Technology streamlines a messy, time-consuming
process, but some still like to get their hands dirty.

    In the beginning, it was a process. High-level advisors (and those who wanted to be) embraced investment management consulting and the various steps of the process to add value to the client relationship and, ultimately, to the portfolio. They performed all of the steps, one by one, for each client. Yes, it was time-consuming, but it was easier to demonstrate value and justify fees.
    They continued to study, add designations to their names, attend conferences, learn the benefits of SMAs and market to the high-net-worth individual. But, as time went on, many consultants realized that they needed more time to maintain and service their existing clients and to capture more assets. Fortunately, technology stepped in and allowed them to automate many of the steps in the process.   
    Was this a good thing? Or did it take away from the value that advisors and consultants provided the client? It's a thought-provoking question. To understand the challenges and the solutions, let's take a step back in time.

What's History
Got To Do With It?
    It was a long and arduous journey that led to the acceptance and practice of the value-added process. The early pioneers borrowed the disciplined and systematic investment method from the institutional money managers and, after a time, were able to pass along the opportunity to individual investors. Not only was it a political battle at the time, but it also was an almost impossible feat to overcome the administrative, technological and compensation/fee issues surrounding the implementation of separately managed accounts for the high-net-worth individual.
    The evolution of technology was a major factor in the continued advancement of the consulting industry, and the development in the early days (late 1970s/80s) was slow. Platforms were crude and procedures for doing due diligence, monitoring the managers, generating performance reports and other responsibilities were long and laborious. But the die-hard "consultants" persisted through trial and error, doing everything themselves, because they knew it was in the client's best interest. And they knew that, as a fiduciary, they had to rely on their own constant research and supervision of the managers they hired, do their own asset allocation, create their own performance reports, rebalance and the numerous other responsibilities. In other words, "the buck stopped" there.
    With the development and use of the PC, firms began creating their own performance reporting systems and outside vendors sprang up to provide other or better capabilities. Effron created a database system called Plan Sponsor Network (PSN, now part of Informa Investment Solutions) that was still focused on the large institutional plan sponsors. CDA (the mutual fund tracking service, now CDA/Wiesenberger) sold their system to consultants, which consisted of manager data collected and input into a Lotus spreadsheet that could be manipulated. Industry veteran and visionary Robert L. Padgette of Klein Decisions founded the legendary Mobius and its M-Search and M-Watch products, releasing in 1989 the first PC-based database that provided true manager search capabilities. (It was the largest database available at the time, and included 300 managers and 900 sets of returns.)
Technology Aids The Investment Process For Consultants
    Even though major technology breakthroughs were made and it became more efficient over time for advisors and consultants to use the process, many dedicated and skilled professionals continued to do their own research. They searched for, and evaluated, the independent money managers before choosing them, they did all of the asset allocation, manager monitoring and performance monitoring (which became second nature), performance reports and rebalancing-the client meetings were quarterly events to look forward to. Clients seemed to appreciate all of the hard work and personal attention they received. Fees were justified.
    The first step-the manager search aspect of the consulting process-was the initial major hurdle to conquer. Narrowing down a major list to just a handful of appropriate managers represented a considerable investment in time and money, because the managers first had to be located, then investigated (mostly through in-person interviews), and performance numbers needed to be analyzed, etc. In trying to streamline this process by developing manager search capabilities, pioneer John Brock (now principal at Birmingham, Ala.-based Brock Hazzard Investment Group) took a major step in the 1980s and hired an M.B.A. as an analyst who personally gathered ADVs from more than 200 investment managers. Brock's team did its own proprietary research manually, but used the newly introduced PC computer to aid in its computations.
    Another veteran consultant, Rod D. Hennek, managing director and branch manager of Morgan Keegan & Co. Inc., went through similar experiences in building his team and the technology systems to support its consulting business. Hennek came on the scene in the mid-'80s when the large firms still had regional technology centers and manager databases were crude or nonexistent. He says that any information a consultant wanted about managers, "you pretty much had to solicit [from your peers] and develop of your own accord." His team would do its own research by sending out questionnaires to various managers on a regular basis, compile all the data and do all the follow-up themselves. This required hours and hours of manpower, which made the entire process painstaking and expensive.
The Thrill Of The Hunt
    Now, after more than two decades of technology advancements and industry participation, investment management consultants and institutional-caliber money managers are accessible to almost any financial advisor.
    Turnkey Asset Management Programs (TAMPs) are proliferating and software programs offer everything from manager searches, manager analysis, reports, portfolio and marketing analysis, asset allocation and much more. Even so, many of the veteran consultants, and an increasing number of newer consultants, still opt to do their own initial manager research. In light of the time that technology frees up to maintain and service current relationships and to capture new assets, why would anyone want to spend a minute longer in front of a computer reading manager profiles and analyzing numbers?
    Why indeed. According to Daniel R. Bott, president of Bott and Associates of Wachovia Securities in Scottsdale, Ariz., he can explain it in three words: He loves it. Bott, the author of The Art and Science of Investment Management Consulting, was one of the first consultants in the business as well as cofounder of IMCA and IIMC. He says, "The majority of advisors are opting to go with the short list [some up to 40 managers] at their firms. And the independents who use Lockwood, Schwab or Wachovia, for example, have a short list and a broad list [some with up to 800, but with limited manager information]. I find that a number of advisors don't have the time, or the inclination, they can't make the decisions when faced with hundreds or thousands of manager prospects, so they just default to the short list." He goes on to explain that he is searching for good, consistent performance from smaller, less visible managers in order to add more value for his clients, and that's why manager resources (like online databases) are valuable to him.
    The common thread that runs through consultants like Bott, Brock, Henneck and others is simply this: They LOVE doing the research and the satisfaction they derive from it. And if they have to spend a few more hours in the day doing it, so be it-they schedule it in, hire an associate to make client calls or other marketing work, and go about doing what pleases them and their clients.

Comments From The Wizards
    Consultants and advisors can take advantage of a variety of online tools and resources. Some are cost-prohibitive; others are relatively affordable. Most large firms subscribe to the more expensive services and allow their advisors to benefit from these unlimited tools and resources, which frees up their time, while smaller firms and independent one-and two-person shops rely on the basic manager search and report databases.
    Online manager databases help the advisor sell a manager, says respected industry veteran and technology expert Jamie Waller, CEO of Family Wealth Report and a partner in Rockaway Partners. "Morningstar became the validator of mutual funds. An advisor could refer to the star ranking system. The current challenge to SMAs is that there is no such authoritative voice. If you don't work for a major, you have to go with what your platform offers or be big enough to offer managers on a more open platform basis. This is heavy lifting for the average advisor just getting into it."
    Trivium Consulting LLC President Scott A. MacKillop (formerly president of US Fiduciary Services) believes that it is challenging for some advisors to do their own manager search, even though they may love doing it. "It's difficult to sort through online data of separate account managers because of less regulation of reporting requirements, plus advisors need a fair amount of understanding of what is 'behind' the numbers," says MacKillop. He says that most all of the platforms subscribe to the comprehensive services such as Mobius and Nelson's Information Services. "Prima Capital has an excellent tool, as well. But if you are determined to go it alone, roll up your sleeves, get your hands on the process, a good online manager database is one good resource. These types of advisors are good candidates for these services. But if you are focused on asset gathering and servicing, then outsourcing is the best option."
    Waller agrees and adds, "There are many advisors who 'sell' managers and are value-added, CIMA-types. Others will rely on the home office to build a better MDA-type offering. The centralized approach has not worked well in other walks of life and will not work in the investment world. Each generation of products create an innovator's dilemma for somebody. In this case, the "mutual fund-ization of wrap" continues to confuse the real issue: how can an advisor really help their clients? How do you offer custom solutions without a descriptive database and common language around SMAs? The databases will eventually have to take on this issue. The challenge to the SMA database universe is that SMAs are different than funds, of course. Dealer agreements are much more focused and consequently many products/managers may not be available on the platforms that an advisor is affiliated with. Most TAMPS do not offer as many choices in SMAs." With all of this advice (and history) in mind, if an advisor is determined and skilled to move ahead with his or her own manager searches, it is a good idea to research the available online databases that are available and do a comparison of features and costs. Here is a rundown of a few of the most popular online manager databases that advisors and consultants (and their clients) have reported using on a regular basis, along with a few of the larger, more sophisticated services.
    Peter Walker, founder and president of Money Manager Review, (, an online guide to the nation's top money managers, explains the benefits of his service to an advisor or consultant. "It is one of the best ways to obtain information on a manager you want to hire, if your firm does not provide that for you. We feature approximately 600 managers and about 1,700 products. Our manager reports are in-depth and each has about four charts/graphs. In total, our service offers more than 3,000 manager reports." In addition to manager search, Walker's service offers style rankings, manager profiles, watch lists, free editorial reports, news bulletins, and regular manager interviews that are archived on the site.
    Adds Walker, "Our users are consultants and advisors, brokerage firms-approximately 5,000 institutions and businesses utilize our service including plan sponsors, foundations and charities." He says that their database uses ADV-registered private money managers with at least one year's performance and at least $15 million under management. The Web site was rated one of the Best 25 Online Resources for Investors by Barron's. At $295 per year, it is affordable for most any advisor or consultant.
    Gabe Burczyk, president and founder of six-year-old WrapManager Inc. (, says his service is used by both advisors and investors. Though their target market is the high-end investor, to whom they offer a manager matching service which boasts access to more than 800 managers, about 30% of their traffic includes the advisor looking to do his or her own research. Burczyk says that advisors use the information either to compare information, pass it on to a client or research a competitor. Explains Burczyk, "We are different from a company like PSN/Mobius (Investor Solutions) or Morningstar, because those companies provide data on the managers, but they do mostly consulting rather than matching client to money manager." will perform due diligence upon request of the client, but he says that many of their clients just want help creating a relationship with a money manager and aren't as interested in the due diligence. They're rolling out two new services soon, "" to accommodate the client who wants information on money managers, and "" which will offer research-oriented information in addition to asset allocation and money manager advice.
    One of Nelson's key products is the quarterly World's Best Money Managers. On its Web site,, the World's Best Money Managers presents the latest investment performance results compiled from 6,500 investment products or composites from more than 1,500 investment management firms. Elizabeth Johnson, Director of Commercial Support, Thomson Financial Content Group, says "We're objective in that as long as the money manager is doing discretionary money management, we'll collect data on them."
    The Nelson division of Thomson Financial collects information from about 1,600 money managers. (About 2,100 managers have profile data on the site, but they have in-depth information on about 1,600.) Nelson does quarterly rankings based on various performance categories. While they market primarily to money managers, many advisors and consultants find this Web site a wealth of information. They can subscribe to Nelson products, including the MPWeb online product, as well as the various directories. The Web site states that if you register you'll gain free access to the World's Best Money Managers section of Nelson MarketPlace. They have several print products including the Directory of Investment Managers and The World's Best Money Managers. Their nearest competitor is Morningstar and Informa Investment Solutions.
Informa Investment Solutions ( made an asset purchase from Check Free Investment Services (which acquired Mobius in 1999) in February of this year and which now represents the combination of the widely used Mobius and PSN databases.
Jay Kimple, vice president of marketing and client relations for Informa, explains that they are not a due diligence provider, nor a consulting firm. They are an information services company. "We collect information from investment managers, compile that information, generate analytics based on the information we collect and distribute that information," he says. They follow more than 2,000 different firms and 10,000 products, and have been tracking SMAs for more than 20 years.
While Informa's major clients are organizations that sponsor SMA programs, most advisors and consultants are familiar with and/or have used the Mobius and PSN databases as part of their firm's provided resources. Their major competitor is Morningstar (which now owns
    Jamie Ott, client relations and marketing associate for Morningstar Inc., says her firm purchased InvestorForce in August of this year. The acquisition included both the AltvestTM database, one of the first and largest online databases covering active hedge funds, managers and data, along with InvestorForce's extensive institutional separate account database. InvestorForce's separate account database will add approximately 1,500 separate accounts to the Morningstar database, bringing the total coverage to about 6,000. It also includes several online software applications for manager search, research and reporting.
    Among the Morningstar offerings are two products designed to support financial advisors: Morningstar Advisor Workstation and Morningstar Institutional Investor Exchange. Says Ott, "For financial advisors looking to provide for their high-net-worth and institutional clients more customizable investment vehicles through separately managed accounts, Morningstar Institutional Investor Exchange is an effective, Web-based due diligence platform." She explains that it provides accurate data, flexible screening tools, client-ready reports, analytics and an automated RFP center. Subscribers may screen investments on firm, strategy and vehicle level data points such as manager background, performance history, portfolio characteristics and assets under management. Data providers update performance and AUM on a monthly basis and portfolio holdings on a quarterly basis through an online survey. The service is supported with Morningstar separate account, commingled fund and mutual fund data and product training resources.
    In addition, their Morningstar Advisor Workstation provides a Web-based investment planning platform for financial advisors that features in-depth research, robust client reports and portfolio management.

The Last Word On The First Step

The controversy over whether a true hands-on approach to the consulting process is the best, or whether the use of technology adds the real value for the client, will continue. While it frees you up to bring the value of your professional interpretation of the data to your clients, you first need to understand "how" to interpret the data and what to do with the numbers. You must consider the amount of "grunt work" you have to do compared to managing relationships with your clients. If the grunt work can be taken out and the process made increasingly quicker with more efficient technology, then everybody wins. If you don't consider it grunt work, you enjoy it and your clients benefit from your exploration and discovery of unique managers, then it's time to dust off that old Lotus spreadsheet.

We welcome any suggestions of online manager databases we have not covered, and will be happy to review them in a future issue. Many thanks to Minnetonka, Minn., journalist and researcher Sheri Lear for assisting with the research for this article.