It’s More Than Just Fancy User Interfaces

By Travis Morgan, CFA, CIPM

The time has come. You have finally pulled the trigger. Your firm has outgrown their current portfolio accounting software and you just signed the contract for the latest and greatest piece of software. You loved the look and feel of the user interface. The idea of being able to customize any report was a nice bonus. The client reports look great.

A couple months have gone by and you finally have time to crack open that verification data request that Ashland Partners sent to you back in May. Alarms start going off in your head. You knew how to get this information from your old software. You fondly remember being able to run a couple extracts and being able to cross off a good portion of the request. Now you’re starting to realize the task of actually pulling data out in large batches may not be possible and your weekend just filled up with running monthly statements for hundreds of accounts.

If this sounds like something you have gone through, you’re not alone. The systems coming out today tend to look great from a reconciliation and user interface stand point, but are lacking when it comes to composite construction and data extraction. So if your firm is claiming compliance, what should you be looking for prior to signing a new contract?

First, how does the system construct composites? Composite construction tends to be the last thing on a long list of needs that a firm may need, so you can bet that it is also at the bottom of the list for the developer of the software. The first question you should ask is how many of their current clients claim compliance with the Global Investment Performance Standards (GIPS®) and ask to speak to with some of them. Being able to speak to other compliant firms will give you a good idea if your firm’s composite construction needs are met with the new software. Here are a few other things you should be asking:

  • Can portfolios enter and exit a composite multiple times?
  • What frequency is performance calculated?
  • Can the system screen for accounts below a minimum asset size?
  • Can the system screen for external flows?
  • Can composite performance be locked down?
  • Can the system screen for outliers?

Typically, the ability to answer these questions will give you a good idea on whether or not the developer has put much thought into this. A GIPS compliant firm should be wary of providers that appear to be confused by these questions or they make the claim that they are working on the development of these features.

Assuming composites can be effectively maintained within the system, your follow up questions should be about how you get the data out of the system. The data needed from a verification or an audit most likely will not decrease in the years to come and the ability to gather this data in a timely fashion can mean the difference between meeting various deadlines and being weeks to months late.

The quickest and most efficient verifications come from firms that utilize software that aggregate data and allow the users to pull out data with ease. For example, you were awestruck when you were told that composite performance is calculated on a daily basis. Your verifier now needs to test to ensure that this in fact being done accurately. This means obtaining that daily information. Does the system allow you to pull this information? Do you need to run multiple reports to get this or is there a canned report that allows you to pull all of this information? What about portfolio level performance? This is done daily as well.

There are various types of information that a verifier will need to complete your verification and if the developer has not put thought into how you as a user will be able to pull this information, then you need to be asking why not. Ashland Partners is very interested in discussing this with your provider and consulting them on various things that they can do to make your life easier.

GIPS® is a registered trademark owned by CFA Institute.


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