As asset allocation becomes both a compliance and client education issue, advisors are finding they have plenty of choice when it comes to software.

Some of the tools are simple to use with your client sitting next to you, while others are designed for doing complex analytics on your own. Fund companies offer workable packages free of charge; more sophisticated programs are available for a fee.

In most cases, the software tends to put the task in its proper context: inside a portfolio-building process that includes clarification of client objectives, identification of risk tolerance and the relative risk/reward trade-offs.

The available tools vary by cost, by analytics, by the breadth of financial products they include in the asset allocation and by the depth of their integration into a full financial planning process.

> In sync and portfolio sense. Toronto-based AIM Funds Management Inc. was one of the first companies to develop a white-label asset-allocation tool that meets a large part of the financial advisory market’s needs for mutual fund allocation. (Many fund companies provide similar tools. AGF Management Ltd. owns Pro Tool and Fidelity Investments Canada Ltd. provides Portfolio Pro, as examples.)

Advisors will like the price — free — but they won’t be able to populate charts and diagnostic tools with individual securities and fixed-income instruments.

AIM offers InSync as a downloadable program and Portfolio Sense as a Web-based program. Neither version requires a high-end computer nor a long learning curve. Within about 20 minutes, you can guide an investor through an intuitive, step-by-step asset-allocation program, beginning with a risk-tolerance questionnaire.

You can provide fundamental analytics and output a competent-looking PDF report that’s free of the fund company’s ads.

With this type of proprietary software, the depth of the analytic tool drops somewhat if you’re unwilling to use the fund company’s respective proprietary funds.

> Paltrak. If you want the same fundamental package as described above, but with a host of analytical tools that you can’t get with a fund company’s offerings, look to Toronto-based Morningstar Canada‘s PalTrak. With this tool, advisors can dissect fund data in just about any way imaginable and deliver graphic reports for each analysis. Again, the focus is on optimization: delivering a portfolio that doesn’t expose a client to too much risk in the way of overlapping stock holdings or geographical and asset weightings.
This tool can help you build a portfolio, stabilize returns and match clients’ risk tolerance accurately with portfolio return output. Mastering it will take time, and most advisors won’t want to take their clients through this process.

> Advisor workstation. Morningstar’s Advisor Workstation is a more robust host of programs and modules that allows you to use the same analytics in the context of complete financial planning. But while Advisor Workstation lets you pick and analyse individual securities and fixed-income, you still aren’t able to plug them into asset-allocation weightings.

> Asset allocation analyst. Montreal-based Equisoft Inc. ‘s Asset Allocation Analyst offers functionality that’s similar to the Morningstar products; depending on your back office, it can handle stocks, bonds and mutual funds, and it’s available as both a desktop and an Internet-based package. The software begins from the earliest premise: a survey that determines what income the client will need at retirement. The graphic demonstration of historical volatility on the client’s asset allocation is good for client education.

> Naviplan extended. Winnipeg-based EISI Inc. offers basic asset-allocation recommendations in the extended version of its NaviPlan software. NaviPlan puts asset allocation in the context of an almost overwhelming suite of financial planning considerations, including a net worth and cash-flow analysis, income taxes, education planning, purchasing habits, insurance needs and other client variables.

> Globeadvisor prostation. For the price, Bell Globemedia Publishing Inc. ‘s GlobeAdvisor ProStation is a strong offering, simply because it’s free and it includes securities and fixed-income in asset-allocation weightings. It’s new this year, meaning that its designers have cherry-picked some of the best functions from other free competitors, plus a few from paid services, and included other bells and whistles.

In this online package, advisors will find the standards of portfolio construction, such as a portfolio’s historical growth on $10,000, best and worst 10 years, breakdowns by sector, asset and geographical weightings, and volatility measures based on three-year standard deviation.

@page_break@Like many of the fund companies’ offerings, ProStation includes the program inside a basic financial planning context, with a client questionnaire and investment policy statement included, and you can churn out a PDF report.
Because this product is new, advisors need to make sure their computers are up-to-date. IE