Advisers face the challenge of data consolidation

Financial advisers don’t suffer from a lack of client data, but too many providers don’t offer such data in a consolidated fashion, forcing advisers to find certain types of information on their own.

That was a key conclusion of a recent report from Aite Group LLC, “Holistic Wealth Management: The Data Consolidation Challenge.”

While the study, which was based on responses from 78 randomly chosen advisers, can’t be considered statistically significant as it was conducted to field-test questions for larger future surveys, the results are nonetheless illuminating.

About one-third of the advisers told Boston-based Aite they “planned on making a change to their account aggregation/data consolidation setup in the next one to two years.” If further study reveals a level of dissatisfaction even approaching that, it would confirm the existence of a large market opportunity for those vendors that can best meet advisers’ data-related needs.

Christopher Mortara, vice president at U.S. Wealth Management LLC in Braintree, Mass., and chief compliance officer at its affiliate, U.S. Financial Advisers LLC, has been on the lookout for the all-purpose provider for years.

“In a perfect world, we could have one platform that does it all: performance reporting, data aggregation, billing, compliance reporting, [customer relationship management],” he said. “None of the providers I have spoken with have what we are looking for.”

Meanwhile, at Coe Financial Services Inc., president J. Richard Coe said the Wichita, Kan.-based firm is happy with the consolidated data it receives from its broker-dealer, Cambridge Investment Research Inc. of Fairfield, Iowa, and through Albridge Solutions Inc. of Lawrence-ville, N.J.

“For client data on holdings not [provided] through Cambridge, it is more challenging,” he said, adding that he turns to CashEdge AllData/ FA from CashEdge Inc. of New York for that information.

“While this has been helpful, there have been frustrations, since some financial institutions build in levels of protection that go beyond login and password information,” Mr. Coe said. Advisers who lack that information must spend additional time contacting the client.

In the years to come, having a well-rounded and easy-to-maintain technology platform will be important for freeing up advisers to spend more time with their clients or prospective clients, according to the report.

“An adviser who has the ability to look beyond the product level and discuss client matters on a holistic scale will be able to become a trusted adviser to the client. But easily getting at the data necessary for this approach remains elusive or expensive,” said the report’s author, Aite senior analyst Alois Pirker.

The issue of better data consolidation resonates with advisers, and many already recognize concrete advantages from it, he said.

One such example is in the area of real-time fee billing, Mr. Pirker said.

“With fee billing, for instance, [advisers] can get paid months earlier than they used to when having to rely on quarterly billing and its more manual reconciliation. It took weeks to get the paperwork to-gether. Now they can do it within a few days.”

Data delivery currently is made up of a complex mlange of technologies from different types of companies within the financial services industry, including broker-dealers, custodians and software companies. For an adviser who is looking from the outside in, the market can appear murky at best.

Companies that are aggregators or providers of deeper levels of data include San-Francisco-based Advent Software Inc.; Albridge Solutions; Eagle Investment Systems LLC of West Hartford, Conn.; Evare LLC of Burlington, Mass; Philadelphia-based InvestEdge Inc.; Investigo Corp. of Minneapolis; Odyssey Fi-nancial Technologies of Lausanne, Switz-erland; Private Client Resources LLC of Wilton, Conn.; and Scivantage Inc. of Jersey City, N.J.

Eagle, InvestEdge, Odyssey and Scivantage — all of which provide integrated data from financial institutions such as banks, brokerage firms and trusts, via broker-dealers — in turn compete with or in some cases are complementary to the offerings of Advent, Albridge, Evare, Investigo, and Private Client Re-sources. The latter companies generally provide online hosted interfaces that link back directly to custodians.

Several of these companies have successfully established a niche for themselves, even if they lack name recognition among advisers.

“Scivantage competes probably more with some of the subsidiaries or internal units of custodial or software companies like Pershing [LLC of Jersey City, N.J.] or SunGard [Data Systems Inc. of Wayne, Pa.],” said Adnane Charchour, president and chief executive of Scivantage, which provides web-based front- and middle-office technology. Their technology gives financial institutions access to consolidated client data and real-time account management as well as trading capabilities.

“It can be an advantage sometimes to be independent and totally agnostic when going after new clients. Sometimes these other companies find themselves competing with themselves or with customers in some cases, if they aren’t careful,” Mr. Charchour said.

For some broker-dealers, the results of the study aren’t surprising.

“This is something we’ve known for years,” said Darren Tedesco, director of business systems and strategic development at independent broker-dealer Commonwealth Financial Network of Waltham, Mass.

Commonwealth has come up with its own measure of just how time-consuming and expensive it can be to have an in-house em-ployee bring together client data from multiple sources. It found that the task requires the full-time attention of an assistant for half a year.

In the past, there were fewer technology choices available to advisers because so much of their work remained paper-based, and the technology being provided by a broker-dealer was more icing on the cake, not a reason to drop one broker-dealer for another. But as technology has be-come a requirement to free up the adviser to handle other aspects of the business, few broker-dealers can afford to continue thinking that way, Mr. Tedesco said.

“The critical piece is simplifying and outsourcing the technology for the adviser. Let us do the heavy lifting for you because we’ve got the economies of scale that you’ll probably not be able to put together for yourself,” Mr. Tedesco said.

Commonwealth has been providing its registered reps with its browser-based Client 360 platform since 2003. With 360, the company has also tried to bring a software-agnostic approach to the data it delivers, allowing data to be im-ported directly into several popular financial planning applications such as MoneyGuidePro from PIE Technologies Inc. of Midlothian, Va., and Morningstar Adviser Workstation from Morningstar Inc. in Chicago.

“It’s all going to come back to saving time: How can we free up that time from a broker-dealer perspective?” Mr. Tedesco said.

Others see the challenges of technology and data as more of a plumbing issue.

“We’re seeing a major difference in terms of the technology they have available to them, when they open up their own shop,” Eric A. Jones, vice president of Wealth Management Products at Thomson Financial of New York, said of advisers. “They go from being provided a unified system from a B-D or wirehouse and taking on the technology themselves, and they find they are spending a lot more time on the technology, whether it is coming in in the morning and having to download this or that data that came packaged for them from their B-D before they were independent.”

“Our objective is to get the same level of functionality whether they are coming through Merrill [Lynch & Co. Inc. of New York] or Wachovia [Securities LLC of Richmond, Va.] or their own shop,” Mr. Jones said.

Davis D. Janowski can be reached at [email protected].