Private client resources is a firm founded over a decade ago by a number of wealthy executives to provide aggregation and reporting service to the founders. They have had success over the years providing software and services to private wealth managers in the ultra-high-net-worth space as well as the family office segment, but until recently, they were not widely known in the independent RIA world.
Over the last several years, because of advances in technology and improvements in their internal work flows, PCR has been able to profitably service advisory firms of a more modest size. According to PCR President Rob Flores, his firm can now service advisors’ firms with as little as $50 million in AUM, although the firm’s typical client tends to be larger than that. Prices for the service and software platform can vary significantly, depending on the services required. So advisory firms that have custodial relationships with one or two custodians and who deal exclusively in publicly traded securities will pay less than a firm with 20 custodian relationships and a lot of difficult-to-value assets. Broadly speaking, most PCR clients will pay between one and three basis points for the firm’s Palette technology platform as well as for aggregation, reconciliation and other services.
The Palette Platform
When you first log on to the system, you land on the home page. The home page can be configured by role. In one common configuration, the firm principals would view a home page divided into four quadrants. The top left would be a bar graph that charts the monthly level of assets under management at the firm level. The lower left would display a pie chart of asset allocation at the firm level. The top right would contain notifications (alerts about large cash deposits and withdrawals, management fee-related alerts and other user-configured alerts that have been triggered. The bottom right can contain RSS feeds. These can be free feeds that are available to anyone or, if the firm subscribes to paid services, those feeds can be displayed here. This is just one popular example of how a home page can be configured. Just about any table or graph available on the platform can be displayed here.
A firm can create multiple home pages and assign them to the user based on the user’s role in the firm. So, for example, client service teams can have a home page with the information relevant to them while investment managers can have a totally different configuration. It should be noted, however, that these home pages are not user-configurable. PCR configures these home pages as part of the onboarding process. When your firm needs to update the home page configurations, you must submit a service request to PCR. Depending on your point of view, this can be good or bad. It is good in the sense that somebody else does the configuring. It is bad in the sense that you can’t get instant gratification, and you can’t tinker around daily until you arrive at the configuration that works best for you.
Many of the elements on the home page, and throughout the program, are interactive. For example, if you click on the bar in the upper left denoting AUM for the most recent month, the application will drill down and provide further information. For example, you can see a breakdown of where the assets are held, AUM by asset class, AUM by household, AUM your firm manages versus assets held away, and AUM by manager (whether it is in a mutual fund, held by a separate account manager, etc.).
If you click on the asset allocation pie chart, the application drills down to show the asset allocation details. You can see graphically and in a table the breakdown of the major asset allocation categories. If I mouse over a portion of the equities bar, a pop-up tells me this portion of the cart represents large-cap equities, for example, and it tells me in dollars and percentages what portion of total equities is in large cap. I can also view information about asset allocation by client, by custodian and by manager.
Back on the home page, there are navigation tools across the top of the screen. The major sections are the MIS (management information system), portfolio views, reporting, document management and the “Collaboration Center.” As you mouse over a navigation element, a menu appears that allows you access to that portion of the program. The MIS section includes things like cash flow, client views, custodian views, manager views, notifications, relationship tracking and the top activity. Cash flow displays all cash flow at the firm level. It can be sorted and filtered by date range, client transaction type, etc. to quickly locate the information you need. The client view, custodian view and manager view work in a similar fashion. The platform simply arranges the data and displays it in the context you desire.
The “notifications” section is where you manage alerts. They are easy to set up. You name an alert (e.g., a large cash deposit), from a drop-down menu, select the composite (PCR’s term for a group) it applies to, select the asset type it applies to (e.g., cash) and select the type of transaction it applies to (e.g., deposits/contributions of cash). You can then define a range by typing a number into the “greater than” or “lesser than” boxes. In this instance, we might want to flag deposits greater than $25,000. That’s all there is to it.
The relationship tracking graph shows total relationships firmwide or, in the case of an individual wealth manager, it can graph his or her relationships over time. If the firm works with multiple entity types (individuals, trusts, etc.) you can track each type of entity separately. Top activity displays tables and graphs representing major purchases and sales, activity by manager and activity by type. My sample system defaulted to watch activity over seven days, but it can be configured for different periods.
The next section, “Portfolio Views,” displays the account performance, account summary, asset allocation, investment gains/losses, manager performance, style performance, transactions and more.
The account performance view is very well designed. You can select a group, you can set a default group to view, you can select from a hierarchy or you can type in a name. You then see account performance, by manager, for the default period. The view in my sample showed all accounts, sorted by manager. If you just want to see totals for a manager, you can collapse the section. Under a manager listing, for each account, you see the account name, the market value, performance, a red or green arrow showing whether the manager is beating its benchmark for the period, what the over- or underperformance is against the benchmark in percentage terms, and the percentage of the portfolio the account represents. The table can be sorted by any one of these columns.
The portfolio summary is another very nice preconfigured view. My version contains elements divided into four quadrants. On the top left is the portfolio summary table containing the beginning market value, contributions, withdrawals, fees and expenses, income received, change in accrued income, investment gains/losses and the ending market value for the quarter to date and year to date. Below that is an allocation pie chart. A drop-down menu allows you to display either by type (physical assets, alternatives, cash, fixed income, etc.), by industry, by custodian or by manager. The top right contains a 30-day chart of daily investment gains and losses. It also plots the market value of the portfolio over the period. In the bottom right is a chart of the top 10 holdings by dollar value and by percentage. A quick glance at this information should be sufficient to answer most questions that clients might have about their portfolios.
The pivot analyzer is a powerful tool that lets you rapidly create your own charts and graphs of the data by dragging and dropping fields, checking boxes and entering date ranges. For example, in seconds I was able to create a table and a graph that displayed beginning and ending market values across all the firm’s accounts by asset class for a custom date range. With a couple of mouse clicks, I could obtain the same report for a client household instead.
The “Pro Forma” tool allows you to perform all kinds of what-ifs on an existing group or household. The tool displays all the assets within a portfolio sorted by asset class with the current market value and the percentage of the portfolio. Presumably, this page could be configured to the needs of the firm. It allows me to enter a first adjustment and a second adjustment. Using drop-down menus, I quickly added more assets and typed dollar amounts into a few of the assets I added. Immediately, the impact on the percentages of other assets to the total portfolio updated.
The document management section covers everything from batch reports to invoices to letters of authorization and statements. It is self-explanatory. As part of the setup process, PCR helps configure your batches, prepare and upload letters of authorization, inputs the billing schedules, etc.
The Collaboration Center is a bit confusing because there is a main section by that name and a subsection by the same name. The subsection contains libraries, including one for the invoices you’ve run, the client reports you’ve run, etc. There’s also a list center that includes a calendar, contacts, tasks and more.
Another section here is the asset hierarchy. Here you track your asset classes, your sub-classes and the benchmark associated with each. The benchmark section lists all of the custom benchmarks you’ve created, with a description of each. There’s also a missing cost subsection that displays records missing cost basis information so that it can be added.
There is a great deal to like about the Palette system. Much of the information you are likely to need is already available in a preconfigured view, so you don’t need to run reports or do complex data mining to get the information you need. For those with complex data and reconciliation needs, the ability to outsource the management and maintenance of the data files to a third party is appealing if there is extensive information about alternatives, collectibles and the like. The fact that the firm has its own data aggregation service and that it can help obtain the necessary permissions from clients to download 401(k) data and the like also adds to PCR’s appeal.
There are just a few caveats. One is that you must rely on PCR to configure your system. At the outset, this is not an issue, but as multiple employees find they want to tweak their views, it would be preferable to have some ability to perform do-it-yourself edits on the dashboards and other elements.
Another minor concern is the lack of transparency on pricing. We understand that the complexity of PCR’s engagements varies significantly, so its prices should vary as well, but we still have trouble understanding the firm’s pricing mechanism, so it would be difficult to know if two similar firms received the same price or not.
Finally, PCR is probably not a good fit for everybody. The firm appears to be most appropriate for firms that service wealthier clients with alternative assets in their portfolios and other complex portfolio accounting needs.
Overall, we think that PCR provides an attractive service and attractive technology for firms with the appropriate client base. If your firm deals with wealthy clients who regularly invest in alterative asset classes, PCR deserves serious consideration.