Schwab PortfolioCenter is now available to advisors in a new way—a hosted version—which is bound to confuse some advisors. Here’s an explanation of what it is and what it’s not, along with a discussion of some key considerations.
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“PortfolioCenter Hosted allows advisors access to data online anytime, anywhere, in a protected, secure environment,” says a Schwab press release.
“It is an ideal fit for advisors who want to keep control of their data, but want to spend less time managing technology infrastructure,” said Brian Shenson, vice president of Advisor Technology Solutions for Schwab Advisor Services.
Schwab clearly has a cloud solution that will work for some but not all advisors. However, trying to understand just where it fits in among the different modes of IT operations may not be so clear. Here is a no-spin explanation of the issues surrounding PotfolioCenter Hosted:
What is “PortfolioCenter Hosted?”
The IT infrastructure that you get with PortfolioCenter Hosted requires that you keep running PortfolioCenter’s desktop version, but you run it in your own private cloud. For $4800 a year, you get a single user license to PortfolioCenter and it is hosted for you in your own private cloud. You also get the hosted version of Microsoft Office, so you can create spreadsheets and documents right from your private cloud. Additional seats cost $100 a month and interfaces for additional custodians and services costs $100 a month. You are not getting the full benefit of the Web by running this IT structure, because PortfolioCenter is not a real Web app and you are not gaining the scaled economy of a data management service. In fairness, however, RIAs in no hurry to get the latest and best technology might be satisfied using this IT infrastructure. It’s reliable and involves the least amount of change for your firm. With this infrastructure, you or your staff download and scrub your account data daily. Any mistakes in calculations of performance are your mistakes, but you are not relying on a third party to handle your clients’ data. It is not as efficient as outsourcing data management, but you may not mind the additional cost because you have other problems to fix first or just feel most comfortable with this technology.
What “PortfolioCenter Hosted” Is Not.
PortfolioCenter is not
a Web app. Web apps are multitenant applications. PortfolioCenter handles one RIA at a time. The desktop version of an app is not multitenant and, therefore, not as scalable as a Web app. Web apps are scalable systems that can handle lots of concurrent users. The best apps built today are Web apps, and you’re giving up having the latest technology by choosing not to get a Web app. Web apps are much more easily integrated with other apps. So you get the benefit of the most recent changes in technology faster with a Web app. Just yesterday
, for example, Adobe announced it would end the life of its Creative Suite desktop application and only develop the product for the Web. This trend is occurring throughout the software world. Because Web apps are less expensive to maintain, and the savings can be passed on to you in the form of lower prices, businesses are moving to the Web.
The PortfolioCenter Exception. PortfolioCenter is an exception because it is owned by Schwab. Schwab looks at PortfolioCenter as a marketing and sales tool in its custodial business. Schwab doesn’t need to make money on PortfolioCenter. It can afford to not look at PortfolioCenter as a profit center. Giving an RIA favorable pricing on PortfolioCenter or PortfolioCenter Hosted is not a problem, because it makes the relationship stickier. PortfolioCenter Hosted is attractively priced for advisors who want their own private cloud.
Switching Portfolio Management Systems
Schwab PortfolioCenter Hosted is for an RIA looking for the least disruptive option to getting to the cloud. It’s a way for an RIA seeking to host PortfolioCenter on a network server or PC to get better security and some of—but not all of—the benefits of the Web. The cost savings and features gained by switching to a Web-based app might not be worth the hassle in your estimation. If you’ve been using PortfolioCenter for 12 or 15 years, switching to a Web app can be a real challenge. Be prepared to pay to run two PMS systems during a one- to three-month transition period and your staff will need to be trained on the new system while you’re still running PortfolioCenter.
Virtualization. PortfolioCenter Hosted relies on virtualization to turn one server into many virtual servers. Instead of having to host his own server, an RIA shares a server with a other RIAs, but each is treated virtually as a separate server. It lowers the cost of hosting drastically and it is stable.
Latency. I’ll have to do more research to address latency, and would welcome any comments from users in the meantime. Users of PortfolioCenter Hosted are logging into their private clouds using Citrix software.
Control Of Your Data. Schwab’s press release says that PortfolioCenter Hosted is “an ideal fit for advisors who want to keep control of their data, but want to spend less time managing technology infrastructure.” To be clear, you can probably lower your costs and save staff time by outsourcing data management. Allowing a third party to handle data management gives you the benefit of their scale, which should be passed on in favorable pricing. The other kind of data-control issue RIAs worry about is not security but fungibility. It’s true that keeping your data in a private cloud lets you retain the same ownership rights to your data as any desktop app you are now using. For the record, however, even if you switch to a Web-based app, you should retain the same ownership rights to your data.
New Advisors. If you’re starting a new firm or breaking away from a broker-dealer, PortfolioCenter Hosted is not the best solution. Moving directly to a Web app would make more sense. If you are starting fresh, start with the newest technology and go with a Web app.