliation, online reporting, and online client reports included in the price.
I must caution, however, that we are early in the game. The service is in the very early stages, functionality is still being added, and currently, only two custodians support it. As is the case with the desktop version, I consider Portfolio Systems' lack of an in-house data conversion facility to be a negative.
Like the desktop version, Portfolio Director Web to appeal primarily to new advisors, or those with relatively small data files to convert. Portfolio Director Web's will be most attractive to those advisors who invest client funds in stocks, straight bonds, mutual funds, ETFs, and options strategies. As the software is built out, and new functionality is added, I suspect that this Web platform will begin attracting a wider audience.
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Joel P. Bruckenstein, publisher of Virtual Office News, is the industry's expert on applied technology for financial professionals. In addition to his monthly columns, Bruckenstein consults with companies large and small to help them achieve higher returns on their technology investment. For more information of Bruckenstein's consulting services, or to have him speak at your upcoming event, please visit www.joelbruckenstein.com.
The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar. Feedback about this article may be sent to advisorquest@morningstar.com.