"We've raised enough cash, and can raise as much as Cornerstone needs to be sustainable for the long term," says Abouljoud. He says it is doubtful, however, that another cash infusion would be needed.
For Cornerstone, it's value to have a partner like Zaske &
Associates, which runs the software on its client database, checks
performance calculation, makes suggestions about new features and
usability and has programmed its own trading tool. "The software is a
hundred times better than it was a year ago," says Abouljoud.
The candor shown by Abouljoud and Lyles about PowerAdvisor and how the
company provides service to advisors is impressive. It sounds real,
like a company that is in the trenches doing the job and determined to
make things work right.
"Yes, we have found some calculation errors," concedes Lyles, when
asked about the challenge of creating accurate performance
calculations. "We take questions from advisors about our calculations
very seriously and analyze each one on a case by case basis." Lyles
says that in recent months complaints about calculation errors were
found to be caused by missing prices or glitches in reconciliation and
not the PMS program.
PowerAdvisor now has 150 firms using its desktop software and 175
licensees. It has no plans to make its application Web-based. Most
users are fee-based advisors, planners or money managers. Interfaces
with Schwab, Fidelity, TD Ameritrade, Yahoo, TIAA-Cref, Rydex, Foliofn,
DST, LPL, National Advisors Trust Company, Pershing, Wachovia, Bear
Stearns, Scottrade, Datalynz and State Street each are available for a
one-time $200 fee. The software is $2,500 for an initial one-year
license and $1,250 annually thereafter. It's $1,000 for an additional
initial license, and thereafter $500 per year for an additional license.
PowerAdvisor generates 68 different types of reports, including six
graphic reports. It supports all types of tax-lot accounting methods,
making it easy to sell a lot based on FIFO, LIFO, Average Cost, Highest
Cost or Lowest Cost, or to specify any particular lot you wish to sell.
That flexibility in tax-lot accounting is demanded by the most finicky
RIAs.
Where the program could come up short with some RIAs is in customizing
reports. You can only create a custom report by using Crystal Reports,
a report-writing software application. Even adding a logo to your
reports requires Crystal. However Cornerstone, which now has 15
employees, has begun customizing reports for advisors in-house, and it
also has created a service bureau.
Lyles says three employees are working full time and two others part
time to do weekly downloads from custodians for each advisor and
reconcile the data. The advisor has several days after the weekly
download to work with the data, fixing asset allocation settings or
billing issues, for instance.
The service costs $65 per month plus $2 per month per account. For an additional 50 cents per account, Cornerstone also will run your reports and run a statement billing your clients. The reports are formatted and customized to your preferences, and you can have different reports for different clients. The reports are sent to you in a PDF file, and you then mail them or e-mail them to your clients. She says about 20 clients are now using the service.
In addition to the service bureau, Cornerstone's service team also has
been converting clients from other software packages. Lyles says the
company has now converted account data for about 35 advisors.
A trading module will be added to Cornerstone's offering, perhaps by
the end of the year. Abouljoud says Zaske & Associates hired the
programmer who actually developed the trading module in Microsoft
Access, and the trading module will be integrated with PowerAdvisor. He
says the trading module will allow the PMS application to draw
guidelines set by an investment policy statement created for a client,
and thus allow restriction of the purchase of certain assets or
prohibit trading a portfolio to own more or less of an asset than the
range specified in a client's investment policy statement.
The bottom line is that the business risks posed by Cornerstone have
diminished significantly, since it now has funding. While it's still
possible sometime in the next few years that a larger company could
acquire Cornerstone, there have been no notable purchases of PMS
companies since the TechFi deal. And even if Cornerstone is bought,
users who want to migrate away from PowerAdvisor would not have too
much trouble since it is desktop software and uses an SQL database.
AssetBook From
Major Technology Resources
Rob Major, who was a co-founder of TechFi, has been slowly
building AssetBook. It is an unusual effort because it is the only
Web-based application that is primarily aimed at RIAs. All of the
Web-based PMS applications I've seen, such as Albridge, target deals
with B/Ds and their reps.
Since I last wrote about AssetBook in August 2005, when he had just six
beta testers and no paid customers, Major says he has signed up 17
clients and five new ones are being put on his platform this month.
Major says he hopes to bring in an additional 50 RIAs by the end of the
year, and that he is satisfied with that level of growth. Major, who
netted $2 million after taxes from the sale of TechFi, says he hopes to
begin taking a salary from his company in the next few months.
The fees for AssetBook are $24 per year per account (not per household
or per client), with a minimum of 200 accounts or $4,800 a year. That
pays for daily downloads and reconciliation from Schwab, Fidelity, TD
Waterhouse and Bear Stearns. A Pershing interface is being developed.
The application supports FIFO, LIFO, Average Cost, Highest Cost and Lowest Cost tax-lot accounting methods, but not actual cost. It can generate 25 types of reports and ten graphical reports. AssetBook does not allow users to create custom reports, but will customize reports for you. You can add your own disclosures to reports, and programming is now being done to allow you to add your logo.
Included in the AssetBook online system is a client portal where your clients can check their performance reports. Clients log in and can view reports associated with their household. They can see performance of their accounts for up to 16 date ranges if you have data on their accounts going back ten years, and they can view performance data on up to 12 different date ranges if their transaction data covers three to five years. The client pages are updated daily, and a secure document vault also is available.
Major says his firm has focused on automating the download and
reconciliation process, and the software typically runs 30 or 40
integrity checks on every transaction. For instance, when a transfer of
shares occurs from one broker to another, it is not uncommon for the
price of the transferred shares to be left off. The brokerage sends the
number of shares and the ticker, but not the price. So one of
AssetBook's data integrity checks ensures that the value of transferred
shares is downloaded.
Major says his users can run a rebalance report against a model that
tells the advisors what securities must be traded across all client
accounts, and then generates an Excel spreadsheet than can be uploaded
to Schwab to make rebalancing easier. A trading application is being
beta tested by three AssetBook users, he says.
With just four employees, AssetBook is an example of why established
software vendors will not be able to buy every new, innovative PMS
vendor that rises up to serve RIAs. It can remain a service-oriented
vendor that might eventually work with 100 or 200 RIA clients and be
very profitable for an entrepreneur like Major, but it still will be
too small to interest a big company. Nevertheless, even if AssetBook
never serves 1,000 or 2,000 RIAs, it can be an attractive
niche-oriented player as it matures and offers more functionality.
PortfolioMinder From Intuit
Intuit, a giant consumer brand name that makes QuickBooks and Quicken,
is being very clever in its entry into the financial advisor software
market. First, it licensed an existing online PMS system coded by
Optima Technologies. Optima spent several years creating Web-based
Interactive Advisory Software-an integrated financial planning,
customer relationship management and PMS program-but thus far it has
gained little traction with advisors. Intuit avoided investing months
of development time by licensing the SQL-based PMS module from Optima,
and it brought the product to market quickly.
Intuit also avoided the ugliest part of entering the advisor market by
saying that its PMS application was targeted to advisors with less than
100 clients and just no more than three employees. This ensures Intuit
won't attract advisors with long transaction histories and huge
databases that need to be converted, and it sets expectations low while
it gets a feel for working in the advisor market.
"We hope to serve an increasingly larger segment of the advisor
market," says Bob Stock, who has the very neat title of "business
leader" at Intuit. "This is our initial product targeted to smaller
advisors, but we intend to serve a broader target in the market with
more features for larger firms."
In other words, Intuit is aiming for simple implementations-avoiding conversions and complications that a larger advisory firm would likely bring-so it can learn the business. "We want to continue to learn about the market and improve the product to meet the market's need. Intuit fully intends to make this a big business, but we're more interested initially in identifying and meeting advisor needs."