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Technology details of Institutional Intelligent Portfolios™ from Schwab Advisor Services

Schwab unveils details of Institutional Intelligent Portfolios™ to financial advisers

Schwab unveils details of Institutional Intelligent Portfolios™ to financial advisers

Details of Institutional Intelligent Portfolios™ unveiled as Schwab arms its advisers with a robo solution

In company webcast and press release today, Schwab Advisor Services provided details of its Institutional Intelligent Portfolios™ solution that the company describes as an “automated investment management solution for independent registered investment advisors (RIAs).”

Earlier I had the chance to speak with Schwab Intelligent Portfolios executive vice president Naureen Hassan and Schwab Advisor Services technology and strategy senior vice president, Neesha Hathi to clarify several details about what financial advisers can expect from the new service.

Here are my important takeaways with a focus on the technology impact for your business.

Adviser Branding, but Schwab Domain

Institutional Intelligent Portfolios™ will be made available in Q2 2015 and it will allow advisers to use their own branding, which includes their firm name, logo, and contact information inside the end-client dashboard.

However, Institutional Intelligent Portfolios will be hosted on the Schwab web domain, so advisers cannot use their own custom website domain. Advisers must provide a link to Institutional Intelligent Portfolios somewhere on their website to direct end investors to the adviser-branded version of the solution.

Proprietary Paperless Process

Once logged in to the dashboard, investors go through an experience very similar to that of the retail Schwab Intelligent Portfolios solution (but one that uses the adviser’s branding and the adviser’s custom portfolios).

Investors answer the same questions about their goals and level of risk tolerance found in Schwab Intelligent Portfolios, and upon completion, investors are matched to a portfolio designed by the adviser that best fits the investor’s profile. This paperless process is proprietary to Schwab and does not support third party form-filling or electronic signature providers that are made available by other institutional custodians.

Investors use the paperless application process to open and fund their accounts and also receive their disclosure documents when they engage in the service.

Mobile Minus Android

Schwab Intelligent Portfolio will be available as a native app for iOS devices, and a responsive website will offer an interface that is suitable for devices of all sizes.

According to Hassan, an Android app is in development but did not provide details on a future release date.

Account Management

Institutional Intelligent Portfolios allows advisors to create custom allocations from over 200 ETFs in the platform. Automated rebalancing and the opportunity for tax-loss harvesting is available for investor accounts greater than $50,000, and advisers can disable the loss harvesting algorithm if they so choose.

Loss harvesting applies only to the assets held within Institutional Intelligent Portfolios, so advisers must pay attention to transactions that trigger wash sales if substantially identical securities are held in outside accounts.

Note that advisers can view investor accounts using Schwab Advisor Center just as they do for the institutional accounts they manage on behalf of clients today. That means that data downloads are supported for assets held in Institutional Intelligent Portfolios. Since the data feeds are available just like any master account, Institutional Intelligent Portfolios holding data can be downloaded into other portfolio management software solutions available from third party vendors.

Finally, for account registrations, Institutional Intelligent Portfolios supports standard taxable brokerage accounts, joint accounts, Traditional and Roth IRA accounts, and living trusts.

Fees and Cash Minimums

With the technology attributes addressed, here are details of the fees of Institutional Intelligent Portfolios.

From the press release, Institutional Intelligent Portfolios has “a two-tiered pricing structure based on total assets custodied with Schwab outside the Institutional Intelligent Portfolios program.”

For advisers with less than $100 million in assets under management (AUM) with Schwab, investors will be charged a 10 basis point platform fee.

But for advisers with more than $100 million in AUM with Schwab, no platform fee is charged.

Schwab Intelligent Portfolios has been questioned for its up to 30% allocations to cash, but on the Institutional Intelligent Portfolios platform, portfolios must maintain a minimum of four percent in cash. The top end of the cash allocation is determined by the custom portfolios designed and configured by each adviser.

 

 

Betterment Institutional launches for financial advisers

Betterment InstitutionalBetterment gives financial advisers access to its popular low-cost, automated online investment solution

FPPad Quick Take:

  • Financial advisers can now offer Betterment Institutional as a white-labeled low-cost online investment service to emerging clients.
  • Betterment Institutional charges 25 basis points a year, advisers can charge an additional fee if they wish
  • Fidelity Institutional Wealth Services will list Betterment Institutional as a practice management solution in its list of resources for advisers

Betterment, a popular automated online investment service, today announced the expansion of its technology for use by financial advisers and an inclusion among Fidelity Institutional Wealth Services practice management solutions.

Betterment for Advisers

Betterment Institutional is an expansion of the startup’s popular online investment service built for retail investors. As of June
10, 2014, Betterment reported $613,372,319 in assets under management in its regulatory filings.

According to Nick Gavronsky, product manager for Betterment, the company’s new offering allows financial advisers to white label the Betterment Institutional offering and brand it for their own business. Advisers using Betterment Institutional will receive a website hosted by Betterment that investors can use to create accounts, view statements and engage with an adviser.

Initially, end clients using Betterment Institutional will use the company’s Android and iOS mobile apps as they exist today, but adviser-branded apps are anticipated to be phased in as the offering matures, Gavronsky said.

Low Cost Investments

Betterment Institutional will allow financial advisers to set their own fee schedule for clients who choose to use the service. Betterment collects an annual fee of 25 basis points (0.25%) from accounts on the Institutional platform, and any additional fees above that amount are paid to the adviser.

Just as with the retail Betterment offering, accounts are held by Betterment LLC, an SEC Registered Investment Adviser, and securities transactions are cleared through Apex Clearing Corporation.

Custom Models Welcome

Investors using Betterment’s retail offering are familiar with the standard asset allocation models the company’s algorithms select for clients based on their answers to a risk tolerance questionnaire.

Betterment Institutional offers the same investment allocation models to financial adviser clients, but the company also permits advisers to create their own custom models.

Again, the same technology that powers the default models in Betterment’s retail platform is available to custom investment models created by advisers, Gavronsky said in an interview.

In addition, investors who have $50,000 or more managed with Betterment Institutional have access to the same Tax Loss Harvesting+™ feature found on the retail Betterment platform. Tax Loss Harvesting+™ is an automated, daily account rebalancing feature.

Fidelity Touts Practice Management

Also noteworthy in the Betterment Institutional announcement is the recognition that Fidelity Institutional Wealth Services, providing custody services to nearly 3,000 RIAs, now includes Betterment Institutional as one of the practice management solutions Institutional Wealth Services offers to its RIA clients and prospects, according to Erica Birke, vice president of communications and corporate affairs for Fidelity Institutional.

“Fidelity Institutional Wealth Services and Betterment share an interest in helping advisors realize that digital advice should not be perceived as a threat, but rather an opportunity to evolve their engagement models to better attract new business segments, particularly the emerging affluent, a segment that many advisory firms have historically under-served or not served at all,” wrote Birke in an email.

Fidelity does not have exclusivity over the Betterment Institutional offering to advisers; any adviser is free to engage Betterment Institutional as he or she wishes.

Financial Adviser Value

Betterment Institutional joins Upside Advisor and Guide Financial in an effort to provide a low-cost automated investment solution to  financial advisers.

Upside Advisor recently made headlines by powering Liftoff, the low-cost investment solutions offered by high profile New York RIA Ritholtz Wealth Management. Liftoff offers a similar model portfolio management service for an annual fee of 40 basis points (0.40%).

Exclusive tour of Fidelity Institutional’s Office of the Future

Fidelity Institutional’s Office of the Future shows how an adviser’s future office may not be a physical office at all

Recently I was invited to tour Fidelity Institutional’s Office of the Future, the company’s bold statement on where it believes the adviser’s future workplace is headed.

Irony notwithstanding, Fidelity Institutional’s Office of the Future does, in fact, occupy a physical space in the company’s Smithfield, RI campus located about an hour’s drive south of its Boston, Mass. headquarters.

Ed O’Brien, head of platform technology for Fidelity Institutional, gave me a personal tour of the Office of the Future to highlight tools and technology advisers can use to invest in their own progressive workplace. A virtual Office of the Future tour is available on Fidelity’s website at https://fidelityinstitutional.fidelity.com/fi/campaigns/office-of-future/fidelity.html

The Office of the Future is segmented into four distinct areas, each highlighting specific concepts and tools in technology that advisers can deploy in their office: the briefing room, the “anywhere adviser” zone, the collaborative office, and the home environment.

Briefing Room

OOTF1

In the briefing room, advisers will find large, HD displays connected to a virtual conferencing system. Advisers can use HD video conferencing to create an interactive bridge with colleagues in remote offices, back office support at the home office, or even with clients (but more on that in the home environment).

In addition, the briefing room is not filled with large, encroaching conference tables. Instead, advisers will find an inviting circle of chairs surrounding a large Lenovo Horizon II 27-Inch All-in-One Touchscreen Desktop where they can sit on the same side of the table with clients and begin to navigate through documents, reports, and other on-screen information in an engaging, dynamic setting.

“Anywhere Advisor” Zone

OOTF2

Fidelity’s O’Brien understands that the adviser no longer does 100% of his or her work in the physical office, and has the need to be productive no matter where his or her travels may lead. So Fidelity’s second room is nicknamed the “anywhere advisor” zone, where advisers can try technology that supports productivity while away from the traditional office.

O’Brien demonstrated the presentation apps on tablet devices that synchronize annotations and markup to any virtual meeting attendee, a Celluon EPIC Virtual Keyboard for the ability to type on any flat surface, a Pebble Steel Smart Watch to view notifications and incoming call information without taking one’s phone out of a pocket or handbag, and the arguably controversial Google Glass.

Collaborative Office

OOTF3

In the collaborative office, O’Brien is quick to point out that there are no physical servers supporting the devices in the office. Instead, the collaborative office features three different styles of workstations, from the low-cost tablet and virtual desktop configuration up to the fully-loaded multiple monitor and HD video conferencing equipment from Cisco.

In addition, the collaborative office features a green screen backdrop that advisers can use to create their own video content for clients and prospects, and use the video to add their own background images, graphics, and other information to make compelling content for their audience (much like I do with my own FPPad Bits and Bytes broadcasts).

The Home Environment

OOTF4

Finally, the last stop on the Office of the Future tour is the home environment, where O’Brien says more and more of the adviser-client interactions will take place.

Clients are increasingly seeking convenient options to work with financial advisers, and that includes the ability to chat and engage with an adviser from the comfort of their own living room.

Video chat services like Skype, Google Hangouts, and Apple FaceTime allow clients to have productive, meaningful conversations with their adviser, without dealing with the hassles of driving to an adviser’s office or even identifying advisor they want to work with that happens to have an office near their home.  Using this technology, clients are free to work with an adviser anywhere in the United States and conduct those meetings at times convenient to them.

FileThis launches document and client portal for financial professionals

FileThis enhances document fetch capabilities with a client portal for financial professionals. Image courtesy of FileThis, Inc.

FileThis enhances document fetch capabilities with a client portal for financial professionals. Image courtesy of FileThis, Inc.

FileThis automates the collection and archiving of clients’ important records

FileThis, a startup based near Silicon Valley, released a version of its electronic document retrieval and storage service for financial professionals.

In a broadcast last year (watch FPPad Bits and Bytes for August 16), I highlighted FileThis Fetch, a service that connects to users’ financial accounts to capture electronic statements and PDF files, routing them to the user’s storage service of choice, including Evernote, Dropbox, Personal, and Google Drive.

FileThis Client Portal

Aimed at reducing lost or undelivered documents by clients, the FileThis Document and Client Portal uses the company’s same Fetch process to capture files from a variety of financial institutions including banks, credit card companies, investment accounts, and more.

The new Document and Client Portal adds on administrative features financial advisers should find very useful. Advisers can invitations to use the FileThis platform from the dashboard.

Once clients activate their accounts, they can begin to link financial accounts to FileThis so the platform can fetch related documents and statements.

Automatic Organization

FileThis attempts to automatically identify and categorize documents fetched by the platform to sort them into meaningful categories.

Documents can be stored in cabinets that correspond to high-level categories such as education, financial, and vital records.

Documents are also identified by accounts using vendor names like AT&T and Bank of America. Finally, individual documents are tagged with metadata to identify the content of the document, including bills, statements, invoices, and more.

Security

Any service that retrieves and stores sensitive financial information must have high security protections in place.

FileThis follows bank-level security procedures to ensure the safety and security of the information it stores.

Data to and from FileThis is sent using 256-bit SSL, and account credentials are encrypted using AES 256-bit encryption. Much more information on the FileThis security features can be found on this page: https://filethis.com/security/

Pricing

With the launch of FileThis Documents and Client Portal, FileThis is offering introductory pricing for new users.

The starter plan is $49 per month for one admin, and the admin account permits up to 50 login accounts for end users, i.e. clients.

Firms that need more accounts for clients should consider the $99 per month plan with two admin accounts and support for up to 400 client logins.

Pricing information for more than 400 client logins can be viewed at the bottom of this page: https://filethis.com/pro/

 

Riskalyze announces Compliance Cloud to pinpoint risky portfolios

Riskalyze announces the launch of Compliance Cloud for broker-dealers and large RIAs

Riskalyze announces the launch of Compliance Cloud for broker-dealers and large RIAs

Riskalyze Compliance Cloud aims to single out portfolios that drift outside a client’s risk tolerance

In a press release today, Riskalyze, the provider of client risk tolerance quantification tools, announced the anticipated launch of Compliance Cloud, a utility that identifies portfolios that are outside their risk tolerance ranges established for individual investors.

Compliance Cloud was first announced by Riskalyze CEO Aaron Klein at the Laser App 2014 conference last month in San Diego. Today’s press release sheds additional light on the benefits Compliance Cloud offers to its institutional users.

Pinpoint Risk

Compliance Cloud aims to reduce the number of unsuitable portfolio allocations applied to client accounts by automatically screening allocations advisors establish for clients and compares the amount of risk in each portfolio with each client’s risk score (likely the Risk Number™ generated by a Riskalyze assessment).

“Fortunately, with Compliance Cloud, the era of the ‘random account spot-check’ is officially over.” Aaron Klein, Riskalyze CEO

“Fortunately, with Compliance Cloud, the era of the ‘random account spot-check’ is officially over.” Aaron Klein, Riskalyze CEO

Any portfolios found to significantly exceed the client’s risk tolerance (or be significantly below) will be flagged by Compliance Cloud for further review. Not only is this automated risk scanning useful to individual advisers and broker-dealer representatives, Compliance Cloud will be a welcome feature for any institutional compliance officer responsible for oversight on thousands of the institution’s representatives.

‘Big Data’ for broker-dealers and institutions

Compliance Cloud is intended for use by broker-dealers and large registered investment advisory firms. Once again, these institutions typically have oversight over thousands, and potentially millions, of investor accounts, and manually identifying risk characteristics of investor portfolios is costly and inefficient.

Riskalyze takes advantage of the general adoption of “big data,” where useful insight and information is extracted by processing large volumes of disparate data spread across multiple systems. In Compliance Cloud, Riskalyze uses risk analytics obtained from millions of individual client portfolios and compares the data with risk tolerance data identified during the client data gathering and on-boarding process.

Historically, financial institutions and compliance officers lacked the tools to programmatically assess millions of holdings each day. Instead, client portfolios were selected at random and then spot-checked against the client’s (often incomplete or outdated) risk tolerance information.

Orion Advisor Services Integration

According to the Klein, Compliance Cloud has been in beta testing for several months with the general release of the product anticipated in October this year.  In addition, Orion Advisor Services, the nation’s largest privately held portfolio accounting service bureau, was identified by Riskalyze as “the premier launch partner” of the Compliance Cloud solution.

Compliance Cloud will be made available directly to Orion Advisor Services’ RIA clients where advisers can take advantage of the integration of reconciled portfolio accounting data, avoiding duplicate or manual entry of client holding information into Compliance Cloud.

Pricing for Compliance Cloud was not disclosed in the company press release, so check back in here at FPPad for more updates as this product enters the market.

Laser App 2014 Conference highlights: Day Two and recap

Fox Financial Planning Network publishes new “robo shield” white paper, ActiFi’s Spenser Segal on technology adoption, and more

The Laser App 2014 Conference in San Diego wrapped up last week, offering over 200 attendees insights on ways technology can streamline the client service experience. A variety of vendors with CRM, document management, electronic signature, practice management solutions, and more delivered valuable takeaways centered around efficient form creation and processing, which the Laser App platform aims to simplify.

Watch the day two highlight video below, which is followed by a conference recap video with feedback from conference attendees about the benefits of attending the Laser App 2014 conference. (or watch the Laser App 2014 Conference YouTube playlist)

Day two highlights

In the opening session on day two, Deborah Fox, CEO & Founder at Fox Financial Planning Network, unveiled a new white paper fresh off the company’s electronic publishing platform.

The white paper, titled How To Build A Robo-Shield™ For Your Financial Advisory Firm: 20 Effective Tactics To Marginalize The Rise Of Robo-Advisers, can be downloaded for free from the company’s website. In nearly 40 pages, the Robo-Shield white paper details tactics to differentiate an advisory business from the online-based investment advisor services, including specific niche development, Tier 2 service models, automated workflows, and more.

Laser App 2014 conference recap

As you can see from the video coverage, Laser App hosts one of the hidden gems among industry conferences. Quite a number of influential vendors and product providers attended the event, and many company presidents and CEOs took the stage.

Laser App 2014 conference attendees learned how to leverage their existing Laser App relationship and also identified new solution providers and integrations that can extend the benefits of Laser App into different areas of their business. All in all, I enjoyed my time at the conference, which offered a great combination of education, networking, and socializing, all in sunny San Diego.

WaveHouse networking event

In addition to the education and exhibit hall opportunities, attendees had several opportunities to let loose, kick back, and network with like-minded peers.

So for an added bonus, here is a video from the first networking event held at the WaveHouse San Diego.

Laser App 2014 Conference Badge

Laser App 2014 Conference highlights: Day One

Laser App adds 40 new relationships in 2014, offers over 32,000 forms in its library

I’m attending the Laser App 2014 Conference in San Diego this week, and I’m trying some new things with content distribution. Check out the video below that recaps the company’s announcements about its new relationships in 2014, form library growth, and total number of forms processed by all of its users. (click here to watch on YouTube)

32,000 forms and growing

Ed Beggs, Laser App founder and CEO, told an audience of over 200 advisors, vendors, and other technology players that the company brought on 40 new relationships so far in 2014, which includes 38 broker-dealers and two custodians.

The Laser App form library now offers over 32,000 unique documents to facilitate transactions of all kinds, and now has over 115,000 users worldwide.

45 million served

To date, over 15 million forms have been downloaded through the Laser App platform. The average form gets processed three times by users, meaning over 45 million unique forms have been processed through Laser App software.

Conference preview

To set up the Day One footage, I filmed a shot conference preview with my rig to test the real-time editing and publishing through the conference facility’s Internet connection. This has been a fun learning experience, so look for more same-day coverage of events around the financial services technology landscape. (click to watch on YouTube)

The Heartbleed FAQ for financial advisers

Heartbleed for financial advisers

A security flaw dubbed “Heartbleed” has the potential to affect financial advisers and their clients

This is an evolving story, so in the interest in providing financial advisers with pertinent information about a serious vulnerability in Internet security, I’m offering this guide in a FAQ format.

What is Heartbleed?

Basically, “Heartbleed” is the name of a bug in software that many web-based services use to secure connections over the internet called OpenSSL. When you see the green padlock icon in your web browser’s address bar, chances are your online Internet session is encrypted with some form of the OpenSSL protocol.

The Heartbleed bug, discovered earlier this week, allows an attacker to use messages called “heartbeats” to trick a server into passing along sensitive information from its memory. The information could include account passwords or the server’s private encryption keys.

When hackers get access to that information, really bad things can happen.

Lots of additional details on Heartbleed can be found online, but you can start with the Wikipedia entry that is being updated in real time: http://en.wikipedia.org/wiki/Heartbleed

How do I test a site if it’s vulnerable to Heartbleed?

Go to this website and type in the domain name of the service you want to test: http://filippo.io/Heartbleed/

The site I tested is vulnerable to Heartbleed! What do I do now?

Oh no! First, assume that your password has been compromised. If you use the same password for other online services, identify the other sites where it’s used.

BUT WAIT! Don’t reset your passwords on the vulnerable sites just yet!

You need to wait until the vendor updates their OpenSSL code to eliminate the vulnerability. Only AFTER you receive confirmation from the vendor that OpenSSL has been updated will it be safe to return to the service and reset your password. Next, skip to the question on multi-factor authentication to increase the security of your online accounts.

The site I tested is all clear. What do I do now?

Whew, what a relief! That one site hasn’t been exposed, but your passwords still may have been exposed from another site. One thing you can easily do to enhance the security of your account is to activate multi-factor authentication (see below).

What’s the multi-factor authentication you mentioned?

Multi-factor authentication is a process where you use two or more factors to successfully log in to a secure account. The “factors” take three forms:

  • Something You Know, like your username, password, PIN, or finger gesture pattern.
  • Something You Have, like your ATM card, security token, smartcard, or mobile phone.
  • Something You Are, like your fingerprint, retina, voice, or typing rhythm.

Combining two or more of these factors substantially increases the difficulty of compromising your online account.

Assume that your password was compromised due to the Heartbleed bug and a hacker attempts to use it. If you implemented multi-factor authentication, the hacker also needs to satisfy the second factor of authentication in order to access your account. If you use your mobile phone to receive a login code, the hacker would not only need to know your password but also have physical access to your mobile phone to identify the login code.

Is there list that shows what sites support multi-factor authentication?

I’m glad you asked! Last week I identified an outstanding resource on multi-factor authentication in this post, Who supports two factor authentication? Find out in this awesome chart.

The site is twofactorauth.org and it’s totally worth your time right now to review the list of services and activate multi-factor authentication for any login

Can I do something to my web browser to validate the security of my session?

Yes, you can tweak your web browser settings to enforce more stringent security settings for your online sessions. While it’s not a guarantee against the Heartbleed vulnerability, the settings shown below will check if a site’s security certificate has been revoked before establishing a connection.

With thanks to Levi on Twitter, here are some changes you can make to Chrome and Firefox:

Also, courtesy of Dan Santner, here is a link to a more comprehensive scanning tool for a server’s SSL integrity:

The results of that test resemble a grade shown below:

A report generated by the Qualys  SSL Server Test

A report generated by the Qualys SSL Server Test

Add your questions below

Did I miss any important details? Is something unclear in one of my answers?

Let me know in the comments below and I’ll update this FAQ accordingly.

Who supports two factor authentication? Find out in this awesome chart

Find out who supports two factor authentication in this awesome chart

Two factor authentication significantly boosts the security of online accounts. Find out who supports the technique.

The damage to your business can be significant if hackers get a hold of your username and password to an online account. Once inside your program, whether it be your online CRM, portfolio accounting software, bookkeeping service, or even custodial dashboard, hackers can perform any number of nefarious activities.

So how do you increase your defenses against attacks and increase the security of your online accounts?

Use two factor authentication (see Boost your online security with two-factor authentication at FPPad)

Where is two factor authentication supported?

Sure, you understand how important two factor authentication is in protecting your online accounts from unauthorized access.

But WHICH online account providers actually support the technique?

I came across a terrific new resource online that spells out, industry by industry, who does and does not support two factor authentication.

The site is twofactorauth.org and it’s worth checking out when you have a moment.

You may discover several services you already use today that support two factor authentication, but you’re not yet using it.

So go visit twofactorauth.org and boost your online account security.