Adventures in Rebalancing: The Last Frontier

FA Magazine recently published a good primer on automated solutions for portfolio rebalancing. The article is titled The Last Frontier and was written by James Picerno and it is definitely well-researched. He managed to obtain quotes from industry experts such as Bill Winterberg, Joel Bruckenstein and Michael Kitces, all of whom I have tremendous respect for. The article is certainly a useful resource for any RIA or advisor interested in the basics of rebalancing.

Besides discussing the basic functions of rebalancing, Picerno also gets into some of the more esoteric features that make rebalancing software so incredibly useful. Here is a quote from a lesser-known industry expert:

Technology circa 2013 offers a better way, for reasons that go beyond easing your workload. “You’re also going to provide better service for clients,” says Craig Iskowitz of the Ezra Group, a financial technology consultancy. Rebalancing software, he explains, makes it easier to build and manage custom investment strategies, such as a socially responsible portfolio that closely matches an investor’s preferences.

Portfolio customization has been available for more than a decade on systems such as Fiserv’s Unified Wealth Platform, which is still based on what was formerly known as CheckfreeAPL. While it’s true that most of the top vendors in the space offer this feature now, you didn’t have to wait until “technology circa 2013” in order to take advantage of it.

Of course, products that are designed to be sold at the enterprise level, such as Fiserv, Vestmark or FolioDynamix, to name a few, have always had a more robust selection of features and options than what was the products targeting RIAs. Although the gap is narrowing significantly, due to “…increasingly powerful computers, falling technology prices, and an expanding menu of software products…,” as Picerno notes.image

Picerno’s article focuses mainly on iRebal from TD Ameritrade and TRX from Total Rebalance Expert. I wrote a series of articles on this topic, starting with a summary of a panel from this year’s fantastic T3 Conference, Which Portfolio Rebalancing Software is Right for You?, and a few follow-up articles which you can read here and here.

[O]nly 10% to 15% of advisors use “intelligent rebalancing software,” estimates Joel Bruckenstein, the publisher of Technology Tools for Today (and a Financial Advisor columnist).

The market penetration remains relatively low, largely because of the cost in time and money, he says. “These software apps aren’t easy to use, but they’ve gotten better over the years,” says Bruckenstein.

The most popular tool that advisors use for portfolio rebalancing is still MS Excel. While it is simple and convenient to use for small practices, it becomes an absolute nightmare when you go beyond a few hundred accounts.

Iskowitz says he consulted with an advisory firm that was still using spreadsheets to manage more than 1,300 accounts. “It takes days to rebalance,” he notes, which is one reason he is helping the shop transition into rebalancing software.

In fact, this firm hired me to help them implement an entirely new advisory platform. One of the more popular services that I offer is to help RIAs upgrade their infrastructure and revamp their business processes. Rebalancing is just one piece of an ever-more complex puzzle in advisory technology.

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The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at