In announcing last week that her TRX rebalancing app was integrated with Morningstar Office, Sheryl Rowling reached a new plateau, and it is sure not to be her last.
Rowling, 56, is no software genius, but she is an entrepreneur and totally independent—especially in the way she thinks. Many CPAs know the Internal Revenue Code but among the nation’s 4,500 Personal Financial Specialists, only Rowling created software to automate rebalancing of investment portfolios tax efficiently across an RIA’s client base.
“Harvesting losses and gains and managing portfolios tax efficiently is the most time-consuming and error-prone part of an RIA business and, if you really want to do it right, it must be automated—just as CPAs must automate tax return preparation,” says Rowling.
In creating Total Rebalance Expert (TRX) software as a complement to any of the major portfolio management software (PMS) systems used by RIAs—a solution that was not bundled with a custodial platform, PMS or other advisor apps—Rowling enables advisors to choose best of breed applications. TRX thus supports a practice management style embraced by the most demanding fiduciaries and that keeps technology costs down. That’s why Rowling qualifies as the first Advisors4Advisors Person Of-The-Year in RIA Practice Management.
Rowling is one of a kind. A woman, a CPA/PFS, she is the owner of a successful RIA who started a technology business. If this combination of characteristics is not enough to make her a unique individual, Rowling’s motivation in life is rooted in the ancient Jewish tradition of trying to make the world perfect. “I was raised to believe in the idea of repairing the world,” Rowling says. “If I see a way I can be a benefit, then that’s the direction I am compelled to go in.”
By Jewish standards, Rowling seems not to be particularly religious. She does not obey Sabbath laws, dietary restrictions, or other basic precepts of Jewish Law. But a concept referred to in Hebrew as “tikkun olam” guides her every move. “So I branch out from my comfort zone because overriding it in my own little world is internal code that I need to do something good in my life, and in the end that wins out over everything else.”
Rowling branched into creating an automated rebalancing platform after becoming frustrated with the solutions available. About eight years ago, Rowling looked at the two solutions available to RIAs for rebalancing and made the decision to adopt iRebal at her firm, paying its $50,000 annual price tag. (It’s since been reduced to about $20,000). Back then, she says, she and another advisor in her firm each spent 20 hours a week for six months to get the program working. Rowling says she would go to sleep dreaming about spreadsheets. “It was a horrendous process,” she says, “and we were told we were one of the quicker implementations.” Despite the high price tag and time-consuming implementation process, Rowling says “it was worth it” because her firm had a reliable rebalancing solution.
In 2007, however, TD Ameritrade Institutional acquired iRebal and began using it as a way to help lure new assets to TDAI. “I was not sure it would be a successful strategy and I was concerned that we would not get the same support because we did not use TDAI as custodian,” says Rowling.
Because iRebal was important to her RIA, costly, and had become integral to TDAI’s business strategy, Rowling says she felt like her firm was in a precarious position. So she sent a staffer to investigate what at that time was the only alternative to iRebal, a program called Tamarac. Rowling says the staffer reported back that Tamarac involved about the same price tag as iRebal and was likely to be even more complex to adopt.
Rowling began to view her rebalancing predicament as one that many other RIAs were also facing. The idea of creating a rebalancing app that could serve “bread and butter advisors” had captured Rowling’s interest. It was during this time in 2007 that Rowling agreed to go with an old college friend, Cheryll Lurtz, on a “walkathon” to raise money for breast cancer treatment. Lurtz, a successful software developer, spent three days walking and talking with Rowling, and the two made plans to launch TRX.
“For advisors with less than about $300 million under management, there was no solution that was accessible in terms of implementation and cost,” Rowling says, whose San Diego-based RIA manages about $250 million. “Yet these are advisors who want to serve clients as fiduciaries and cannot be efficient enough to meet that standard without a tool like this.”
“There are too many clients that get taken advantage of by advisors who are sales people,” says Rowling. “The more I can enable RIAs to grow their practices and help them do a better job, the more business can be taken away from stockbrokers who are not doing what’s in their clients’ best interest.”
In TRX, Rowling and Lurtz created a program that could be implemented by most RIAS in two or three weeks and cost about $10,000 a year. (Special pricing for small firms starts at $5,000.) Last week, TRX announced an integration with Morningstar Office, and TRX previously had integrated with Black Diamond, FinFolio, Orion, PortfolioCenter and Advent Axys, and it is currently working on integrating with additional PMS systems.
A key difference between TRX and most other rebalancing programs is that TRX is a standalone application. While Rowling acknowledges that a solution bundled with a custodian, PMS, CRM, and other platforms can be easier to implement, she prefers to support an unbundled approach. “In my RIA, I want to know that everything I am doing is the very best than can be done for my clients,” says Rowling. “If I have a bundled solution that has a financial planning application I do not like, I am locked into it or I’ll have to replace all of the major systems I am using in that bundled solution because of the economics of bundled packages.”
Rowling says implementing best of breed apps may, in some instances, be easier than a bundled app. “These days, these programs all talk to each other,” she says.
TRX’s tax management capabilities give advisors the option to trade with or without “location” optimization and can automatically perform tax-gain harvesting as well as tax loss harvesting. TRX provides schedules for clients to donate shares to charity on a schedule and optimizes the sales of different lots. Rowling says TRX’s automation of capital gain distribution avoidance is patent pending, and the program produces a report that advisors can give clients to show how much they’re saving by managing investments tax efficiently. In addition, a new instant analysis feature was granted a patent recently.