Rebalancing Software: Questions and Considerations Before Selection and Implementation

Friday, October 26, 2012 06:05
Rebalancing Software: Questions and Considerations  Before Selection and Implementation

Tags: advisor technology | rebalancing

Before selecting rebalancing software to use in your firm, there are a few important questions and considerations that will help you make the correct decision.  Some questions can be asked and answered when you begin considering rebalancing options. Other questions can be answered when you have decided there is a present need and begin the due-diligence process.

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The following considerations were presented during my webinar  last Friday on advisors4advisors. The slides are available on a4a and provide a guide as you go through the rebalancing selection process.


Consider the following when deciding whether to implement rebalancing software in your firm:

·         Do the challenges of rebalancing and the benefits received resonate with you?

There needs to be something that moves you to want to make a change.  It could be that you or your staff responsible for rebalancing has commented on the time it takes to rebalance with the current process. Maybe it is because the current process is too prone to errors.  It could be that you see the benefits from automating the process and what that will do for your future growth, increased productivity, and improved client service. What are your motivating factors?

·         Can your current method of rebalancing keep up with your growth plans?

The process you have in place currently may work fine at your current number of clients.  Where do you see your firm next year, three years, and five years out?  If you expect to grow, can your current process keep up with this growth?

·         What are the goals and needs of your firm?

Hopefully, you have a strategic plan, and part of that plan includes a technology plan.  Your strategic and technology plans should lead you toward prioritizing your technology needs.  Does rebalancing fall at the top of your needs list, or is it further down the list? Will implementing a rebalancing tool help you reach your shorter-term and longer-term goals you have set?

·         What does the cost/benefit analysis reveal?

Many of the benefits of  using rebalancing software are hard to quantify.  When you hear the software increases productivity, provides better quality control, or allows for increased capacity and scalability, these benefits all intuitively make sense. However, it would be easier to make a decision if there was some concrete proof.

If you calculate (estimate or count) the hours it takes to rebalance portfolios monthly and then multiply this number by the hourly rate of the person responsible for the rebalancing process, you will get a dollar figure on rebalancing. Multiply this number by 12 to get a yearly number.  

Now  run the same calculations if the hours were reduced by 75% and 50%.  Many advisors and vendors have seen the time to rebalance reduced by 75% or greater.  Compare the numbers.  How does changing to an automated rebalancing process stack up?

Consider the productivity affect from having the staff member responsible for rebalancing  being shifted to more productive tasks. Advisors have also noted that the automated rebalancing process can be shifted to a lower paid staff member also adding to the cost/benefit of rebalancing software.

Once you are motivated by your need,  and see the benefits of making the change, you can begin the process of identifying an appropriate solution for your firm.

Consider the following when deciding what solution will work for you:

·         How would implementing the software change and improve your rebalancing process?

Although this question could be asked and answered in the previous step, it is placed here because you can answer the question better when you are researching vendors and test driving the software.  During the demo and test drive of the software you begin to see how your process will and should change and how it will become more efficient.

Have the vendor conduct the demo as close to your proposed process as they can.  Vendors are often willing to use your data to make the demo more realistic. 

Also consider running the software during the demo. This will give you a better idea of what you do and don’t like about using the software. Only do this when you have narrowed your list of potential vendors to two or three.

·         Does the software integrate with your portfolio management software and your custodian(s)?

These are fairly easy to figure out from visiting the vendor’s website.  Make sure not to exclude a vendor solely based on this however.  Many vendors are adding integrations to other portfolio management systems and custodians.  What is not currently listed may be available in three or six months. If one you need is not listed,  ask the vendor if they plan to add it anytime soon.

·         Consider the training.

What types of training are available or required to operate the software. Some of the vendors offer extensive training and others offer less.  Decide what types of training work best for the staff that will operate the software.  Some users like to learn the software by “playing around with it” while others prefer more structured learning such as a vendor-led class or webinar.  Figure out what will work best for your users.

One important question that needs to be asked and answered by you and your staff to get an effective software implementation: Are you and your staff ready, willing, and able to put in the needed time and effort to learn the software and utilize it effectively?  Too often, firms have good intentions regarding their new software, but forget that the new software needs to be thoroughly learned and new processes established and embedded to get the maximum benefit from the purchase.

·         Consider the customer support.

Usually, this is an afterthought. Consider what the vendor offers for customer support and if that works for your firm.  Do they have user groups or online help that might be needed by your staff during the vendor’s non-working hours.

Asking and answering the questions above will help you decide if and when to implement rebalancing software in your firm. It will also guide you through the rebalancing software selection process and help identify the right tool to create a more efficient and effective rebalancing process.

Comments (3)

TDAI's API which is about to be released directly to advisors will make 3rd party rebalancing obsolete (as well as 3rd party performance reporting). For the cost of an annual subscription for an application that operates as a one size fits all, advisors can pay for the customization of their own. Truly meet the processes of how they manage and rebalance accounts.
brentb843 , October 26, 2012
This is an excellent article summarizing what to consider when choosing a rebalancing software. We offer a guide "Are you ready for rebalancing software? 7 Questions to Ask and Why" at
I'd also suggest that those considering rebalancing software take a look at our white paper "Measuring the Return on Technology Investment: Total Rebalance Expert". This can be downloaded for free at
SherylCPA , November 05, 2012
Sheryl- Great additions, your "Measuring the Return on Technology Investment: Total Rebalance Expert" provides excellent examples of the ROI of using rebalancing software. I have read and heard from advisors about these types of returns, but had not seen enough personal evidence to make more of a case in the article. If advisors can see the returns (after all they are numbers people!) they may take a more serious look at the software.
ReidStone , November 06, 2012

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