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How a Cloud-Based, Integrated Portfolio Management Platform Can Level the Playing Field for RIAs

By adopting platforms that tightly integrate portfolio management, CRM, trading and other core investment processes, RIAs such as SEIA gain enterprise-class functionality that gives them more time to serve clients and fuel growth.

Though long-term relationship building continues to reward registered investment advisers in the post-crisis economy, many firms face a Catch-22. "Frequently, RIAs are too busy serving clients to evaluate new technologies or migrate to new systems," explains Alois Pirker, research director for Aite Group. "Instead, they throw more effort into getting the work done."

For a risk-averse industry, pursuing a labor-intensive strategy is perilous at best. "Firms that rely on legacy technologies spend inordinate amounts of time manually double- and triple-checking data," notes Pirker. "Since manual processes are more error-prone, this increases the risk of rebalancing against the wrong data and even making the wrong trades."

Beyond the risks, Pirker argues that the inherent inefficiencies siphon off profits and keep the industry from meeting its potential. "Firms pay dearly quarter over quarter and year over year," he says. "And, as an industry, insufficient technology is one of the things that holds it up overall."

Naturally, firms experiencing significant growth feel the effects most acutely. Los Angeles-based Signature Estate and Investment Advisors (SEIA), for example, has grown 20 percent annually for most of the past decade, expanding assets under management to more than $2.1 billion at the close of 2011. While Andrew Lin, SEIA's head of strategic development, says the firms plans to continue the growth trend, he acknowledges that it began hitting a technology wall in early 2010.

Even though the SEIA had expanded to four locations on the West Coast and one serving the Washington, D.C., metro are, "We still used the same systems that were deployed by our founders in 1997," Lin recalls. "Our main customer interaction platform was Microsoft's [Redmond, Wash.] Outlook Express. We also relied on Sage [Newcastle upon Tyne, U.K.] Act! and [Microsoft] Excel."

Lin, who previously had worked for a larger organization, says he knew there was a better way. "For us to sustain our past growth going forward and ensure all of our locations could interact efficiently, we needed tools that permitted our advisers to spend more time with their clients," he says.

Building a Modern Architecture

As SEIA's point person on the project, Lin began investigating the options in spring 2010. Because most of SEIA's assets are custodied at Charles Schwab (San Francisco), interoperability with Schwab's integrated office solution for RIAs, Schwab Intelligent Technologies, became a key criterion. Of the six solutions Lin considered, five were traditional portfolio management platforms. The sixth, from Seattle-based Tamarac, was Advisor Xi, a SaaS-enabled, integrated RIA platform. "Tamarac started out at the bottom of the list because they were a new company," Lin admits. "But I had a positive prior experience with its rebalancing tool, so I wanted to take a look."

[For more on the rise of cloud solutions in financial services, see "Cloud Computing Has Become a Dominant Force."]

Ultimately, Tamarac rose to the top. "Tactically, it had everything we needed -- CRM, portfolio accounting, client-facing web portal capabilities. And strategically, Tamarac is focused on our industry," Lin says.

"In the end," he continues, "we decided we'd at least be upgraded to a modern, [Microsoft] SQL-based solution. And there were plenty of other vendors that could service Schwab even if a relationship with Tamarac didn't work out."

After inking a deal with Tamarac in October 2010, SEIA formed a small deployment team consisting of the IT manager and a rotation of individuals, depending upon skills required. "In total, about 8 people worked on the project, with two to three devoted to it at any given time," Lin relates.

Work began immediately on the first of a two-phase implementation. "With over 2,000 accounts and a decade of detailed historical information that needed to move, we designed the first phase to include only a quarter of our accounts," Lin reports. "Since these accounts were the most complex in our book of business, we expected the expertise developed during their migration would trickle down to the remaining 75 percent."

Throughout the first phase of the migration, SEIA and Tamarac teams met regularly, pulling in SEIA expertise as appropriate. "We ensured a wide spectrum of users met with Tamarac. Some could provide broad strokes and others minute details -- such as background for each data field -- to give Tamarac a complete picture of our needs and processes," Lin explains.

"In fact, we were impressed with how much time Tamarac spent learning about our firm," he adds. "During meetings, Tamarac's representatives frequently challenged us to explain our business and technology processes while also providing us with examples of other approaches. This was very productive for understanding how others firms perform similar tasks."

Only the Beginning of the Benefits

The inaugural phase rolled out in spring 2011, just in time to run Q1 client reports. "We braced for confused phone calls from our clients when their new report formats arrived," recalls Lin. "But we didn't get any. Instead, the feedback on the quality and convenience of the reports was very positive."

After a short break to allow SEIA staff to master Advisor Xi basics, phase two was completed in about a month. "We were finished by late August," Lin reports.

Not surprisingly, the biggest hurdle has been managing change at a company formerly dependent on a legacy version of Outlook Express. "When we started, right-clicking wasn't even second nature to us," quips Lin. "So moving to the latest version of [Microsoft] Office Outlook was enough change. Going any further -- like immediately adopting Tamarac's paperless workflow features -- would have caused indigestion."

Anne Rawland Gabriel is a technology writer and marketing communications consultant based in the Minneapolis/St. Paul metro area. Among other projects, she's a regular contributor to UBM Tech's Bank Systems & Technology, Insurance & Technology and Wall Street & Technology ... View Full Bio

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