How to Manage Your Most Valuable Asset
A Guide For The Professional Money Manager 

by Robert A. Bernikow 

Many Investment Advisory organizations view the record keeping process as a necessary burden imposed by inquisitive clients or government regulations. I submit that such information is really the most valuable asset such firms possess and can only be effectively utilized with the proper tools. This article will suggest some ways in which this asset can best be deployed for maximum advantage to the firm. 

First, we must look at a little history. Up until a few years ago, the record keeping process of Investment Advisors consisted of using a service bureau onsite periodic basis to update positions and provide client and government reports. Such services provided only fixed format reports which the user had to accept as the only way to present the firm's assets. 

Additionally, in a nightly update cycle, input errors would quite often not be caught until (at best) the next day with correction that evening. Clearly this scenario does not support timely, creative use of information.

In the late 1970's, timesharing firms saw opportunities in this business and began to offer ''online" portfolio accounting services to this marketplace. The advantage offered was faster updating and correction of data with additional flexibility as to the type of reports offered. The drawback was variability in cost, the more one used, the higher the monthly bill. 


In the mid 1980's, the price of hardware had come down to the point where micro and mini computers in the $5,000 to $100,000 range now can be purchased with enough computing power to satisfy the needs of the majority of Advisory firms. These systems offer significant advantages in their usefulness as analytical tools. 


For example, many of the systems available today combine analytical components which work with the "accounting information". This allows users to ask questions of the system relevant to such factors as: 

  • What is my exposure to this industry? What do I need to do to become 5% invested in such stocks?

  • What steps do I need to take to optimize my holdings based upon my specific portfolio strategies?

  • If I do a large block trade, how can I best "allocate" the stock across my accounts?

  • How can I protect myself against making trades which violate my client's instructions?

  • How have my managers performed in adding "approved stocks" to their portfolios? What has been the value added by an active investment strategy?

  • What are the fundamental and risk characteristics of my portfolios?

  • How can I present my story most effectively to prospective clients? Can I produce graphs and reports to support my investment approach?

  • Can I access outside databases for additional data to support my analyses?

  • Can I automate the affirmation process with Depository Trust?

  • Can I integrate all this information with other automation tools, e.g. word processing, spreadsheets, etc?

  • Finally, can I get the information when and how I want it?

Projects for Institutions

Clearly, the above questions can best be answered by having information tools which support the way you want to manage your assets. 

This list is intended only as a starting point for an organization to analyze its own approach to the advisory business. Once a firm realizes that tools are available to support such information utilization, the question then becomes .... "How do I find the best system for my firm?"' 

This question, whether relevant to mainframes really starts with an evaluation of the software products available as the focal point for an "in-house" system. The hardware decision is then dictated by the chosen software. 

The firm should analyze their own approach to the kinds of information and tools which make sense in their environment. Let this be as "blue sky" as possible. You might be surprised to find that such capabilities already exist in vendor offerings. The list can be as extensive or narrow as you feel is warranted for starting a discussion with potential vendors. Remember even some "off the shelf" packages are sold with a good deal of client customization. 

The bottom line of any selection process should be dictated by not only what a vendor can do for you today, but also how your purchase will grow with you into the future. Therefore, find a vendor who seems to think in the same ways you do and has the proper business approach to succeed for the longer term. 

ReprinteD from: Barron's Special Section on "Investment Technology for Institutions"


Robert A. Bernikow
QFS Inc.

505 Tower Drive

Edgewater, NJ 07020

tel: (845) 667-6114 



QFS, Inc., a Robert Bernikow Professional Services Corporation     845-667-6114