The article talks about how advisors feel like they are held hostage by their Portfolio Management System due to a lack of standards which results in difficulty switching from one system to another. Switching portfolio management systems will usually mean that you also need to pay someone to convert your data – either this will be provided by the new company/service, or will be performed by a 3rd party consultant that is familiar with both systems. Hopefully an advisor would be able to negotiate a data conversion with the new provider. In addition to the time, cost and complexity of migrating to a new system, there is the important process of running parallel. I have worked with several advisory firms that have switched systems, only to realize too late that the new system doesn’t handle a particular critical process, which may result in a very extended period of running parallel, or in some cases, scrapping the new system entirely. Such a process can be incredibly costly in terms of lost productivity time as well as dollars. Most vendors will require a contract, and backing out of a contract can be another headache. Trying to prove that a new vendor didn’t disclose that their system did/didn’t do something the advisor absolutely had to have can be very frustrating.
If an advisor is considering switching portfolio management systems, here are some things to consider:
1. Can the new provider convert some of your data in advance of signing a contract, so you can run reports in the new system and compare them against your old system?
2. Can you run through a period end procedure, crossing over a reporting period and see how the new system performs?
3. Will the new system convert your “transaction history” or will it just be a position conversion? If the latter, then how cumbersome will it be to keep going back to the first system for historical data? This will undoubtedly occur, especially around year end and tax time when clients need historical cost basis.
4. What kind of agreement can be struck with the new vendor giving your firm the ability to back out if absolutely necessary?
5. List all critical aspects of your current system, and make sure to specifically test these in the new system (this is a very abbreviated list), such as:
a. Trading
b. Asset Allocation
c. Categorization of Securities/Graphics
d. Security
e. Billing
f. CRM features, if included in new system
g. Performance
h. Customization
i. Ability to get data in/out of the new system
j. Ease of use/learning curve
Switching systems is like switching custodians – it’s generally not something that is done unless you have to. In addition to the above, you should speak with users that are similar to your type of practice. If you are investing in individual stocks, talking to another user that is investing only in mutual funds is not going to give you the information you need. If the new firm doesn’t have any advisors that are similar to your practice, then that should be a red flag.
Larry Baker
BaySys Technology, LLC
Cell: (925) 984-4869
Posted via email from Baysys Technology Blogs By SocialNetGate
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