You can pay as little as roughly $800 for portfolio management software. You can also pay tens of thousands more. This month, we'll take a look at two portfolio management systems at opposite ends of the cost spectrum. One product, Portfolio Director from a Holidayburg, Pa.-based company called Portfolio Systems Inc. (http://www.scscompany.com), retails for as little as $795. At the other extreme, we will look at a system from Orion Advisor Services LLC (http://www.orionadvisor.com) that will almost certainly set you back more than $30,000 annually and possibly much more.

Portfolio Director

Portfolio Director is one of the least expensive, functional portfolio management programs that I have come across. According to Portfolio Systems Inc., there are currently about 200 Portfolio Director users. The company also produces Option Money, a program for active options traders with about 2,000 users.

Portfolio Director is a Java-based desktop application capable of running on either an individual PC or a network. Because it is Java based, Portfolio Director will work with Windows, Mac and Linux operating systems. The program has a number of limitations, but it also has some interesting stock option tools.

According to Portfolio System spokesperson Bob Yacobucci, client accounts must be set up manually. This entails entering the account holder's name, account number and other relevant data (type of account, for example) into the system. For small advisory firms or new ones, this should not be much of an issue. For those with larger account rosters, the firm offers a manual data entry service that can enter the data for you at a reasonable price.

Once the accounts are set up, historical data is converted electronically. Portfolio Systems will either provide the advisor with a program that can convert the data from the old program to Portfolio Director, or the advisor can ship the data file to Portfolio Systems, in which case they will convert the data, create a new file and send it back to the advisor. Yacobucci says his firm charges $95 per hour to convert data, and the total conversion cost rarely exceeds $1,000.

Once all relevant data makes its way into the program, Portfolio Director is easy to navigate and use. Most program features are accessed by selecting something and right-clicking on it, which brings up a context-sensitive menu. For example, if you click on a single mutual fund holding in a portfolio, you can obtain, among other things, trade history, position details (cost basis, P & L, pricing info, etc.), classification (Morningstar category and three user-defined classifications) and a "corporate actions menu" to insert manual adjustments.

Portfolio Systems maintains pricing files for U.S. stocks, mutual funds, listed stock options and indices that can be accessed over the Web. These files would be useful as a backup to custodian-supplied information, but they can be used to compare portfolio performance to a custom benchmark or to an index as well. The pricing files also enable advisors to illustrate the historical performance of model portfolios.

There is a separate tab for tracking options strategies. Say that you regularly write covered calls on certain individual equities in a client portfolio. This tab allows you to view, at a glance, the performance numbers for the individual security after options trading profits and losses are factored in. One can view the results at the client level (all strategies for all equities), the equity level (all strategies for an individual equity) or at the individual trade level.

Portfolio Director Web is an optional additional service that allows clients to generate their own portfolio reports. Portfolio Systems creates a secure, custom log-in page for your customers that can be seamlessly integrated within your firm's Web site. The advisor regularly loads a copy of the firm's Portfolio Director data file onto the Portfolio Director Web server, and the server creates the Web reports for clients as requested. Advisors can control which reports clients have access to, selecting from a menu that includes all Portfolio Director client reports.

Portfolio Director is inexpensive. A one-time purchase, which includes three months of support and end-of-day pricing, costs $795. For professional advisors, the monthly subscription at $70 per month ($840 per year) is the way to go. The monthly subscription includes 20-minute delayed prices, historical pricing, unlimited technical support and all software updates. The networked version costs $70 per month for the first three licenses, $35 for each additional one.

Portfolio Director Web costs $9.95 per client per month, with a ten-client minimum. The one-time set up fee is based upon the number of reports made available to clients; each report costs $250.

Portfolio Director has the look and feel of a program that was originally designed for individuals, and then expanded and modified to accommodate professionals. (The manual also sounds like something written for the lay person.) As a result, it lacks some of the niceties that advisors expect, such as the ability to import client and account info from a custodian upon set up, a billing module, etc. The process of posting downloads from custodians is more cumbersome than it is with other programs. In short, as a professional portfolio management system, Portfolio Director is fairly rudimentary. Nevertheless, it is competent. It can compute returns and output a reasonable assortment of reports. Not all of the reports are as aesthetically pleasing as they could be, but they are acceptable, and they contain the necessary information.

Interfaces for several popular custodians are not yet available. They've got Schwab Institutional and AmeriTrade covered, but TD Waterhouse and Fidelity Institutional are lacking.

If you are a smaller firm that primarily invests client assets in individual stocks, straight bonds, mutual funds and listed stock options, this program may be all you need.

The Web service is a nice complement to the basic service. Those who use options hedging strategies will appreciate the ability to easily track open and closed options positions.

There were some things we liked about Portfolio Director, but because it requires more manual interaction than other programs, any upfront savings will be rapidly consumed by higher labor costs. The lack of some popular interfaces is problematic.

If your needs and your budget are limited, Portfolio Director may do the trick, but for an initial outlay of $1,500, the recently reviewed PowerBroker ($750 annually), represents a much better value. Portfolio Director has potential, but it still needs work.

Orion Advisor Services LLC

Orion Advisor Services LLC offers a comprehensive portfolio management and service bureau platform targeted primarily at advisory firms with $50 million or more in assets under management.

What would it cost if you managed about $150 million in assets and you wanted to outsource everything (and I mean everything) related to the maintenance of your portfolio management system? We're talking about data conversion from your current system to the new system, downloads, reconciliation, security, billing, mailing of performance reports, disaster protection and disaster recovery. If you engaged Orion Advisor Services to do it, the answer is probably between five to eight basis points, or between $75,000 and $120,000 per year. According to company spokesperson Bill Wostoupal, the exact fee would depend on the number of accounts, the average account size, the number of custodial downloads and the data conversion requirements.

According to Wostoupal, Orion was designed to meet the needs of Clarke Lanzen Skalla (CLS) Investment Firm LLC, an Omaha, Neb.-based RIA firm with more than $1.5 billion under management, which previously used dbCAMS, and later TechFi, for their portfolio management chores. Currently, the platform manages more than $4.1 billion for 54 advisory firms. So, if you back out the $1.5 billion of CLS money, there are 53 firms with average assets of just under $50 million using Orion's services.

What does Orion's relatively high fee buy you? Actually, quite a bit. Each advisor is assigned a dedicated relationship manager. You get an online portfolio management system that can be accessed any time from anywhere, through a Web browser. Orion offers a high-touch conversion process that includes sending a conversion manager out to your office, easing the transition pain. Once converted, custodial downloads will become a thing of the past, as will reconciliation; Orion will take care of all of that.

The Orion system can handle multiple fee schedules or any design, but you will have to enter the schedules through the Web interface, or have Orion do it for you. Since this is only a one-time set-up chore, it's not too onerous.

There will be no need to compute invoices, print them or mail them to clients for collection. Orion can handle that. For those accounts debited by the custodian, Orion will prepare the necessary files or faxes, and will send fee notifications to clients.

Orion currently offers 45 custodial interfaces, so most popular downloads are available. The Orion Web interface works reasonably well, but I think it could be better.

On the plus side, the interface is uncluttered; no screen overwhelms you with information. All of the reports and functionality one would expect of a good portfolio management system are here, including some trading aids, like the ability to assign accounts to a model and rebalancing reports. The reports the program generates look professional.

Client reports can be printed and mailed to the client by Orion or they can be made available to the client on a private-labeled Web site. Quarterly reports can include additional information like investment objective, risk tolerance, time horizon, target asset allocations, etc. This sort of information aids in the compliance process. Reports can also incorporate an advisor's newsletter and/or a commentary. Advisors can also add nontraditional or unmanaged assets manually to a report so that they can be tracked.

Among the negatives, navigation generally required too many mouse clicks. In addition, I found response times slow. This could be due to the fact that I was conducting my tests on a demo account, but if my experience was indicative of a live account, I'd be wary.

In effect, advisors get to piggyback on the Orion disaster recovery plan. Every 60 minutes, data is copied to a second remote location, so if the main Orion servers go down, they can switch to the backup. All data is then backed up to Iron Mountain (a reputable third-party data storage provider) daily. Orion can provide written documentation of its disaster recovery plans, which can be incorporated into advisors' written plans. If data is required on a disk, for either compliance purposes or disaster recovery purposes, Orion will overnight it to the advisor.

Much of Orion's value proposition rests upon their service claims, and it was impossible for me to draw any definitive conclusions in this area. The technology is OK, but I think it could be better. The interface is due for an overhaul soon; this may improve both navigation and performance.

Cost is another factor. If you are paying a full-time employee in excess of $40,000 solely to perform all of the tasks that Orion can do, outsourcing could be attractive, because if you add up all related costs (employee benefits, equipment, rent, etc.), the portfolio management, billing and reporting are probably costing you closer to $80,000. An added advantage of going with Orion is that you don't have to worry about your employee quitting on you.

On the other hand, Orion does not operate in a vacuum. Other Web-based systems are out there, and you can outsource to other service bureaus. Viewed strictly from a technology perspective, I thought the Fidelity/IDS offering, which I previewed last month, was far superior technologically to what Orion offers, and it should be less expensive; however, that platform will only be available to Fidelity customers for the time being.

As an alternative, one could choose to purchase another good portfolio management program and outsource the downloading, reconciliation, etc., to a third party. You'd be dealing with multiple providers, but the savings might be substantial.

In summary, Orion has some appeal, but it is priced a bit extravagantly. Even if you take for granted that they offer outstanding customer service, you can probably find better technology and equivalent service elsewhere for less. That said, it you are looking for a one-stop solution that includes a dedicated representative who is responsible to you, and you are willing to pay a premium price for the convenience, Orion is worth a look.

Joel 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].