Two years ago in this column I coined a phrase about portfolio management software: "PMS gridlock," a term that describes the competitive stalemate among software vendors who provide performance reporting and accounting systems for registered investment advisors. This stasis has lingered for yet another year with little hope of breaking up soon. At least not for a few months until a new application, FinFolio, goes into production and possibly shakes things up a bit.
The software is being developed by Matt Abar, an entrepreneur best known to RIAs for his previous run at the PMS business, a venture called TechFi that began in his Denver home ten years ago and produced an application called Portfolio 2000. Abar succeeded in attracting hundreds of users to this program because it was the first PMS system based on the open architecture of a Microsoft SQL database.
Portfolio 2000 threatened to undo the lock on market share held by two other big PMS applications-Advent Axys and Schwab PortfolioCenter (then called Centerpiece). Then, as now, these two applications controlled about 70% of the PMS market among RIAs serving high-net-worth individuals; Advent has claimed that about 4,000 firms use its Axys application and Schwab said PortfolioCenter was used by about 3,400 RIAs.
But TechFi's ambitions were never realized. Advent Software Corp. bought the company for $23 million in June 2002 and soon killed off TechFi's desktop application and fledgling Web-based PMS system, AdvisorMart. The story enthralled advisors because it had all the elements of a TV soap opera, with Advent playing the role of a villainous corporate giant snuffing out a tiny innovative startup and young Abar playing the role of the entrepreneur who forsakes his clients when he's seduced into taking the money and running. Abar netted $12 million on the sale, split with Advent within a few months, and was prohibited from competing in the advisor software business-at least not until January 1, 2008.
What most advisors don't know is that Abar was embarrassed and regretful about the way things turned out for TechFi's clients. Sure, it's hard to feel too bad for a 30-year-old who gets a huge buyout check and is forced into retirement for five years. But Abar has been itching to get back into the game since then and is now wiser and more mature. He wants to make things right. So it was with great anticipation that I got a tour of his new software program in early January, just a few weeks ahead of a planned beta release.
For advisors, who are always looking for PMS alternatives, Abar has differentiated FinFolio mainly by improving on-screen graphics, by building a data-scrubbing engine, by creating more elegant custom client reports, by enabling the use of free pricing services over the Web and by building the application on the latest Microsoft architecture. He originally succeeded with TechFi largely because he saw the benefit of using Microsoft developer tools and the latest Microsoft technology, and he's adopted that approach again.
Abar says he's using Windows Presentation Foundation, an interface for developers programming graphical under interfaces in .NET applications. WPF is used in Vista and will be in the upcoming release of Windows 7, and it can also run on the XP operating system. A big advantage of WPF is that it allows Abar to create a browser-based version of FinFolio as well as a desktop application without much added effort.
Abar is also adopting another new Microsoft graphical user interface tool-ribbons. For those of you not familiar with Office 2007 or Vista, ribbons display the commands for Word, Excel, PowerPoint, Outlook and Access in a strip across the top of the screen. Office 2007 has favored the ribbon and ditched pull-down menus, and FinFolio has adopted it too. In the months ahead, computer users will become very familiar with the ribbon as they use Microsoft Office, and this should promote more familiarity with the convention among FinFolio users and make it easier to access the program's commands.
Like Portfolio 2000, this application will attract users because it can drill down deeper into numbers. While many PMS applications still require you to run reports to retrieve deeper data, FinFolio lets you dig for more details from lists of portfolios, asset classes, positions-even from some graphics. If you have a mutual fund position, for instance, you can double-click on it to see its underlying transaction details and you do not have to run a report to access that data.
FinFolio also incorporates graphics on screen. So when you see a list of securities in a portfolio on the left side of the screen, the right side can simultaneously display a pie chart of the positions or assets. While the three-dimensional pie chart graphics are nifty, Abar was still working out how to best display data labels for them.