Financial Advisor Marketing & Technology

Marketing & Technology For Independent Financial Advisors

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Archive for November, 2008

AdvisorVault 2.0 Is Hot

While the economy and stock market has been tanking, we have been experiencing one of the strongest growth spurts in our 12-year history. Much of the increased demand for our products can be traced to AdvisorVault 2.0, our new secure online vault platform that allows advisors to share documents with clients. AdvisorVault Video

AdvisorVault is pretty much a no-brainer for advisors. AdvisorVault is less expensive than standalone online vault platforms marketed to advisory firms. Such standalone vaults are not integrated with a marketing website, website content, email newsletters system, and other features that we offer to help advisors market and communicate. Some standalone vault systems do offer many features that are valuable to advisors, but they don't provide the same value as AdvisorVault. They cost about the same or more than what we charge for a website packaged with AdvisorVault, and AdvisorVault offers all the same features or more than the standalone vault systems. Point is, even though other companies may specialize and sell nothing but an online vault, AdvisorVault works as well or better.

Meanwhile, if you compare AdvisorVault to virtual vaults marketed by our competitors in the advisor website business, AdvisorVault offers far more functionality–in most instances at a much lower price. For instance, some of the vault platforms offered by other website vendors don't let clients upload documents or their interface makes it difficult to perform routine tasks like uploading a document. Yet some of these website vendors charge twice the annual fee we charge for a website with AdvisorVault.

AdvisorVault is really easy to use. For instance, AdvisorVault allows an advisor or a client to drag and drop file from their desktop to their virtual drive. To the best of my knowledge, no other client vault enables you to drag and drop files from a local drive to the online drive–never mind allowing a client to do so.

AdvisorVault contains other features advisors value. For instance, you can permission other professionals to have access to specific folders. So if you collaborate with a tax accountant or attorney, you can give them permission to access specific folders. Another nice feature is that whenever you, another professional, or a client uploads a new document to AdvisorVault, an email notification is sent automatically letting you know to check the vault. You can also archive a document for a specific length of time. So when you upload a perfromance report, for instance, you can program AdvisorVault to delete the file on a specified date, say three years or five years from now.

AdvisorVault 2.0 is built using the latest technology–a Microsoft SharePoint platform and a .NET 2.0 framework. That makes it easier for us to continue to program improvements to the system. And we are doing just that. By the end of the year, clients and advisors will be able to fax documents into their vaults. Since most clients don't have scanners, this is intended to make it very easy for clients to get their documents on the system.

We're also improving the way permissions are set up for households. The head of a family will be able to grant permission to his children to access some but not all of the household's folders. Permissioning levels will also be created to enable an advisor's assistant to create vaults for clients but not view documents in vaults.

Additional enhancements are planned for release by the end of the first quarter of 2009. We'll keep you posted.

Thank You For Making My Life More Meaningful

In running Advisor Products Inc. for over 12 years, I’ve seen some wild market cycles. There was the roaring bull market of the mid-1990s, when large-cap growth stocks led the way for so long and by so much that some professional investors declared small-cap value stocks forever dead. Then, there was the dot-com boom of the late 1990s, followed by the dot-com bust of 2000, and the post-9/11 bear market. Then came the Bush bull market, which gave way in recent months to a collapse of confidence in America’s financial institutions and triggered a global economic crisis.

While I much prefer the ups to the downs, I have to admit to gaining some special satisfaction from this most recent flight from equities. It’s perhaps borne of the maturity that comes to us all in our 50s. Or maybe it’s just that I’ve been through so many market crises since I began covering Wall Street in the mid-1980s at The New York Daily News that this meltdown is somehow easier to bear. For whatever the reason, Advisor Products was better prepared than ever to help advisors manage the financial crisis.

I have to give some credit to my good friend, financial advisor Tom Connelly of Versant Capital Management. Tom scared the heck out of me last spring by telling me that there was about a 30% chance of a systemic problem occuring in the American economy. Tom is obviously a very smart guy and one of the more influential members of API’s Editorial Advisory Board. And when he told me in April 2008 that he was watching the Federal Reserve’s balance sheet, I for the first time understood the serious nature of the subprime mortgage problem. I began assigning our writers stories warning of the possibility of systemic financial problems and a bear market. By late spring, we were publishing articles on advisor websites and in their newsletters warning of a weakening Fed balance sheet and tempering client expectations for portfolio returns.

When the subprime problem erupted into a full-blown financial crisis and stock market collapse in October, we were prepared. We were ready with articles for advisor newsletters and websites that would help advisors communicate with their clients honestly, calmly, intelligently, and in a timely manner. Some of the titles of articles included:

  • How The Fed Played A Key Role In The Credit Crisis
  • Lessons Of The Auction-Rate Securities Crisis
  • How Will We Know When The Credit Crisis Is Over?
  • Fed’s Actions Are Swift And Unprecedented
  • In A Recession, Keep An Eye On Small-Cap Stocks
  • Regulators Won’t Regain Confidence Without Total Truth
  • SEC Concedes It Failed To Police Wall Street Properly
  • After Wall Street Failures, A New Order
  • Opportunities Amid The Wreckage

In early December, we expect the following articles to be back from FINRA review and released for use in our newsletters and websites:

  • Investment Implications Of The Federal Bailout Plan
  • Key Mechanisms Of The Federal Bailout Law
  • How The Bailout Law Changes The AMT
  • Lessons From The Wall Street Giants’ Fall
  • Managing Cash Flow In Tight Times
  • Don’t Make The Economy’s Crisis Your Crisis
  • Retirement Plans Changing Due To Financial Crisis
  • Your Referrals Are Appreciated Now More Than Ever

Like I said, I prefer bull markets to bear markets, but the work we’ve done to help advisors cope with the crisis has been incredibly fulfilling to me. You see, I had chosen a career in journalism because I wanted to help people. I wanted to do something to make the world better. But by the mid-1990s, when I was covering investing as senior writer at Worth, I had become cynical about my work. Covering personal finance for high-net-worth individuals had begun to make me feel like I was just making the world safe for wealthy people. By 1996, the year I founded Advisor Products, I had gotten married, started a family, and given up on elping people and making the world better. I wanted to just make a good living and take care of my family.

Lately, though, I’ve begun to feel like I am helping people again. If I can help you, Mr. and Mrs. Advisor, inform a retiree about how to avoid panicking in favor of planning, then I am one lucky guy. If we can together educate a pre-retired couple about how they can pull together college financing while still putting away enough to fund their retirement goals, then I can feel good about my work.

So, thanks. Thank you for putting me in a position where I can help you help your clients, thank you for making my company more successful than I had ever dreamed possible when I started it 12 years ago, and thank you for making my life more meaningful.

When A Rose Is Not A Rose

When writer Gertrude Stein said that “a rose is a rose is a rose,” she meant that things are what they are.

But sometimes that’s just plain untrue, as in the case of technology companies marketing client portals to advisors.

Many tech vendors serving advisors are marketing client-facing pages and calling them client portals, but they are using the term all too loosely. Portals are supposed to present information from a variety of sources on a single site. Search engine companies created the first portals by presenting email, news, stock prices, as well as search engine access, on a single page.

When a portfolio reporting application displays performance data on a page for an advisor’s client and calls it a client portal, that’s using the term inaccurately. When a financial planning system enables displaying planning data to clients and littl else, and calls the client-facing pages a "Client Portal," that is also using the term inaccurately. Same is true with CRM systems offering some client-facing features.

I've seen tactics like this before. In 1997, one of the big vendors that made websites marketed to advisors "Custom Sites" that were really little more than template sites with a few small fix-ups. It succeeded in confusing advisors. It's sad to see the same sort fo confusion all over again with financial portals for clients.

At Advisor Products, we’ve been offering a Personal Client Portals platform to fnancial advisors for a year now, and what we have is truly a financial portal for advisor clients. We use XML feeds to programatically import data from a long list of finanial advisor technology solutions including:

· Advisor Exchange

· Albridge Solutions

· AssetBook

· Black Diamond Reporting

· FinanceLogix

· Laser App

· Money Tree

· MoneyGuide Pro

· Orion Advisor Services

· PortfolioCenter

· XLR8

Advisor Products is actively developing interfaces to also enable display of data from By All Accounts and EZ-Data Smart Office, and we are in discussions with several other vendors to add them to the list.

Advisor Products, moreover, is developing client portals with RSS feeds from hundreds of website–feeds about health, sports, technology, science, the economy, and much more. Plus, Advisor Products content experts filter RSS feeds from personal finance websites to categorize them and ensure they are aligned with an advisor's perspective.

Financial content produced by Advisor Products deals with wealth management issues high-net-worth individuals care about and is personalized to each client’s interests.

Advisors can securely store clients' personal documents in an online vault that is integrated into the portal patform.

Financial advisors can post blogs to communicate with clients and expose blogs on heir public marketing website.

Advisors can assign or receive tasks in the To-Do Manager.

Outside professionals, such as an estate planning attorney or tax accountant, can also be permissioned to assign and receive to dos.

Feeds of market indexes, stock prices, and useful calculators are also provided as resources to clients.

The Advisor Products client portal platform provides real portals to the clients' of financial advisors. Advisor Products is not making CRM. Advisor Products is not making portfolio managment software. Advisor Products is not making a financial planning application.

Advisor Products wants to do one thing great: make the most flexible, complete, and fully integrated client portal system offered to advisors.

So, be skeptical when vendors tell you they have a client portal.

Some roses are not roses at all, but are every bit as thorny. Don’t get stuck.

Reporting Performance Daily

An article in today's issue of Investment News, entitled "Performance Reporting Isn't Cutting It For Clients," contains some good points but also contains some confusing information.

The story is about how important it’s been for advisors to be able to post performance reports online daily. Since the market crisis erupted in early October, the need has become acute.

That makes sense. A small portion of clients are probably looking for daily updates. But the story quotes Celent Communications LLC analyst Robert Ellis saying, "Reporting is the biggest reason for wealth management client attrition." That's ridiculous.

Most advisor relationships fall apart because of a lack of communication. I've never heard of an advisor getting fired because his performance reports were issued too infrequently–never mind because the reports were formatted poorly, difficult to understand, or not available online.

I have no quarrel with the basic premise of the story. More clients want to view performance reports online than a year ago. But only a fraction of clients will check them daily, even in turbulent times.

The story also rightly says that web-based systems make it easier for advisors to provide online reports. But what’s missing from the article is any mention of the fact that the desktop applications are accommodating advisors who want to post reports daily. Which brings me to my next point.

Contrary to the thrust of the article, just because an advisory firm is using a desktop application does not mean it cannot provide online reporting daily. For instance, Advisor Products has developed an interface for uploading PortfolioCenter reports that allows advisors to batch upload client reports. An advisory firm can create an XML extract of its client reports in PortfolioCenter every morning and upload it to our AdvisorVault 2.0 in minutes. The reports are parsed by an application that runs on our server and they are automatically dropped into each client's secure, encrypted vault folder. While the manual upload process surely is an extra step that is avoided if your firm uses an online portfolio reporting system, it is—contrary to the impression you'd get from the article—very doable daily.

Another place where the story goes wrong is in confusing the information contained in the reports with the ability to post reports online daily. Specifically, the story quotes Celent analyst Ellis saying that wealthy clients might get "subpar" performance reports "because their portfolios tend to contain esoteric asset classes and sophisticated securities. In addition, their portfolios are held with several custodians, and assets are denominated in many currencies, a situation that creates a huge reconciliation and reporting nightmare."

The ability to handle multi-currency reporting and arcane securities, however, has nothing at all to do with the reporting application's ability to get reports online daily. Moreover, the weakness of the desktop PMS applications is not in their inability to handle multi-currency portfolios and exotic securities. Few advisors need multi-currency reporting. Even the most sophisticated advisors I know aren't running non-dollar denominated accounts. Plus, many exotic investments are not even priced daily–like oil partnerships and real estate deals. And to the extent an advisor is using an esoteric security, the desktop apps are probably more likely than web based applications to be able to account for them simply because they have had so much more experience with handling Original Issue Discount bonds, Zeroes, and other offbeat securities.

The story confuses the information in performance reports with the ability to post reports online. If the data in the reports are not giving clients what they need, however, the advisor needs to simply change the reports. That's a separate issue from whether it is possible to get the reports online.

To be sure, portfolio reporting is headed to the web. Advisory firms using desktop reporting applications will be in the minority in five years. But advisory firms have not been ready for online PMS applications and only recently started to warm to them.

Incidentally, I don't like taking a cheap shot at another advisor-technology writer. The author of the article in question is a careful reporter and has been doing a great job. I've read his articles for months and have enjoyed his work. This just wasn't his best story.

Advisors Eschewing Conventional Wisdom

During last Friday’s webinar with guest speakers Bill Bengen and Greg Brousseau, we conducted a series of polls. The results are surprising.

Based on answers to our polls, advisors are sticking with the traditional buy-and-hold asset allocation doctrine that has dominated the profession for two decades. Advisors say they have not reduced equity allocations. But they are looking for a less dogmatic approach. Here are the results of the poll from the webinar attended by about 120 advisors.

With 74% of those polled saying they have not significantly reduced equity allocations,
the great majority of advisors have adhered to a strict buy-and-hold strategy.

Yet many advisors are questioning the most fundamental precepts of traditional portfolio management. More than a third of advisors say Modern Portfolio Theory and The Efficient Market Hypothesis are not a valid basis for managing portfolios.

While conventional wisdom has been that a buy-and-hold strategy is the best course of action for long-term investing, two-thirds of the advisors polled say it is wise to make judgments about the future direction of the market. I believe we are witnessing the beginning of the end of the traditional buy-and-hold appraoch to asset allocation. My column in next month's issue of Financial Advisor magazine provides a new approach being put forward by one of the best thinkers among institutional money managers. Please see the magazine's website after December 1 to read about a new approach that could be influential as advisors move into the era of "Post-Modern Portfolio Theory." (I've never seen this term used before. Have you?)

Just how pessimistic are advisors? The good news is that a majority (59%) of the advisors we polled believe the economy will remain in poor condition for one or two years, while only 4% believe the American economy will remain in poor shape for more than five years. However, a significant number of advisors polled (40%) said they believe poor economic conditions will plague the nation for a three- to five-year period.

73% of the advisors polled believe now is a good time to buy stocks. Market sentiment polls like this are actually reverse indicators. The optimstic sentiment could mean that too few advisors have capitulated, and that the market must drop further before hitting bottom. Finally, in what may be the most significant finding, last Friday’s poll revealed significant dissatisfaction with the industry’s membership organizations. At the suggestion of one of our guest speakers, Bill Bengen, CFP®, who is best known for his groundbreaking research into “safe” withdrawal rates for retirees, I asked advisors attending the webinar whether they have been well served during the financial crisis by the industry’s educational apparatus. The answer: 48% of the 110 advisors participating in the webinar disagreed. This means that almost half of the advisors at the session believe they’ve not been well served by the industry’s professional educational system.

I don’t understand why the membership organizations have not produced weekly programs to help financial advisors deal with one of the worst financial events in the nation's history and certainly the worst financial crisis since the advent of personal financial planning. These groups have far greater resources than I do, can reach a much larger audience, and are paid by their members to provide this kind of support. Moreover, even though I’ve been conducting these webinars for over a month now, no one from the educational arms of the major membership organizations has called me to ask how they can help, whether they can provide some expert speakers, offer continuing education credits to attendees, or just to say thank you.

I'm grateful for the many kind words of support from advisors who have attended the webinars. Your encouragement is motivating.

Thank you for placing me in a position to be able to help during this difficult time.

Online Reporting For PortfolioCenter Moves Forward

Beta testing of the Advisor Products Inc.'s (API) application for Online Reporting For PortfolioCenter has been a great success and we are now focused on improving web reporting for advisory firms using PortfolioCenter.

Beta testers gave API Online Reporting For PortfolioCenter rave reviews and some great suggestions for improving the application. Seven advisory firms participated in the beta test by uploading their client reports to our server, which successfully parsed client reports and deposited them into secure folders accessible to clients. Click For Large Screenshot of Online Reporting For PortfolioCenter

A portfolio accounting service bureau also tested the application with multiple advisory firms that use PortfolioCcenter. The service bureau, Back Office Support Service (BOSS),which works with more than 100 firms using PortfolioCenter, is deploying the web reporting system with some of the largest RIA firms it serves.

Online Reporting for PortfolioCenter is less costly, better designed, and easier to use than previous solutions for providing PortfolioCenter reports to clients online. The application is integrated with Advisor Products’ new AdvisorVault 2.0, which is a secure, .NET application built on a Microsoft SharePoint platform. In addition to supporting batch uploads of PortfolioCenter, AdvisorVault 2.0 allows advisors and clients to drag and drop documents from their desktop to the virtual vault. It is hosted at a SAS 70-certified facility and mirrored for redundancy.

Other website vendors are charging $5,000 for the first year for less robust web-reporting solutions, and $9,000 to $12,000 in subsequent years. Advisor Products charges $3,600 a year, and our pricing is good for three years. In addition, since Advisor Products hosts sites for more than 1,200 advisory firms and provides newsletters, brochures, and other products to a total of more than 1,800 firms, we are able to invest in rapid development and improve our systems. Our development plans for 1Q09 include the following improvements to Online Reporting for PortfolioCenter:

  • Advisor control of which performance reports are displayed
  • Change the names and order of performance reports
  • Change names of columns in performance reports
  • Drag & drop columns in performance reports
  • Match graphic elements in reports to advisory firm’s branding
  • Incremental upload (changed data only) to reduce time/cost
  • Automated uploads
  • Enable printer-friendly reports
  • Allow advisors and clients to permission others to view specified reports
  • Additional reports

We cannot promise that every single one of these enhancements will be completed by the end of 1Q09. However, we do expect some of these features to be developed before the end of this year and our development team has been given a schedule that devotes resources to complete these and other improvements to Online Reporting for PortfolioCenter by March 30, 2009.

Video About Online Portfolio Reporting For PortfolioCenter.

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