Portfolio Director 8.0 offers better account setup and custodian interfaces-and more.
About two years ago (November 2004 Financial
Advisor, "Opposite Ends Of The Spectrum"), I first mentioned Portfolio
Director, a portfolio management program from Portfolio Systems Inc.
(www.scscompany.com) of Hollidaysburg, Pa. At the time, Portfolio
Director, retailing for as little as $795, attracted my attention
primarily because of its low price. As an added bonus, Portfolio
Director was built on Java technology, making it one of the few
applications for advisors compatible with the Mac and Linux operating
systems as well as Windows.
Unfortunately, the earlier version of Portfolio
Director had many limitations. Interfaces for popular custodians were
missing, posting was difficult, there was no billing module, and the
list went on. These omissions limited Portfolio Director's appeal.
Fortunately, Portfolio Systems learned from their mistakes. The latest
release is much improved.
The installation was simple. I received a link by
e-mail directing me to the appropriate download page. I followed the
instructions, downloaded the program, and installed it using the
default setting. I used a sample database, so I had to delete the
default database and copy over an existing one instead. This is the
same process an advisor might use if a third party converted an
existing database to a Portfolio Director one, and I did not find it at
all challenging.
In the earlier version, users had to set up accounts
manually. This lack of ability to automate the setup process served as
a huge barrier to established advisory firms. It was less of an issue
for new firms, but even for them it was somewhat of a negative. With
Portfolio Director 8.0, this is no longer the case. If a custodial
interface is available, the software can import various files from the
custodian and use those files to initialize the Portfolio Director
application.
Previously, Portfolio Systems Inc. offered two
alternatives for getting data out of an existing portfolio management
system. One was a do-it-yourself approach. Portfolio Systems would
provide advisors with a piece of software that in many cases allowed
them to convert the data from an existing file format to one that
Portfolio Director could recognize and use. This software, in an
improved form, still exists. The other option was to ship the data to
Portfolio Systems and have them convert the data for you at what was,
at that time, a fairly nominal charge. This second alternative is no
longer available. Portfolio Solutions prefers to concentrate its
efforts on development, but it will refer advisors to third parties
capable of converting existing data from most popular competing
products.
The new user interface is much better than the old
one. Upon launch, you see a number of tabs along the top of the
program: Admin, Preferences, Actions, Summary Reports, Specialty
Reports and Help. Each one of these tabs leads to a navigation page,
similar to Web pages one often sees with lots of hot links to other
sites.
The tabbed architecture allows the developer to
easily group common tasks on the same page. The pages with more than a
handful of links are then subdivided, to further simplify navigation.
For example the Actions page is divided into four quadrants:
Maintenance Actions, Automated Data Actions, Edit Underlying
Information and Manual Data Entry. Within each quadrant, there might be
three to six individual actions.
On the Admin page, you can set the preferred cost
basis method by individual asset type. The default for all types of
assets is FIFO. The other option available is average cost basis. With
a few mouse clicks, you easily can choose average cost basis as the
default for mutual funds and FIFO as the default for annuities if you
wish. There is an option to "include earnings in adjusted cost basis."
This option is off by default. Advisors can override the default
settings and specify individual tax lots as needed.
Much of the actual work takes place on the Actions
page. Here, you can initiate automatic actions like importing daily
activities (from custodial files, Internet data import, .ofx files or
tab-delimited files). More than 20 interfaces are supported, including
the big three RIA custodians, Schwab, Fidelity and TD Ameritrade. Other
popular interfaces supported include Pershing and Fiserv.
From the Actions page one initiates manual input of
trades, options strategies and price updates. You can also edit account
categories, client categories and investment classifications. The
preference tab allows the user to control things such as the date
conventions used for various fixed-income assets, external quote
services (if any) and third-party add-ons.
The other two tabs likely to get the most use are
the Summary Report tab and the Specialty Report tab. The specialty
report tab contains links to the performance reports and the asset
allocation reports. Almost all of the other reports are contained in
the summary report section. In total, about 30 report templates are
available, covering the most commonly used report types. Benchmarks can
be created so that client accounts can be compared to the selected
benchmark(s). User-defined benchmarks are supported. A model portfolio
comparison report is included. This report can be used to manually
rebalance client positions to target levels.
Advisors can use the batch reporting template
feature to group a number of individual reports into a client report
package. Once the templates are created, advisors can print, save to
PDF or e-mail multiple reports to multiple clients in one easy process.
Two years ago, Portfolio Director lacked billing
capabilities. This omission has been rectified. The program now
includes flexible billing templates that allow you to create various
billing methods, save them as a template and then apply the template at
the account level. If necessary, you can exclude accounts, or
individual assets within an account, from the billing process. It also
is possible to assign different templates to assets within an account.
There's a lot to like here. Chief among them is
price. Portfolio Director costs $150 per month for the first user.
There are no other setup fees or custodial interface fees. Additional
users can be added at any time on a sliding price scale: the second
concurrent user pays $100 per month, the third pays $75 per month. One
hour of training is free, after which the charge is a reasonable $50
per hour billed in 15-minute increments.
For an additional fee, advisors can post data to the
Web through Portfolio Director Web. This service allows advisors to
publish their whole database, or a portion of it, to a secure server
maintained by Portfolio Systems. The site can be branded so it appears
to be an extension of the advisor's site.
Once a client logs onto the site, the client can
create his or her own reports using any of the data the advisor makes
available. The advisor can make all reports available to the client, or
just a subset. The advisor can allow the client access to a wide range
of data points, or a limited set. This service provides instantaneous
24/7 access of up-to-date data for clients, while allowing the advisor
a good measure of control over what the client can see.
How much does all of this cost? Surprisingly little.
The Web service costs $2 per month per account, with a 50-account ($100
per month) minimum. There is a one-time charge of $495 to set up the
Web site and load the database. This service can be ordered along with
the Portfolio Director program, or it can be added at a later date.
While price is an important factor in the purchasing
process, it is not the only one. In order for a program to be a good
value, it must be functional, and Portfolio Director has made great
strides in this area since we last examined it.
Portfolio Director now stores all client information
in an Apache Derby database. This is good news for a number of reasons.
First, Derby is an open source database, which keeps the cost down.
Second, it is compatible with Java and SQL standards. This means that
the database is efficient, stable and scalable. Backing up is easy,
because all of the data is stored in a single folder (the derbyDB
folder).
In addition, SQL offers true multi-user support,
something previous versions lacked. The administrator can create user
accounts, assign passwords and determine which users can access which
client accounts.
Because SQL databases are the de facto industry
standard, ensuring compatibility with third parties is generally not an
issue. In fact, a number of third parties already have developed
applications that interface with Portfolio Director. For example, two
outsource providers of back office support, Planners Consulting Group
Inc. and Back Office Solutions, service the program. Emmarah Solutions
provides an application that allows users to download historic prices
from Yahoo Finance into Portfolio Director.
Other niceties improve the program's value
proposition. Accounts can be mapped to a model which, among other
things, makes rebalancing easier. Categories can be assigned at both
the client level and at the account level. The program supports
multiple currencies, and it is very adept at accounting for option
holdings. Alerts can be set to warn advisors of "exceptional"
conditions, such as option positions that are about to expire, bonds
that are about to mature or portfolios that are out of balance.
While Portfolio Director is vastly improved over
where it was two years ago, there is still room for improvement. More
granular security controls are needed. Currently, you can control who
gets to access to an account, but you can't control what they do once
access is granted.
The program interface, which makes liberal use of
hot links contained within pages, is a good idea. Allowing users to
customize their own navigation pages would be a better idea.
There are only two levels in the hierarchy: clients
and accounts. A client can be an entity or a household, but many
advisors prefer a three-tiered hierarchy (household, client, account).
Graphs are a mixed bag. There are some decent graphs
contained in this version, like one that allows you to graph the price
history of an asset, but many lack pizzazz. They get the job done, but
they are not as aesthetically pleasing as they could be.
For established firms, the low cost is somewhat
deceiving. Getting data out off one's existing program and into
Portfolio Director will take some time and it could cost an additional
few thousand dollars.
With the exception of price, which is still competitive,
Portfolio Director 8.0 bears little resemblance to the program I
previously tested. There is better navigation, better coverage of
essential features and improved reporting.
Portfolio Director is probably most appealing to
newer firms that have little if any previous history, but unlike its
predecessor, this version can support growing firms with multiple
users. The Web reporting option is compelling. Price conscious advisors
should give Portfolio Director 8.0 a serious look.
Joel P. Bruckenstein, publisher of
Virtual Office News (www.virtualofficenews.com) and an expert in
applied technology for financial services professionals, can be
contacted at [email protected].