RIA Compliance and Practice Management Blog

RIA Portfolio Management and Reporting Software: Morningstar and Orion

Posted by RIA in a Box

Aug 13, 2018 3:01:53 PM

top portfolio management and performance repoting software adopted by RIA FirmsThe findings in this blog post come from our annual survey of over 1,500 registered investment adviser ("RIA") firms that was conducted in the first quarter of 2018. This proprietary RIA in a Box study is paired with publicly accessible data provided by the Securities and Exchange Commission ("SEC"). The goal of our annual study is to understand different options that comprise each firm characteristic, and to determine whether specific characteristics affect the growth, size, or operational efficiency of an RIA firm. In this blog post, we focus on the top portfolio management and reporting ("PM/Rep") software used by RIA firms.

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RIA Adoption Rate of Portfolio Management and Reporting Software

In our 2017 technology survey, portfolio management and reporting systems were one of the most popular type of technology adopted with 41% of firms using a PM/Rep system. Like many technology solutions utilized by investment advisers, portfolio management and reporting systems generally show higher adoption rates as a firm's regulatory assets under management ("AUM") increases. Our most recent survey shows that PM/Rep solutions are often the third or fourth solution that an RIA firm is likely to adopt when building its technology platform.

Interestingly, our survey has shown a slight decrease in the adoption rate of investment adviser portfolio management and performance reporting systems in recent years:

RIA portfolio management software adoption rate by year

RIA Portfolio Management and Reporting Software Adoption Rate by Firm AUM Size

In particular, firms with $100 million or more in AUM are the most likely to adopt a portfolio management and reporting system. While on the other hand, firms with less than $5 million in AUM are the least likely to purchase a portfolio management or performance reporting system. Around 55% of firms with $100 million or more in AUM currently utilize a portfolio management and reporting system compared to around 20% of firms with less than $5 million in AUM. As noted above, we have seen overall adoption rate generally decrease across all AUM size segments in recent years:

Portfolio reporting software for RIA firms by AUM size

In particular, firms with $5 - $25 million in assets under management show the steepest decline in adoption rates. From a regulatory compliance standpoint, this trend is concerning because many state regulatory bodies still require a duplicate invoice to be sent to clients whenever a fee is debited from a client account. For smaller firms, a portfolio management and reporting solution can help to automate and streamline that key regulatory compliance requirement.

Top Portfolio Management and Reporting Systems Adopted by RIA Firms

In recent years, PM/Rep solutions have continued to improve their solutions by adding third party technology integration capabilities, improving customized performance reports, releasing portfolio rebalancing solutions, building client-facing portals, and much more. Much like in the CRM market, we have seen cloud-based solutions begin to distance themselves from legacy, on-premise software solutions. 

Also similar to the CRM market, in recent years we have seen two solutions begin to distance themselves in a very competitive market: Morningstar Office and Orion. Morningstar Office recently released a fully rebuilt cloud-based solution which has allowed it to continue to dominate the small to mid-size RIA segments. In particular, Morningstar has done a terrific job in staying nimble by bundling its world-class research, portfolio management, and data capabilities into its Office platform to meet the needs of many different types of advisory firms. Smaller investment advisory firms also continue to consider Schwab Portfolio Center.

On the other hand, Orion has continued to gain market share with larger investment advisory firms. Orion has cemented itself as an innovative solution that integrates with a number of the other leading RIA technology providers including our MyRIACompliance® online compliance software platform. Similar to when we last looked at the top portfolio management and reporting solutions in 2015, we continue to see large RIA firms consider Orion, Black Diamond, Envestnet Tamarac, and Addepar.

Orion vs. Morningstar Office vs. Black Diamond

Unlike some other investment adviser technology categories, the portfolio management and reporting solution competitive landscape remains quite fragmented with many of the most popular solutions holding less than 15% market share according to our latest survey. Although the list of the top providers has remained relatively stagnant in recent years, we continue to see new emerging entrants into this category and expect the arms race on innovation to continue for years to come which should hopefully continue to benefit RIA firms of all sizes.

Portfolio management and reporting solutions are often one of the more expensive technology solutions that an advisor will purchase, but the right solution can deliver a tremendous return on investment by helping automate client fee billing, invoicing, portfolio management, trading, performance reporting, interactive client engagement, and more. Today, many top systems also include many features to help enhance the client experience with aesthetically pleasing reports and digital access to investment portfolio and personal balance sheet details.

This post is the second of five blog posts that will focus on the core technology solutions available to investment advisory firms. In the coming weeks, we will further explore the top financial planning, document storage, and portfolio risk management software solutions.

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Topics: RIA Operations, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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