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Outsourcing Alternative Asset Aggregation and More

Combining online portfolio software with alternative asset aggregation helps advisors satisfy the expectations of high net worth clients.

Bill Winterberg, 10/11/2012

In today's low-return investment environment, financial advisors are increasing their use of alternatives, hedge funds, private equity, and other similar assets in their clients' portfolios. Including such assets adds to portfolio diversification through non-correlated assets and raises the potential for investment income exceeding that of record-low Treasuries and fixed income. As the use of alternative assets grows, so, too, does the difficulty of aggregating and reporting accurate and timely data both internally to the firm and externally to clients.

Today's sophisticated investor now expects up-to-date information and full transparency with respect to their investments, challenging advisors to deliver the access clients desire. One solution aimed at helping advisors manage portfolios for high net worth clients and report on alternative assets is Palette Platform™ from Private Client Resources, LLC (PCR).

Palette Platform Genesis
Palette Platform is a Web-based portfolio reporting solution released for general use in July 2011 after several years of testing and development. The company behind the solution is Wilton, Conn.-based Private Client Resources, a financial data aggregator and client reporting service provider. PCR was created in 2000 after its founders, Joseph Dionne, former chairman and CEO of McGraw Hill, and Chris Snyder, founder and former CEO of Loan Pricing Corporation, failed to find a solution they felt could properly manage complex investments of high net worth individuals and families.

PCR set out to create a software solution tightly coupled with a back-office service bureau to deliver high-quality aggregated data, reporting, intelligent dashboards, CRM, and fee invoicing to its advisor clients.

"About 70% of the prospective clients we meet are managing client financial data through manual processes," said Rob Fiore, president and CEO of PCR. "And in most cases, we see many registered investment advisory firms using alternative assets in client portfolios, ranging anywhere from 10% to 70% of a client's allocation."

PCR establishes proprietary data feeds to a variety of financial institutions, and at last count supported over 3,700 feeds into Palette Platform. Financial data is retrieved from an advisor's account custodians as well as held-away accounts, and includes data for marketable securities, alternative investments such as hedge funds, derivatives and private equity, and clients' personal and real property. PCR's data services team of roughly 18 employees performs quality assurance on a daily basis, and a client services team of similar size addresses day-to-day needs of advisors using the platform.

Platform Dashboards
Palette Platform first presents advisors with a home screen displaying a one-year bar chart of the advisory firm's AUM levels, a pie chart of the firm's current asset allocation, open tasks to complete, and a summary of news headlines from Google and Yahoo news sources. The main menu bar along the top of the screen includes items labeled MIS (Management Information System), Portfolio Views, Reporting, Document Management, Collaboration Center, Invoicing, CRM, and Risk.

MIS allows advisors to view key metrics across all assets the firm manages. Example metrics include assets under management segmented by investment custodian, asset allocation also segmented by custodian, and the largest buy and sell transactions executed in client accounts over the last seven days. Fiore commented that reports in MIS provide greater transparency of actions taken by third-party investment managers, as PCR performs transaction-level reconciliation of such activity used to feed reports.

Bill Winterberg, CFP, is a technology and operations consultant to independent financial advisors. His comments on technology have been featured in a variety of financial industry publications. You can view more information about Bill and see his schedule of upcoming speaking engagements at his Web site, FPPad.com. The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.
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