"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."