FIN has been supporting advisors for nearly 40 years, and it's still going strong.
By Joel Bruckenstein
After getting a few inquiries recently about
Financial Information Network, I decided it was time to familiarize
myself with the firm. FIN has been serving advisors since 1969, an
eternity in the technology world. To give you a little perspective,
they stared out with an IBM 360 computer and punch cards. FIN has a
knowledgeable and experienced staff of 30. The average employee has
been with the firm 15 years; management tenure averages 19.5 years. In
addition, FIN has established a relationship with a Romanian firm to
facilitate product development.
Like many mature RIA practices, FIN is selective about the clients they take on. "We are probably not appropriate for firms managing less than $100 million," says Gail Woronick, FIN's director of sales, marketing and implementation. "Our sweet spot is firms in the $250 million to $3 billion range." Currently, FIN has 40 clients, with AUM ranging from $200 million to $30 billion.
FIN is an application service provider (ASP). That means that the FINGPS application resides on their server, and you access it over the Internet. There are a number of advantages to this set up for the advisor. FIN hosts the application and maintains the server. They are responsible for all updates. They back up the data. In addition, there is a replicated server at a second location.
FIN's ASP model is unique. The typical ASP serving advisors grants users access through a secure Web site. FIN takes a different approach. A hardware VPN appliance, typically a SonicWALL, resides in the client's office. A direct point-to-point VPN connection is then established between the client and FIN.
Use of disaster recovery facilities (both located in Southern California) is included in the price. According to Woronick, three FIN clients have used the facilities over the last year.
FINGPS appears to be a robust system. It can handle all types of securities. FIN will automatically download transactions, reconcile, price securities, inform of corporate actions and flag maturing bonds. The firm can report on bond amortization/accretion as well as accrue dividends/interest. At the transaction level, FINGPS offers full tax-lot accounting, cash management, and automatic withdrawal management. In short, FINGPS offers all of the functionality the typical RIA requires of an outsourced PMS solution.
The FINGPS interface is divided into five major sections: Account Information, Portfolio Review, Performance Display, Realized Gains/Losses and Transaction Summary. Within each of these sections there are numerous subsections. For example, within the Accounts section, the General tab contains contact information, tax ID, who is responsible for the account, date opened, date terminated (if any) and whether this is a single account or part of a group. The accounting tab contains information to perform calculations and service the account. This includes things like the state of residence, cost basis, accrual method, method for handling cash, meetings per year, last meeting date, type of account (individual, IRA, etc), discretionary or nondiscretionary, tax status and whether the advisor votes the proxies. The performance tab delineates the performance date, frequency and benchmark, if any. Another tab allows you to list interested parties.
The restrictions tab allows for three broad categories of restrictions: free form with a memo, security restrictions and sector restrictions. The More tab dictates the type of statement to be sent. There is a report generation grid (when statements go out, when statement copies go out, when tax reports go out, when copies of tax reports go out), billing frequency, billing schedule, etc. Almost any type of billing schedule can be supported. You also can indicate whether to send a standard or custom bill, whether the assets are to be listed on the bill, and much more.
The portfolio review section is designed to allow you to do just that. There is a summary view and a detailed spreadsheet view with many customizable columns. You can view cash as multiple line items, so for example if some cash is held in reserve for regular withdrawals, and other cash is for investment, you can account for each amount individually.
The advisor can set "portfolio guidelines"-target amounts of stocks/bonds/cash, for example-and this view will show the targets, the actual percentages and the variance from the target.
FIN can display a number of useful fixed-income views, many of which are customizable. You can view average years to maturity, average yield to maturity, average coupon, modified duration and many more.
The performance display, realized gains/loss and transaction sections should be self-explanatory. In the performance area, you can slice and dice the data with the push of a button. For example, a drop down menu allows you to filer for performance of one asset class only (stocks, bonds, etc). A couple of mouse clicks allows you to adjust the reporting intervals and/or generate an accompanying graph. Check a box to view performance net of management fees. I did some limited work running various performance reports on a demo site, and everything worked as expected.
FINGPS includes an impressive library of reports. Reports are divided into eight sections: Client, Broker, custodian, Working Appraisal (primarily for portfolio risk appraisals), Summary of holdings, trade blotter, cash balances and tax (including mgt. fee) information. Just to give you an idea, the client section includes between 45 and 50 preformatted reports; there are 15 broker reports and six custodian reports.
Each client is charged one all-inclusive monthly fee. Three factors influence pricing: AUM, number of accounts and features used. There's also a one-time implementation fee, and there are a few "extras" not covered by the monthly fee.
Woronick offers a few examples of how FIN would price an engagement. For an RIA with $300 million AUM and 550 accounts, she estimates pricing would fall in the $3,000 to $4,000 per month range, depending on the specific firm's needs. The initial one-time implementation fee would be $15,000 to $20,000. For this fee, all authorized employees at the firm can have concurrent access to the system. This includes FIX trading (electronically sending orders) OYSYS (electronic trade allocation), custodial interfaces, interfaces with some third-party programs, and more. Implementation includes custom set up, three days of onsite support and training, unlimited remote support and training, interface setup and data conversion. For an RIA with $1billion to $3 billion and up to 2,000 accounts, the monthly fee would run $5,000 to $8,000 and the initial setup fee would run $20,000 to $30,000.
The firm has an impressive 37-year track record. The staff is experienced; long tenure is often an indication of a satisfied, motivated work force.
The firm prides itself on being client-centric. Changes to systems and procedures are highly reliant on customer feedback. Woronick says that the firm is financially sound and carries no debt. "We keep expenses low, she says. "We can do more with less."
FIN's ASP structure differs from almost all other ASP firms we've encountered. The pluses of the VPN structure are security and granular controls. The disaster recovery facilities are a plus. The fact that three of their clients made use of the facilities recently reinforces the point.
I was impressed by the lengths to which FIN will go to meet customer needs. Many features can be applied at the firm level or even at the individual portfolio level. One example: amortization/accretion. FIN has a number of clients that manage portfolios of municipal bonds. Some of these bonds have multiple call dates; FIN can calibrate amortization/accretion schedules to the nearest call. If the bonds are not called, they will recalibrate to the next call. They also offer "real time" recalibration, meaning that they can recalibrate each night if needed. Finally, FIN allows the client to dictate the memorization/accretion model. This level of service is not commonly offered in the field.
FIN tells me that they can integrate with third-party applications, but I could not evaluate the accuracy of the claim or the depth of integration available.
The interface is functional, but it feels a little dated. There are a few operations that require inputs into a DOS-like blue and white screen; even the graphical interface feels a bit clunky at times. Ditto for many reports. They are functional, but not particularly aesthetically pleasing. In all fairness, FIN is in the process of totally updating the system onto a state-of-the-art technology platform (SQL 2005, .NET, new flexible reporting tool), but they aren't quite there yet.
Setting up the VPN can be a bit complicated. A fixed IP address is required. In order for employees to be able to access FIN remotely, they have to go through the office VPN and then be relayed to FIN. Somebody will have to configure, update and maintain the VPN software and the permission policies. None if this is a huge obstacle, but it isn't as easy as logging onto a secure Web site, either. The disaster recovery facilities are an impressive extra, but they may not be of much use if you aren't located in Southern California.
Prices are not cheap, but they can be cost effective. A careful analysis should be performed to determine your actual in-house costs for comparison purposes.
When looking for an outsource provider of portfolio management/reporting, it is nice to have a variety of providers to choose from. Most do a decent job at the basics, but when you delve into the details one might offer a specific feature that's important to you while another might not.
For the mid- sized to large RIA, FIN appears to offer a great deal of flexibility and customization, increasing the likelihood that they can provide the information you need. Prices are not cheap, but they are in line with the competition for similar services. If their platform modernization program proceeds on schedule, FIN looks poised to continue serving their market niche successfully.
Joel P. Bruckenstein, publisher of
Virtual Office News and an expert in technology for financial services
professionals, can be reached at email@example.com.