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Why Advisors Shouldn’t Shy Away From Technology

How investment management software can make you more valuable to clients

Sheryl Rowling


Just because you use software to help manage your investments doesn’t make you a robo-advisor. It means you can be efficient like a robo-advisor while providing way more value.

Investment management software can be broken down into three basic types:

  • Portfolio accounting software (like Morningstar Office℠): This tracks each client’s investment holdings, dividends, interest, realized gains/losses, unrealized gains/losses, returns, and more.

  • Account aggregation software (like Morningstar® ByAllAccounts®): This retrieves financial data on investments such as annuities and 401(k)s that are held outside an advisor’s direct management, and then it integrates that data directly into the portfolio accounting software.

  • Rebalancing software (like Morningstar® Total Rebalance Expert®): This monitors clients’ accounts and calculates appropriate tax-efficient trades for rebalancing, cash needs, and tax-motivated transactions—such as tax-loss harvesting, capital gains distributions avoidance, and location optimization.

Advisors are expected to make sound investment recommendations, track their clients’ investments, rebalance when necessary, and provide periodic reports. Using robust investment management software can help you exceed client expectations and leave your competition—and the robo-advisors—in the dust.

7 benefits investment management software can bring your clients:

  1. 401(k) management: Let’s face it. Most clients don’t pay attention to their 401(k)-investment strategy. They might ask you to review their allocations every year or two, but they generally feel lost when it comes to employer plans. By integrating clients’ 401(k)s with their directly managed accounts, you can provide ongoing professional management of funds that have largely been ignored. From my experience, clients are more than happy to pay more management fees for the sense of relief. 

  2. Portfolio-level management: Many advisors and most robo-advisors manage on an account-by-account basis. This means that a “full pie” of asset classes is contained in each account. Managing at the portfolio level reduces the number of transactions (rebalancing won’t require you to buy more “global real estate” in every account or sell “emerging markets equity” in every account) and allows for location optimization (holding appreciating investments in taxable accounts, income-producing investments in retirement accounts, and high-return investments in Roth IRAs) to minimize taxes.

  3. Potential savings on current taxes: Rebalancing software can prevent unnecessary tax hits by avoiding short-term gains, choosing high basis tax lots on sales, capturing opportunities for tax-loss harvesting, and avoiding capital gains distributions at year-end.
  4. Insight into tax savings: Morningstar® Total Rebalance Expert® will actually quantify current tax savings from trading in a tax-efficient manner. It’s one thing to save your clients money, but it’s even better to let them know about it.
  5. More bang for their buck: By identifying holdings with long-term appreciation, clients can contribute shares to their favorite charities, or donor-advised funds, rather than cash. And they get the full deduction at fair market value without paying tax on the gain.
  6. Faster responses: Rebalancing software can create trades across all your clients in minutes should you need to replace a fund due to manager change or update strategies.
  7. Improved client relationships: Perhaps the biggest advantage to using investment management software is that your time is freed up. With efficiency, you can respond to client emails right away, talk to clients when they call, and meet with them when they want. In the end, it’s all about relationships.

Don’t shy away from technology. It can be a godsend to you and your clients!

Learn more about Morningstar OfficeSM Cloud, our web-based platform for advisors.

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