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.
The System
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.
Pricing
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.
Strengths
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.
Weaknesses
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 protected].