Marshall McLuhan, the legendary communications theorist, once observed that the price tag for the modern age is that "we live habitually in a state of information overload. There's always more than you can cope with." He made that observation in the 1960s, and it's safe to say that overload is now in overdrive-at an accelerating rate.

How do financial advisors cope? There's no silver bullet, but everyone has an opinion about what works, what doesn't and how to tell the difference. In search of some insight, Financial Advisor recently asked several planners for their top picks for tools, techniques and resources for managing client accounts, navigating the money maze and otherwise staying informed on matters strategic.

The question isn't really fair, of course, since any advisor worthy of the title taps into an array of products and services. Investing is too complicated in the 21st century, as are the associated analytics, to pick just one item. But we forced our interview subjects to comply anyway, and, being good sports, they played along. Good thing, too, for reasons you'll discover in the recommendations below.

Louis Hibbitts
Financial Counselors of Virginia, Portsmouth, Va.
Recommends: steelesystems.com (Steele Systems Inc.)
Everyone agrees that access to financial data is critical for managing money. Where advisors part company is choosing a source (or sources) for accessing the numbers. The good news is that the possibilities, while not quite endless, are certainly ample. There are numerous competitors in the marketplace for fund analysis, ranging from free or virtually free services on the Web to sophisticated products with price tags that can make even large institutional shops think twice before writing a check.

In the perennial quest to find some answers without breaking the bank, advisor Louis Hibbitts favors Steele Systems' mutual fund/ETF software. If you've never heard of Steele, a small, one-product vendor, you're probably not alone. "I never see [the company] marketed," Hibbitts says. Obscure or not, its product is an essential tool for his financial advisory business. "We've been using Steele Systems for at least 15 years," he says. "There's no way we could live without it."

He says Steele allows users to export performance data into an Excel spreadsheet for multiple funds for any time period. That's not possible with the competing products, he insists, and it's a feature he uses frequently for analyzing investment products. It's a huge time saver because he can load return histories for several tickers in a single exporting session, instead of one fund at a time, which he would have to do elsewhere.

He also appreciates that Steele offers subscribers additional risk analytics that aren't commonly available, if at all, in similar software packages (at least those priced for the retail advisor). In addition to standard modern portfolio theory metrics (beta, alpha, standard deviation, the Sharpe ratio, etc.), Steele also publishes so-called "post-MPT" measures, such as upside/downside capture ratios, semi-standard deviation, and skewness and kurtosis. "Steele at the moment has more computed data points, offering a wider set of ratios" than the competition, he says.

But there's still room for improvement, Hibbitts says. For instance, he'd like to see a broader choice of benchmarks that cover a wider array of asset classes. But he believes the Steele software is very cost-effective, partly because the subscriptions are available monthly or quarterly.

Kent "Chip" Addis
Addis & Hill Financial Advisors, Wayne, Pa.
Recommends: outsourcedanalytics.com (Outsourced Financial Analytics)
Time is the most precious commodity, especially for small independent financial advisory firms. One way advisors can save more time for themselves is by hiring extra staff, but not every shop can afford it. Computers and software products offer a less-expensive alternative for some tasks, but then you must also sink time into learning new programs and then performing ongoing maintenance and education-and that's assuming everything works glitch-free.

Chip Addis, a co-founder of Addis & Hill, thinks he's found a viable third way with Outsourced Financial Analytics, an investment consulting firm he says he uses as "an extension of our internal investment committee" for research for the firm's model portfolios. The consultancy helps Addis & Hill by looking into its securities mix, looking for sources of yield and ways the firm can further diversify. Outsource Financial also reviews Addis & Hill's ETF list to see if it can be streamlined without affecting the target risk/return profiles. The consultants, says Addis, ask questions like, "Is the added diversification we've used worth it? Can we scale back [on the number of funds] and still accomplish the same objectives?"

The relationship allows Addis & Hill a cost-effective way to tap professional analysts without the expense of adding new staff (or buying extra software). The firm can talk with quantitatively savvy finance professionals regularly in order to make strategic investment decisions. Perhaps the biggest advantage is that the relationship helps the small firm make better use of its time. "We're a growing practice and we need to develop new business," Addis says. Outsourced Financial is helping the firm achieve that goal by shouldering some of the research workload.

Stan Richelson
Scarsdale Investment Group, Blue Bell, Pa.
Recommends: A proprietary list of muni broker/dealers
The world of bonds may appear more serene and uncomplicated than stocks to the casual observer, but appearances can be deceiving. Those who buy and sell individual bonds-as Richelson prefers to do-face Byzantine variables. That's particularly true for his fixed-income preference-municipal bonds, which suffer from illiquidity, variations in call provisions, etc. The only way to navigate this maze is to develop a network of broker/dealers that specialize in munis, says Richelson, co-author of the book Bonds: The Unbeaten Path to Secure Investment Growth (Bloomberg, 2011). Otherwise, there's little alternative, since there's no consolidated, liquid marketplace for munis.

It's taken Richelson years to piece together his trusty list of 15 B/D sources, he explains, a critical resource if he's to find specific munis at competitive prices. "It's not like trading stocks," he emphasizes. "There are 500 big stocks and another 2,500 smaller ones, and they're all available, whomever you call." Bonds are different. "There are over 1 million discrete issues, and I'm just talking about munis."

He says it's no small advantage that 15 brokers are routinely advising him on their inventory. On any given day, he may be investing several million dollars for clients, although most of that comes from rollovers with maturing issues.
In the old days, he says, you could call Merrill Lynch and they'd quote from a huge inventory. But the muni market has evolved, and inventories at any one broker tend to be lean these days. Richelson's network also comes in handy when he's selling. In those instances that he's a seller, his ability to review five or 10 bids from brokers at once is a powerful advantage for securing a fair price.

His network includes several familiar names-Morgan Stanley, Merrill Lynch, Wells Fargo-along with less-conspicuous players such as small regional banks. But the real advantage-his proprietary edge, as he sees it-is his long-standing relationships with the individuals at these firms. "We've found brokers who spend the bulk of their time in munis."

You can ask Richelson just about anything on the topic of munis and he'll respond authoritatively and at length. But just don't ask him to name names in his network. That's the one subject in fixed income on which he's speechless.

Nancy Bryant
Greenspring Wealth Management, Towson, Md.
Recommends: Total Rebalance Expert software (trxpert.com)
Rebalancing is a critical part of managing portfolios, but some aspects can be mind-numbing and time-consuming. Fortunately, a new generation of rebalancing software eases the burden and helps optimize the investment decisions along the way. Of the several competing products available, Greenspring favors Total Rebalance Expert (TRX), which is designed to work with Schwab's Portfolio Center portfolio management system (the successor to what was known as Centerpiece).

Bryant's firm uses TRX for three primary facets of rebalancing: 1) picking asset weights to maximize the expected risk-adjusted return, while 2) minimizing the taxes and 3) lowering trading costs. Greenspring, which manages money via several model portfolios built around ETFs and mutual funds, has been using the software for about two years. The firm has roughly 150 clients, so this method is far superior to the old one (crunching the numbers on a spreadsheet), Bryant says. "Last year, we rebalanced [client portfolios] twice due to market moves." The spreadsheet approach would have taken a week, maybe longer. Now the job is completed in a few hours.

The software also allows advisors to customize rebalancing rules for each client, choosing how and when the rebalancing trades are executed. In addition, "the technical support from TRX is tremendous," Bryant says. And since the software runs on a cloud system, the users don't have to worry so much about problems on their local computers.

Perhaps the only thing to worry about is the ancient problem of human error. "The software assumes that I know what I'm doing," Bryant says. So all bets are off if, say, an equity ETF is mislabeled in the rebalancing process as a bond fund. As in any software system, the results are only as good as the information put in. Software, in other words, still has a hard time overcoming the limits of wetware.

Michael Smith
Granite Springs Asset Management, New York, N.Y.
Recommends: ETFreplay.com (ETF Replay)
The rise of ETFs offers a rainbow of choices for portfolio design, which means that it's never been easier to customize risk allocations. But some strategic challenges are still immune to quick solutions, starting with the ambiguity of how a given asset allocation strategy would have fared through history.

Enter ETF Replay, which helps minimize the mystery by offering a Web-based platform for back-testing ETF portfolios. "We find it very useful," says Michael Smith, chief operating officer at Granite Springs, where ETFs play a key role in portfolio design. ETF Replay allows the firm to consider new portfolio design possibilities. The firm specializes in fixed-income strategies, though it's hard to use individual securities for smaller accounts for liquidity reasons. ETFs are a practical alternative, particularly for accessing the high-yield and muni markets, where trading volume can be thin. The SPDR Lehman Short Term Municipal (SHM) and iShares iBoxx High Yield Corporate Bond (HYG) ETFs are popular with the firm, for instance.

ETF Replay is hardly the only game in town. In fact, Smith says that Granite was using a popular but "clumsy" institutional platform before discovering the site about two years ago. "We had a hotshot intern from Brazil turn us on to it."

Among other things, the site can compare a new client's existing holdings with Granite's portfolio models. What if a client owns ETFs that aren't on the firm's preferred list? Selling the funds and rebalancing the mix to match Granite's models is one solution, but that may not be practical if the portfolio has embedded capital gains. In that case, ETF Replay can help the firm determine how much common ground there is between the existing allocation and Granite's benchmark portfolios.

Rick Ferri
Portfolio Solutions, Troy, Mich.
Recommends: indexuniverse.com, ETFdb.com (ETF Database) and Morningstar Principia
It's no secret that Rick Ferri likes ETFs. He's written several books on investing, and ETFs figure prominently in his reporting, including his latest work: The Power of Passive Investing (Wiley, 2010). Where does one of the leading ETF authorities go for the latest news and data on the popular funds? As you might expect, he uses a variety of sources, but he cites a trio of services in particular for most of his research: two free Web sites-IndexUniverse.com and ETFdb.com-plus Morningstar's Principia software, which charges a subscription fee.

Index Universe does a good job of staying on top of the ETF news, he says. "They really seem to catch everything in a day or two." For example, he was intrigued when a PowerShares small-cap value ETF recently changed its benchmark to the RAFI Fundamental Small Value Index. "I was interested to see if [the new index] is better than what I'm using." After reading about it on Index Universe, he added the fund to his list of ETFs to monitor. "I probably wouldn't have known about it otherwise."

Although Ferri's portfolio allocations change infrequently, he's always looking for new products that offer improvements. Few of the innovations in recent years pass muster with him, but he watches the ETF landscape closely just the same. He's a fan of ETFdb.com's fund-screening tool, although he double-checks the results against the screens on IndexUniverse.com and Principia. Definitions of small-cap value, for instance, vary, so different data sources may generate slightly different fund lists, he notes.

Allan Roth
Wealth Logic, Colorado Springs, Colo.
Recommends: Benchmarking with ETF/index mutual fund data
"I do a lot of benchmarking in my business," says Allan Roth, who counsels foundations and wealthy individuals. "I advise on over $1 billion," with an emphasis on advising. He doesn't manage money, he explains, at least not directly.
He's a consultant who dispenses recommendations on investment policy, target allocations and the tolerance limits that influence portfolio rebalancing decisions. Roth, the author of How a Second Grader Beats Wall Street (Wiley, 2009), is partial to indexing, though he also evaluates the active managers used by his clients. One of his priorities is analyzing track records against the custom benchmarks that he designs for clients. Naturally, he relies on investment data, most of which he finds gratis on the Web, such as Yahoo Finance and Morningstar's Portfolio Manager, which is free in its basic version.

"For the most part, I benchmark against practical indices," he says. "I develop weighted average benchmarks, and it's usually based on real products." For example, a client who uses a mix of active managers in a domestic stock/bond portfolio might be benchmarked against two Vanguard ETFs: the Vanguard Total Stock Market fund (VTI) and the Vanguard Total Bond Market fund (BND). "I'm a believer in broad benchmarks," he says-as well as investable ones.

Roth tells clients that if they are going to pay more for active managers, they must see a measurable payoff. "If they're paying a manager a lot of money, [the manager] better be beating the benchmarks." Over time, the indexing argument has persuaded clients to move away from active strategies. "They fire managers and don't hire new ones." Quite a few clients have started with an all-active portfolio that evolves into a part active/part passive one.

Tom Connelly
Versant Capital Management, Phoenix
Recommends: Bridgewater Daily Observations (bwater.com)
"I had a hard time coming up with just one," says Tom Connelly, when asked for his favorite resource in the money game. When pressed, he names Bridgewater Daily Observations, the research service published by hedge fund firm Bridgewater Associates. "It's the thing I read most frequently," says Connelly, who's also chair of the investment committee for the board of trustees for the Arizona State Retirement System. Bridgewater has "a huge staff, and they construct a lot of their own data and look at it in interesting ways. I read every issue." Alas, BDO isn't widely available to the general public. You can, however, find a few select samples at bwater.com.