Portfolio Upgrade

The new version of AssetBook offers the features of the larger portfolio management platforms—at an affordable price.

Financial planning/advisory firms can spend a lot of money on portfolio reporting/management software, at a time when portfolio management activities are becoming a smaller and smaller part of their value proposition.  Isn’t there a reasonably-priced, full-featured alternative to the big names?

I’m actually not sure there was until AssetBook (https://www.assetbook.com/) recently came out with Pulse, a comprehensive cloud-based re-write of its once market-leading portfolio management solution. 

If you aren’t familiar with AssetBook, it comes with a story.  Older readers might remember AssetBook founder Rob Major as a key part of the executive team at dbCAMS back in the day.  After leaving dbCAMS, Major was a partner with the team that created a now-forgotten program called TechFi—a highly-innovative portfolio management solution which was ultimately sold to Advent.  Major felt the sale was a betrayal of TechFi users (Advent killed the competing program after the acquisition), and he started AssetBook on a mission in July 2002.  The program quickly became a great low-cost alternative to Advent; a high percentage of AssetBook’s early customers came from former dbCAMS or other software users who valued Major’s ability to convert their clients’ historical data over to his more modern platform.

Over time, AssetBook created an upgrade called Radar, but increasingly, the program seemed to get lost in the shuffle with the emergence of giant platform-like solutions like Black Diamond and Orion.  With the new Pulse upgrade, AssetBook is once again a viable competitor on features—at a more affordable price-point.

Firmwide metrics

When you log onto AssetBook’s Pulse, the first thing you see is a dashboard that lets you monitor some key business metrics of your firm. (See image at the bottom of the page.)  The screen shows the number of new and terminated (or deceased) clients, new assets, total change in AUM and total firm revenue.  You can set this to the beginning of the quarter or the beginning of the year—or, really, any time period, though it appears that most advisors use the current quarter.

You can’t see it on the limited screen shot, but if you scroll down, you can see the firm’s total assets by custodian (Pulse integrates with Schwab, TD Ameritrade, BNY Mellon/Pershing, Fidelity, SEI, Interactive Brokers, DST FanMail and a variety of other platforms), and a ByAllAccounts integration allows advisors to see held away client assets.  This, as we’ll see later, is helpful for creating household-level asset allocations.

A menu on the side of the home page allows the user to see households, individual accounts, investments, reports, documents and the fee billings and settings.

If you want to stay on a global level for a moment, then AssetBook’s Pulse makes it easy for advisors to create model portfolios.  This starts, reasonably enough, with the intended allocation between stocks, fixed income investments, and alternative investments or balanced portfolios.  Under each category, you can further refine the underlying asset classes; for example, under fixed income, you would have cash, Treasuries, U.S. corporate bonds, munis and global (or international) bonds. 

You can actually go down several more levels with increasingly fine asset class distinctions, but for most advisory firms, the next level down will be the actual investments which are included in each of the underlying asset classes: the funds or ETFs (or individual bonds) that will be in that model.  “We’ll work with advisors initially to get these model portfolios set up,” says Major. 

Client asset views

If you turn next to the household view, the screen shows you all the different households whose assets the firm is managing and their total balances, and you can click on any household to see their managed assets at all of your specified asset class levels, and also the held-away assets that might be in the client’s 401(k).  The initial screen shows the total value of the various household portfolios, the change over the last 30 days and cash on hand—and below that, you find quarter-to-date, year-to-date, 1-year and 3-year performance of the overall portfolio compared with your choice of indices.  You can create blended indices which will be more appropriate benchmarks for the client portfolio, and the program automatically maps the portfolio’s return and the benchmarks in risk-return space.  (See image below.)

The plot can be adjusted to basically any time period the advisor chooses, and advisors can toggle between internal rate of return and time-weighted rate of return, accounting for all deposits and withdrawals.  Click a button, and you can see annual returns of the portfolio vs. benchmarks every year since inception.  “If a client calls and says, we’re not making much money this year; I’m a bit uncomfortable with that,” says Major, “you can call up this screen and say, yes, but in 2019 you made 14.65%.”  Another graph shows the growth of the portfolio vs. your chosen benchmarks since inception.  (See image, bottom.)

There’s another interesting graph, not shown here, which replicates in visual format what financial planning programs aspire to do.  The advisor calculates the annualized return that clients need to achieve to meet their goals, and the graph shows that straight line growth of the initial portfolio value moving horizontally up from left to right.  Then the program takes the performance data and maps it to the same graph, showing the actual growth of the portfolio dancing up and down around the line due to fluctuating annual portfolio returns, and if all goes well, it moves past the growth line and never looks back.  (This, too, can be customized to different time frames, but most advisors seem to leave it on ‘since inception.’)

“I want to mention that this particular screen is available not only at the household level—the group of accounts in one family—but also at the account level,” says Major.  “If an advisor has different goals in different portfolios, then you can see the education fund vs. the required return growth, and that can be modeled differently from the retirement account.”  The system also tracks inflows and outflows, and alerts the advisor when the fund seems to be falling short of meeting the goals by certain metrics.

Of course, the program allows you to click down to the individual accounts within the household, and see all the portfolio positions.  You see the usual things: circle charts that show the allocation both at a broad level and at the detail of individual holdings, and in list format you see the name of each investment and cusip, the dollar value of each holding, number of shares, the unrealized gain or loss of that holding—and then, to the right, the percentage allocation of that holding, with little bands showing whether that holding is in or out of tolerance.  “The advisor sets those tolerance bands, and they can do it at the broad allocation (or model) level or at the individual asset level,” says Major.  “You can see the portfolios grouped in models or in portfolios.  And they can see the allocations based on percentage or dollar value.”

The bands allow the advisor to see which assets are getting close to being out of tolerance (the current percentage is a small indicator within or outside the lines that represent the upper and lower tolerance bound), and those asset classes or assets which ARE out of balance show up in bright red.  The advisor can also ask the system to simply show every allocation among all clients that happens to be out of tolerance, and if the advisor isn’t checking this every day, there is an alerts system which also tells the advisor whenever any particular holding has exceeded its tolerance bands among all client portfolios.  “They can get that alert on the screen or in an email,” says Major.  “We found that some advisors wanted to get an email message, so we built that into the program.” 

The overall asset allocation can incorporate the 401(k) or other held-away assets, even if, obviously, the advisor can’t do any trading in those accounts.  As long as the ByAllAccounts data is updated, the program will show overall allocations and this data is reflected in the individualized “out of tolerance” calculations.

Click deeper and you can see every holding at the lot level, and the unrealized long-term or short-term gain or loss of each lot—which, of course, helps to determine what to buy and sell in the non-qualified accounts when you’re rebalancing a client portfolio back to tolerance.  You can also see a detailed transaction history for each portfolio, which can be filtered by buys or sells or simply all the trades in and out listed by date, along with the history of fees debited from each account.  Advisors can also pull up an individual investment and see every client who owns it and how much they have invested.

AssetBook’s Pulse software also gives its users an alert when new money has come into or out of portfolios across the client base.  “Advisors asked us for a feature that lets them know when somebody just dropped $50,000 in their account, and didn’t bother to tell them,” says Major.  “It happens all the time.”

Major says that all of this is designed to provide, very quickly, the information that clients are asking for.  “If a client calls and asks questions about her portfolio,” he says, “the screens are designed to answer at least 75% of the questions she might ask.”  Advisors can also pull up the data on a big screen monitor or create up-to-yesterday’s-close reports for the client meeting that afternoon.

Automated batch reporting

Which, of course, brings us to the performance reporting functions.  The new version of AssetBook also comes with a detailed permissioning system which, when used internally, lets the advisory firm click (or not) many buttons to determine whether any individual in the office is allowed to see which parts of the data, and whether they can change it or just look at it.  

Advisors can also design their own quarterly reports, or choose from a library of reports that have already been created by AssetBook staff or other advisory firms.  AssetBook has automated the process of creating reports for all clients at the touch of a button; you select the report, pick which clients will receive it, and the program will create individual PDFs that can be printed or emailed to clients, or (most likely) stored in a client vault.  “Anytime you run a batch of reports,” says Major, “you get one PDF that contains all the reports, for your files, and a zip file that has all the individual PDFs for all clients.”

The reports are normally grouped by household, with a cover page, overview and then much of the detail that the advisor would see when drilling down into the portfolio level: the asset allocation in a circle graph, the value of each account, the performance data vs. benchmarks in lists and graphical format, and so forth.

The Pulse upgrade also streamlined AssetBook’s automated fee billing services, which accommodate the usual tiered fee level (you set the levels, you set the percentage fees for each level), plus flat quarterly fees.  In the demonstration, it looked like even a journalist could set the fee schedule globally and then customize it for individual client households.  For each household, you can set which account will pay the fees, or you can have different fee rates for different accounts inside the same household.  Advisors can do a screen and sort to make sure there is enough cash in the accounts to pay the advisory fees.

Finally, the new version of AssetBook was built with open APIs, which many advisors will shrug their shoulders at.  But the APIs allow larger advisory firms to customize their own tightly-integrated combinations of best-of-breed programs in each software category—and any program that doesn’t boast an open platform and allow this level of customization is automatically excluded from larger firm consideration.  For smaller advisory firms who don’t have the resources to hire their own programmers, the open APIs mean that when a client address is updated at the custodian level or in Redtail, it won’t have to be re-keystroked into AssetBook. 

Rebalancing daily

What do real-world users think of the program?  Rick Adkins, of the Arkansas Financial Group in Little Rock, AR, is a bit more industrious about rebalancing than most of his peers: he checks his client accounts for rebalancing opportunities every day.  “We set tolerances at 25%,” he says.  “If, on any day, an asset class falls above or below that, we are fixing it.  But most of the time that happens when somebody dumps a bunch of cash in.  I go to AssetBook to know where to apply it.”

Despite the daily inspections, there may not be many individual trades on any given day.  “We were doing a lot of trading in natural resources and financials during March,” says Adkins.  “But many days, it may be just three or four trades.”

Adkins especially likes the alert system.  “I need to know what deposits and withdrawals my clients are making,” he says.  “A lot of the packages will give you a net number, which is virtually useless to me.  I need to see, are they making routine deposits and also randomly taking money out that is greater than that?”

Smooth conversion of your historical data, from outside systems to AssetBook, is a big selling feature for the program.  Adkins is not new to AssetBook, but he found, some years back, that the conversion process from his old dbCAMS architecture went smoothly.  “They were able to do it quickly, and everything was totally in balance,” he says.  In addition, AssetBook’s focus on household accounting made his life easier.  “We have a system for clients who are withdrawing from their portfolios,” Adkins explains.  “On the 24th of each month, we do the internal transfers—that is, we move the money from the IRA to one of the taxable accounts.  Then, on the 28th, the money will go into the various client checking and savings accounts.”

What’s the problem?  “On most platforms, that shows up as a withdrawal and a deposit,” says Adkins.  “In AssetBook, those are coded as internal transfers—and that was a biggie for us.”

What are the biggest differences between the Radar version of AssetBook and Pulse?  “The new version has a much better dashboard at the firm level,” says Adkins.  “I can see that we started the year with 325 clients, we have added 12 and have had one death.  We’ve added $7.8 million in new client assets so far this year.  I can see management fees and the market change in overall assets.”

The household level view is now pretty comprehensive.  “If I get a call from a client,” says Adkins, “most of the questions they’re going to ask have to do with stuff that is on that household dashboard.”

The way that AssetBook allows a customized classification of holdings also makes it appealing.  “We wanted to be able to classify each holding in terms of the big picture, which was cash, fixed income and equities,” Adkins explains.  “Even though most of the platforms offer detailed views like what you find in AssetBook as well,” he says, “Most clients’ eyes glaze over if you start talking about the sub-asset classes and detailed holdings.  What they want to know is: what is the percentage of equities in the portfolio?  If they want more detail, I can drill down to the next level, which breaks equities and fixed income into domestic vs. international. And then I can go down to class, and then individual investments, and I can see different performance periods compared with the indices.”

Adkins says that he’s found that clients can more intuitively grasp portfolio performance by looking at the scatterplot in risk/return space compared with benchmarks or indices, so he made sure that graph was included in Arkansas Financial performance reports.  The next goal is to have the performance report PDFs automatically sent over to each clients’ eMoney vault.  “There is an API so that Pulse will send those reports directly into a client vault,” says Adkins.  “It’s one of those things that advisors may not notice, but in terms of functionality, that’s going to be an important time-saver going forward.”

Race to $200 million

Randy Brunson of Centurion Advisory Group in Duluth, GA, is paying a lot of attention to AssetBook’s new firmwide dashboard these days—for a particular reason.  “We’re custodied with TDAI,” he explains.  “With the Schwab acquisition, we believe internally that we need to get to $200 million, like, the day before yesterday, or we’re going to be having to look at some of these other custodial options that you’ve been writing about.”

The dashboard tells him, every day, the total AUM, and he also looks at the classification by asset class.  “I’m the one who builds the models here,” Brunson explains, “and this lets me see in one picture how much of our total AUM is in each investment class.  It lets me know how this compares to past time periods.”

What about the household views?  “Like most advisory firms, we manage at the household level, not the account level,” says Brunson.  “You can get pretty much any answer that a client might ask for, either on the first screen or with a click or two,” he adds. 

Recently, he received a call from a client who (he has previously calculated) needs an annual 5% return on assets to achieve her goals.  “Those returns have nothing to do with a benchmark,” Brunson says.  “Benchmarks are a portfolio manager thing; here, we’re trying to help our clients get somewhere.”  So during the client call, he turned to the household dashboard and was able to tell the client, immediately, that year-to-date her portfolio has returned 2.36%, over the last 12 months the return was 7.5% and the three-year annualized return is comfortably over her 5% long-term yearly goal.

That year-to-date return was as of late June, before the big runup in August, so it requires some explanation.  “Since she’s just 24 months from retirement,” Brunson explains, we have this protocol to reduce equity exposure.  We had no idea what was going to happen, but it turned out pretty well, and now she is at 35/65.”

Brunson says a big difference with the upgrade—and advantage of AssetBook over competing performance monitoring software—is he can get all this data without having to generate a separate report.  “Somebody calls and I can tell them exactly what they’re doing for the quarter, year-to-date and over different time periods or since we’ve been working together.”

For rebalancing, Centurion allows two percentage points of variance for each asset class.  Brunson now gets alerts whenever a portfolio is out of tolerance according to the bands he’s set, and he can drill down to short-term and long-term unrealized gains at the lot level to decide how to go about rebalancing. 

The screen will also show year-to-date qualified dividends, ordinary dividends and all short-term and long-term realized gains.  “The reason that matters,” says Brunson, “is that 30 days ago, some clients told us they wanted to buy a lake house.  They needed to pull out $100,000.  So what do we sell?  We went through the process of matching up gains and losses, and were able to pull out what they needed with a minimum tax impact.”

The client who needed a 5% annual return has that built into the graph that shows the growth of the portfolio value—so, Brunson says, he can evaluate clients’ progress in a way that they intuitively grasp.  “You can point to places where the portfolio dropped below that solid line, and say, these were nasty quarters,” says Brunson.  But you did what we recommended.  You ignored it and stayed the course, and as a result you’re ahead of target, just by your decisions and habits.  Keep doing what you’re doing.  It allows us,”he says, “to reinforce clients’ positive behaviors in the face of very unpleasant markets.”

Brunson expects the tax lot information to come in handy in a couple of months.  “As we get to October, we want to start doing the tax matching, where you harvest losses and avoid gains,” he says.  “Do we need to reallocate or rebalance?  Maybe we can go a little underweight this position but still within tolerance, and take a loss to reduce her taxable gains.”

Brunson says that Major has been open to his requests for features and for support as he is figuring out the details of the program.  “I have his cell phone number,” he says, “and he has mine.”

New money metrics

Patti Brennan, with Key Financial in West Chester, PA, runs one of the larger advisory firms that makes full use of the open API features in AssetBook.  “We are pulling data from all our software providers into our own software system, and AssetBook is a big part of it,” she says.  “At any given moment, I can go to the computer and see exactly what we have in terms of how many calls we’ve gotten, how many clients we have, how many appointments I have had in initial meetings, where we are in terms of new money coming in and going out, and client retention, which is our most important metric.”

Brennan likes the fact that AssetBook breaks out new money coming in from new clients separate from new money coming in from existing clients, and those separate from the market returns’ contribution to overall growth of client assets.  “Our marketing goal focuses on new money,” says Brennan—not net growth of assets.  “I don’t want any of my employees worried that there’s $500,000 going out for a house.  That’s what we’re SUPPOSED to be doing for our clients.  My job is to give clients their money back, whether it be for a second home or for retirement income or a wonderful inheritance for their children.”

As a result, AssetBook’s new money from existing clients metric is highlighted in the customized system that Key Financial has created.  “I believe if we’re doing a good job, then our existing clients will be sending us new money,” says Brennan.  But the program also makes it easy for the firm to calculate the distributions for retired clients, while maintaining the models and allocations.  And the household level view lets Brennan and her team answer client questions just by looking at their monitor.  “From time to time people ask about the underlying holdings,” she says.  “But most of the time, once I get through an explanation of what is happening in the big picture and the world around us, and what we’re doing about it, that’s all that clients want to hear.”

One more API integration is on the way.  “We’re about to start integrating our retirement return assumptions from eMoney into Pulse,” says Brennan.  “Historically, we would have to go back to AssetBook and say, in eMoney we are assuming a 6.3% rate of return going forward, could you run a report that tells us, how did we do compared with those assumptions?  This is going to be much, much easier in Pulse.  The profession has been so benchmark-focused for so long; we’re going to be comparing returns with what people need to reach their goals.”

Overall, Brennan is impressed.  “I think Pulse is phenomenal software, and it’s going to get better and better,” she says.  “I appreciate that Rob and his team actually listen, and they do everything they can to make the software what the users want it to be.”

Easy models

Cathy Gearig, of LifePlan Financial Advisory Group in Rochester Hills, MI, was an early beta tester of the new Pulse version of AssetBook, a couple of years after having signed on with the program in 2016 after attending a T3 conference.  Her morning routine is now looking at the firm-level screen, checking the growth in households and assets, and the overall asset allocation for all clients.  “They have everything in a snapshot for me,” she says. 

Pretty much all LifePlan client portfolios are models that were created in AssetBook, so Gearig gets alerts which tell her, generally, whenever a model portfolio is out of tolerance for most of her clients.  Gearig likes the billing features a lot more than in the previous version, but she still only charges AUM fees through AssetBook.  “We charge an administrative fee to some clients on a quarterly basis,” she says, “but we send invoices and the clients send us checks.  Any planning or retainer fees, they send checks.”  Gearig plans to look more closely at the nontraditional billing features in AssetBook, but is skeptical that she’ll ask her clients to make the switch.

How hard was it to create the model portfolios?  “Not hard at all,” says Gearig.  “When we first started with Pulse, I would set up the models, but now we’ve delegated it to one of our assistants.”  For the classifications, Gearig only goes down three levels: stocks, bonds, alternative investments and asset allocation funds at the top level, and below that the sub-asset classes (fixed income: cash, global fixed income, international fixed income, U.S. fixed income), and finally the individual ETFs or funds themselves that live under each sub-asset class category.  That informs the household pie charts, one for each level.

In the performance section of the household view, Gearig created custom benchmarks that mirror the allocations of the model portfolios.  “That can be customized to every client if you want,” she says.  What about the customized client return goal, where a client might need a 5.5% annual return to achieve her goals?  “We actually didn’t know about that feature until last week, when we were on the phone with Rob,” says Gearig.  “But we will definitely use it.  I think it’s a better way to frame things with clients, and keep them in their seats during these rough times.”

Like the other advisors profiled here, Gearig has found that she can answer pretty much all portfolio-related questions at the client’s household level view, and any of the rest with a click into more detailed information. 

“We have been doing so many Zoom meetings these days,” she says, “and so far I have run client reports in AssetBook and put the reports on the screen.  But the more I interact with this,” she says, “the more I wonder if I might just end up pulling up AssetBook and sharing the screen with the client.  There’s a lot of great information here.”

Overall, Gearig is very happy with her portfolio reporting solution.  “I like it a lot so far,” she says.  “You have to choose your vendors very carefully these days,” she adds.  “You can get trapped in software, and they have all your data from way, way back.  I honestly hope,” says Gearig, “that AssetBook is going to be around for a long time.”