THE GLUCK REPORT, Part I: Advent's Big Challenge
It's No. 1 in portfolio management systems for advisors. But its 1980s technology is now an issue
By Andrew Gluck
From the January 2005 Issue of Investment Advisor Magazine
With nearly 800 employees, a $672 million market capitalization, and a stock that trades at 4.4 times its trailing 12-month revenues, Advent Software is by far the biggest of all the companies selling portfolio management software (PMS) to independent advisors. It dwarfs the competition. But unless Advent changes, it could lose its dominance.
The technology driving PMS systems has completely changed over the last five years, while Advent’s software has basically remained the same. Advent’s portfolio management reporting and accounting program, Axys, is powerful, proven, and accurate. But it was built on 1980s technology, using a proprietary database.
In the ’80s, you would write your own code programming your database. Today, however, database programming is standardized around products like Microsoft SQL and Oracle. To program an SQL database, developers use tools that make software coding easier, faster, and less costly. While all the code behind Advent must be written in its own proprietary scripting language that only Advent developers and a small cadre of consultants know, SQL database programmers have wizards and components they can plug into their code to make programming much easier.
Advent Axys’s archaic back end presents real limitations to advisory firms. To integrate Advent with a customer relationship management program, trading module, and other programs, you must know Advent’s programming language, or buy Advent’s pricey companion modules. By contrast, with an SQL database you can get directly to the underlying tables if you know how to use them, and the data tags are not cryptic proprietary terms that are known only to a small group of technologists.
Any good database programmer can make an open-database PMS system link dynamically to other applications like your CRM system, or create custom reports and merge your PMS system data into Microsoft Office documents. While engaging a database programmer to write a script that pipes in data from an SQL-based PMS system would be very doable, there is a very limited number of programmers that you could hire to do this with Advent Axys because it requires intimate knowledge of Advent’s complex database structure.
This is not to diminish Axys’ strengths. In a Web tour of Axys that Advent hosted for a group of about 10 advisors I convened, the benefits of the application were evident: elegant-looking reports, a time-tested calculation engine, and clean interfaces with more than 400 brokerages, custodians, and institutions.
Axys offers more than 200 different performance and management reports. Schwab, by contrast, says its PMS software offers only 40 interfaces and 102 performance and management reports. Another PMS system popular with advisors, dbCAMS, offers 200 interfaces and 61 reports (a review of Schwab’s system and dbCAMS’s appeared in my December 2004 column in Investment Advisor). Axys handles all types of tax lot accounting and management options—LIFO, FIFO, and average, actual, highest, or lowest cost––and is targeted at money management firms with $5 million to $100 billion under management. In addition, with 3,800 customers, 21 years in business, and a customer base that would find it difficult to convert their data and defect to another program, Advent is unlikely to go out of business or suffer from business risk that could hobble smaller, newer competitors.
But Will Advisors Buy Brand X?
Despite Axys’s many strengths, new advisory firms are likely to consider alternatives before signing up with Advent. Its failure to change the guts of its program is likely to allow small, innovative companies an opening. Other programs will give an advisory firm more flexibility, a better price, or a more user-friendly interface.
For advisory firms that want to create custom reports, custom screen views, and dynamically link PMS data into mail merge documents, or use their PMS data in ways custom-tailored to their business process, Advent has limitations compared to more modern systems.
