The 'next-generation portfolio management system' takes data cleanliness into a godliness realm but competitors and observers offer sharp criticism of the plan -- and its mushy deadline for completion

November 12, 2013 — 5:10 AM UTC by Brooke Southall


The head of RIA technology at Schwab has announced a power play by her company’s Raleigh, N.C., software division and her own custody division aimed at fulfilling a “new vision” with a program called Project PM.

Neesha Hathi, Schwab Advisor Services’ senior vice president for advisor technology solutions, told the assembled 1,500 financial advisors at Schwab IMPACT in Washington, D.C., that Schwab Performance Technologies is looking toward a time when Schwab data and the data on the portfolio accounting system are the same. SPT is the maker of Schwab PortfolioCenter. See: Schwab PortfolioCenter may be poised to shed its utilitarian image.

The idea is that an advisor won’t have to reconcile data — and that that will pave the way for a variety of good outcomes..

“We have a new vision for portfolio management that will access custodial data directly, create dashboards, reports and presentations rapidly,” Hathi stated in a press release.

Schwab provided no timeline for when this capability might become available, but Hathi indicated that there will be more to say about it in another year, according to sources who heard her speak. See: Why the whiff of another delay of Schwab’s ETF-only 401(k) plan is drawing so much attention.

'Restart button’ and the 'gorilla’

Franklin Tsung: Schwab recognized its gorilla status and is leveraging it in the best way possible.
Franklin Tsung: Schwab recognized its gorilla
status and is leveraging it in
the best way possible.

Schwab’s move could pay off because it plays on the advantages of being the big, dominant RIA custodian, according to Franklin Tsung, principal of AppCrown LLC.

“It’s a bold move but it’s a bet that will most likely pay off in a great way in the long run as newly developed capabilities built on today’s web-capable technology will naturally challenge the value proposition of its competitors. There is no other competitor with the resources to press the restart button while supporting the existing product. Schwab recognized its gorilla status and is leveraging it in the best way possible.”

Moot issue?

It’s a “very cool” idea because clean, reconciled data are the starting point for anything that can get done on software by advisors, says Peter Giza, the Nashua, N.H.-based head of business development for WealthSite.

He says that it makes sense for custodians to go in this direction as a way to simplify the process of complying with ever-stiffer regulations. Right now, data get reconciled in a hodgepodge of ways — including reliance on a data-cleaning person inside RIAs. See: Addepar slashes prices, opens up its architecture and shows RIA custodians some love as it confronts market realities.

But Ed O’Brien, head of platform technology for Fidelity Institutional Wealth Services, doesn’t necessarily see big advancements coming out of Schwab’s Project PM.

“We believe that the need to eliminate reconciliation for the advisor has been solved,” he says. “Many reporting systems — including Fidelity’s own platform — take data directly from custodian data sources, eliminating the need for reconciliation. Or, in other cases, software-as-service platforms have invested in automating reconciliation processes, so that advisors are not required to perform that task.”

Schwab spokesman Greg Gable says: “That is incorrect.” in response to O’Brien’s assertion that reconciliation issues have been solved for advisors. Gable declined to elaborate on just exactly how it is not right.

Joseph Giannone, a spokesman at TD Ameritrade Institutional, says that his firm declined to comment specifically on a competitor’s acction. But he pointed out that RIAs at TD have benefitted from the firm’s integrated set of data and increased efficiency through Veo Open Access.

“Advisors’ custodial data is integrated across their technology suite and seamlessly fed to all the systems they work with, including such core applications as customer relationship management, financial planning and portfolio management,” Giannone says.

Ed O'Brien: We believe that the need to eliminate reconciliation for the advisor has been solved.
Ed O’Brien: We believe that the
need to eliminate reconciliation for the
advisor has been solved.

Schwab as competitor

Hathi’s statement suggests that there could be benefits to Schwab’s new vision. “[We are] enabling an advisor to easily uncover insights, and through one-step publishing, let the advisor share information with clients directly anytime, anywhere,” her statement says.

Eric Clarke, president of Orion Advisor Services LLC, doesn’t agree with Tsung’s inference that Schwab’s power play will threaten the value of software data reconciliation as provided by third parties. There are trust as well as technology issues that come into play.

“Ironically, we’ve had to compete with Schwab in this area for quite some time, so its really not anything new,” he writes in an e-mail. “If Schwab does decide to go multi-custodial with PM2, advisors will have to decide if they trust Schwab having their non-Schwab client data.”

He continues: “Keep in mind, Schwab is the firm that directly competes with advisors with Windhaven, sets up franchises in the same communities advisors reside, etc. It doesn’t seem likely that advisors would trust a firm that competes with them in the advice business [to handle] their non-Schwab client data.” See: Schwab adds $2 billion of assets from Windhaven, with RIA help, and another $2 billion of assets from 41 new RIAs.

Third-party providers do have a place in Schwab’s vision, Gable says in the email. He declined to elaborate about how.

“We believe third-party providers will continue to have ways to add value to the advisors’ experience.”

No reconciliation needed

O’Brien adds that there is more nuance to the data reconciliation issue.

“The portfolio reporting within Fidelity’s advisor platform does not require any reconciliation. We have moved beyond static, text-oriented reporting to much more interactive visualizations that help advisors interpret information about their clients’ portfolios and their business operations,” he says.

“Furthermore, Fidelity works with many third-party reporting platforms; as part of our open-platform approach, RIAs take our data and information directly, and require no reconciliation process for the advisor.” See: Fidelity is set to add Envestnet, Redtail, Morningstar, AppCrown and Salesforce to WealthCentral.

Demand for customization

Peter Giza: Advisors just don't believe anymore. They say: 'Show me when you have it.'
Peter Giza: Advisors just don’t believe
anymore. They say: 'Show me when
you have it.’

Clarke agrees that there are more considerations in an ecosystem environment of differentiated providers that RIAs use.

“The vast majority of the firms we work with — 90%-plus — are multicustodial, requiring us to bring in and reconcile data from multiple custodians. We’ve got nearly 14 years of experience reconciling data for advisors on our cloud-based platform, which gives us a bit of experience under our belt. Advisors demand customization, scale and integration capabilities that go way beyond automated reconciliation. We believe third-party providers will continue to have ways to add value to the advisors’ experience. See: Schwab moves to keep 3,500 desktop-bound RIAs from walking onto somebody else’s cloud.

Giza says all this pondering Project PM may be moot — at least for the foreseeable future — given the technological gridlock Schwab and other RIA custodians exhibit in trying to roll out new programs. See: What Neesha Hathi has to say about Schwab’s oh-so-slow-but-steady technology initiative. Schwab’s Project C is still a work in progress four years later. See: Schwab’s Project C now has two tiers and three new names.

“Advisors just don’t believe anymore. They say: 'Show me when you have it.’”

Mentioned in this article:

AppCrown, LLC
Outsourcer, CRM Software, Tech: Other
Top Executive: Ted Tsung

Fidelity Clearing & Custody Solutions
Asset Custodian
Top Executive: Sanjiv Mirchandani

Share your thoughts and opinions with the author or other readers.


Bill Winterberg said:

November 12, 2013 — 9:08 PM UTC

PM2 will be multi-custodial. See


Brooke Southall said:

November 12, 2013 — 9:25 PM UTC

Hi Bill,

What do you mean by multi-custodial? Schwab will reconcile data from other custodians or other custodians will receive Schwab’s pre-scrubbed data, or some other thing?

Nobody seemed to have a clear picture of that.




Bill Winterberg said:

November 12, 2013 — 9:48 PM UTC

The former. PM2 will house data from assets held at other custodians.


Peter Giza said:

November 13, 2013 — 12:52 AM UTC

Interesting that PM will be multi-custodial:-) Within the past 18 months I lobbied very hard for such a platform including an open data standard. I was met from almost all corners with “it will never happen”. When I asked why it all came down to client attrition.

Many custodians are convinced that if they allow another custodian to share a common data comm and application platform that it will make it simple for advisors to jump ship.

My response was that advisors don’t stick with a custodian because of cute apps and technology platforms. There are plenty of ugly old tech platforms out there with lots of very loyal subscribers who are there because of what the provider brings to the table.

To me PM is the inevitable evolution. Within the past 36 months mobile computing had greatly advanced the speed and dexterity with which information is processed and delivered. These improvements, some exponential, demand following by larger platforms such as Schwab.

Also there is technology pressure from the sell-side and other industries that make it inevitable. For example, DTCC recently announced a new service that provides intraday trade confirmation and order fill data in real time to the masses. SunGard announced partnership with weeks if my memory serves.

Combining a service like the above with the information the custodians hold and sprinkle in some CRM, partnership accounting / reporting, online OMS and client facing portal / apps and a well done executive dashboard and voila! you have PM.

Now the devil is in the detail of who at Schwab is on the hook to deliver. Is it SPT, PS, or the mothership itself? Lots of moving parts and a client base not known for spending more than 4-6% on technology is foreboding for any product team.

I for one hope that our industry will wake up to a consortium that among other things will propose and promote a common data standard that will allow the custodians to provide the raw materials and transport to the all the software genius out there to build the really cool stuff.


Pete Giza
VP Business Development | WealthSite Inc |
The Finest in Partnership and Alternative Reporting


Brooke Southall said:

November 13, 2013 — 5:39 AM UTC


Thank you for this comment. There is much to ponder based on what you relate and because I talked to you in reporting this article, I know these thoughts, in a sense, scratch the surface. You bring a passion and perspicacity to all your doings and that includes the thoughts you leave here and relate to reporters. For us technophobes, we can read your comments and say: Ah, I didn’t understand all of this and realize that maybe, just maybe, it’s because “all this” presented more questions than answers.



Jim Starcev said:

November 13, 2013 — 3:51 PM UTC

Pete is absolutely right that the real answer is a common data standard, unfortunately I don’t think that is coming. If Bill is right and it will be multi-custodian offer, that is a very big task. Having worked with a lot of portfolio reporting data for a lot of years, small nuances in the transactional data can reek havoc on the performance reporting. For them to have the confidence to say this is clean data, feel comfortable giving this performance report to your client, would require a lot of confidence that all of the data is being handled correctly.

I have seen some firms using, for lack of a better term, artificial intelligence to map data. The technology is getting better, but I don’t think it is right around the corner. Seems like an early announcement by Schwab, can’t believe they could actually have something to offer in less than 24 or 36 months, but I could be wrong.

Jim Starcev


Bill Winterberg said:

November 13, 2013 — 4:56 PM UTC

I’ll throw out a guess. Project PM2 is two years away from entering the pilot phase with select RIAs. That’s my opinion and not endorsed by anyone at Schwab.


Brooke Southall said:

November 13, 2013 — 5:28 PM UTC

I think when the optimists are saying that there could be a 'pilot’ of a 'project’ in two years or more that it is safe to presume that engineers aren’t losing sleep, skipping meals to get this done on an ASAP basis.


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