After years of slow and steady progress, the move towards integrated technology platforms for advisors has accelerated tremendously over the last several years. One of the major forces behind the renewed interest and investment in integrated advisor workstations has been the RIA custodians. Major custodians such as Fidelity and Pershing, as well as smaller ones including Shareholders Service Group (SSG), Trust Company of America and Trade-PMR, have all rolled out integrated solutions. More recently, TD Ameritrade and Charles Schwab have been tackling the thorny issues surrounding integration for their advisors.
Although RIA custodians have been grabbing most of the integration-related headlines recently, they are not the only ones pursuing this holy grail of technology for advisors. A number of independent, third-party technology firms continue to develop their own solutions, as do a number of independent broker-dealers. Within this latter group, one firm, Commonwealth Financial Network, continues to differentiate itself as a technological leader.
Commonwealth's excellence in the field of advisor technology is nothing new. For many years, they have ranked at the top or near the top of Tiburon Strategic Advisor's Broker/Dealer technology rankings. They also ranked first in a 2010 study by J.D. Power and Associates for overall satisfaction among independent advisors and first in the technology category of the same study. More recently, an industry publication released a survey indicating that 51% of Commonwealth's reps were "very satisfied" with their B-D's technology, far ahead of most competitors. In fact, only one other B-D named in that survey achieved a "very satisfied" ranking of above 40%, confirmation that Commonwealth's ongoing technology efforts are paying dividends.
Now, Commonwealth has begun rolling out some major enhancements to its Client 360 platform, and further enhancements are expected later this year, so it seems like a good time to examine the current status of Commonwealth's technology for advisors.
According to Darren Tedesco, managing principal, Innovation and Strategy at Commonwealth, the latest enhancements are a continuation of his firm's integrated platform initiative. The core of Commonwealth's technology offering is Client 360, a proprietary, Web-based advisor workstation. Until recently, Client 360 comprised three components: document management, CRM, and wealth management. In addition, Commonwealth offered portfolio management, performance measurement and reporting through Advent software. Now, Commonwealth is in the process of retiring the Advent system in favor of their own proprietary system.
Tedesco is really excited about Commonwealth's new portfolio reporting system. "Before, we have the old Client 360 and the old Advent system," he says. "Now, we are combining the best of both into the Client 360. Advent's APX was overly complex for our needs, so we decided to build something to better meet the needs of Commonwealth advisors."
The new system can aggregate all assets, and it is capable of providing both time-weighted and dollar-weighted returns. The default view on the Performance tab displays daily time-weighted returns. "We can report on anything we get a feed for," Tedesco says. He adds that the firm can also aggregate data for some assets that feeds are not available for, like alternative investment, provided the necessary data is available. "I'm not usually one to make bold statements, but I feel confident that we now have the best alternative investment portfolio management system on the street," he says. Previously, only fee-based business was available through the Advent system. Now, all assets, no matter where they are custodied, are reported upon. All data is scrubbed on a daily basis and posted to the system.
The system allows advisors to apply up to six benchmarks (or blended benchmarks) to an account, a group of accounts, or a household. The benchmarks update daily. New data feeds allow advisors to classify holdings in 11 different ways. For example, you can classify mutual funds by their primary classification, or you can look through the funds and classify them by the holdings within the fund. You can also classify them by lines of business (fee-based vs. brokerage, for example).
Deep integration with the Fidelity clearing platform allows Client 360 to display intraday holdings (excluding fixed income), so you do not need to wait for the following day to view the impact of trades on the portfolio.
The new holdings tab is highly customizable. It allows the advisor to display up to 24 columns of data so advisors can view exactly the information they need. For example, if they are contemplating some tax loss harvesting, they can display a column with the tax cost, however the cost basis is often confusing to clients, so if the advisor is preparing to discuss a portfolio with a client, a column displaying the principal cost might be equally useful. In addition, you can view holdings by security, asset type, account, or custodian. Holdings, including assets not managed by the advisor, can be pushed automatically into MoneyGuidePro and Morningstar Advisor Workstation.
The integrated periodic investment plans (PIP)/systematic withdrawal plan (SWP) tab shows all PIP/SWP instructions within a household, including the month and day they will occur, positions bought and sold, plus tax withholding. Edits to PIP/SWP instructions can be made from this screen.
The reports tab contains about 50 reports. These reports can be customized and saved so they can be used over and over again. This ability to customize the 50 reports in numerous ways and then save them as new templates means that there are really thousands of possible variations on the 50 core reports. In addition, an advisor who creates a custom template has the option to share the template with other members of the firm, so the customization only has to be performed a single time.
If there is a single feature within the new reporting module that Tedesco is most proud of, it is probably the new 1-Click Reviews. This feature allows users to select a number of their customized reports and bundle them together into a custom report package template.
Then, with a single click, the advisor can generate a formatted, paginated report. Advisors can create multiple 1-Click Review report packages so they might want to create one for internal reviews and a different one for client meetings. For now, 1-Click Reviews are limited to portfolio reports, but Tedesco anticipates that output from other applications like CRM will be incorporated into 1-Click Reviews in the future.
According to Tedesco, other competitors say they offer document management, but few if any offer a system that is as comprehensive and as integrated as his firm's offering. "We allow our advisors to upload, store and view all client documents online in a virtual filing cabinet. We impose no storage restrictions on them and we do not impose surcharges if advisors exceed a predetermined storage limit." Advisors who store their documents online can then save space (and money) by shredding paper copies in accordance with applicable regulatory guidelines.
Commonwealth's proprietary CRM system also adds value. "There are many good CRM systems out there," says Tedesco, "but we wanted to tailor something to the needs of our advisors. By building our own, we could ensure that the application integrated seamlessly with the rest of Client 360 platform." With tight integration, Commonwealth's CRM can do things other advisors can't with their CRM systems. For example, if an advisor updates a client's address in the CRM system, they can push the information to all accounts with one click. This, in turn, will change the client's address in the Commonwealth books and records system as well as change the address on accounts held at Fidelity, their clearing firm. Since the advisor's smartphones and tablets synchronize in real time with Client 360, address changes will also be reflected in the mobile devices. If an advisor has multiple addresses listed for a client, you can swap the primary and secondary addresses of record with a couple of mouse clicks.
A proprietary system also allows Commonwealth to provide the CRM features advisors need, without overwhelming them with features they'll never use. A good example of a feature advisors need is the CRM contact overview page. The top of this page contains the household group (if any), the primary contact information for the group, household level comments, and household level warnings/alerts (for example, never telephone before 8:00 a.m. or after 9:00 p.m.). The next section contains contact information for every member of the household. The bottom portion contains all recent activities related to the household including tasks, e-mails, appointments and phone calls.
The CRM system also contains an intuitive system for setting up reminders and alerts. You can set up reminders to contact clients or prospect every "X" number of days. The same holds true for client review meetings. In addition, the system tracks and reports on "last contact" so you can proactively look to see who you have not contacted lately. Basic calendaring functions are user friendly. Those who need a bit more power can use the advanced calendaring settings to further customize and enhance their user experience. The advanced calendar synchronizes with MS Outlook and mobile devices such as the iPad and BlackBerry.
Tedesco refers to the wealth management portion of the system as "financial conversation software," presumably to differentiate it from financial planning software, since some Commonwealth reps may not be qualified to provide financial planning services. The wealth management section comprises three modules: a Monte Carlo-based goal tracking system, a Wealth Guide (a financial planning type overlay to the CRM system) and a model management system, currently in beta. This latter piece allows the advisor to create model portfolios, set security equivalents, cash buffers and locks.
Commonwealth currently offers some rebalancing capabilities, but they are fairly basic. Right now, advisors are limited to rebalancing account by account, and there is nothing in the way of tax sensitivity included. This will change over the next several months. Soon, Commonwealth will offer rebalancing by household or groups of accounts. They are also working on tax efficient rebalancing and goal-linked rebalancing. Also in the works: straight-through order processing from the rebalancing tool right into Fidelity. Tedesco plans to offer this functionality by the end of Q2 2011.
Currently, Commonwealth offers two automated rebalancing options. One, "least amount of trades," suggests trades that bring the portfolio close to the target percentages while minimizing trades and trading costs. The full rebalance is designed to bring the portfolio as close as possible to the targets, but it may entail additional trades. These same to automated options will be available when the upgrades occur later in the year.
The current rebalancing scheme is somewhat inflexible with regard to rebalancing tolerance bands. Right now, you set one percentage across all asset classes. So, for example, if your allocation to large-cap growth is 20%, and your allocation to cash is 3%, a rebalance alert will be tripped at plus or minus 3% of 20% for large-cap growth, and plus or minus 3% of 3% for cash. Some advisors might want tighter bands for more volatile asset classes such as emerging market equities, but this option is not available, nor are there any immediate plans to add it. Tedesco did indicate that it would be added if a sufficient number of advisors requested it, however.
In addition to all of the enhancements mentioned above, there's more. Commonwealth offers a dashboard through COMMunity Link, their Web-based portal for advisors and their assistants. This portal currently allows advisors to choose from among 30 widgets reflecting either pieces of information or workflow tools. New, smarter widgets are being developed for future release. For example, Tedesco wants to develop 1-Click widgets. The idea is that you set up a widget to show you everyone you are meeting with in the next five days. Then you program a 1-click widget to generate all the documentation and reports for those meetings with a single mouse click, right from your dashboard. Imagine how powerful a tool like that will be! Imagine the time it will save!
As Commonwealth continues to roll out new applications and improve existing ones it sets a new technology standard that some of its competitors will be hard-pressed to match. Better, more tightly integrated tools that also integrate with the clearing platform and select third-party providers make Commonwealth's technology offering more attractive than it has ever been.