This whitepaper defines the role of advisor portals and the challenges faced by advisors, particularly those providing services to high net worth individuals. It discusses the different types of advisors and regulations governing them. Technology solutions like advisor portals can help advisors address challenges around managing complex client portfolios, compliance requirements, and client communications. However, most advisors currently rely on pieced-together solutions rather than integrated platforms to manage their business needs.

1. Advisor Portal – Emerging Trends
Defining the Business of Advisors
Advisor Portal – Emerging Trends
Defining the Business of Advisors
www.niit-tech.com
Sandeep Dhar
NIIT Technologies White Paper

2. Executive Summary 3
The Economic Context 3
Different flavors of Advice/Who is an Advisor? 3
Can technology help? 6
Conclusion 6
References 6
About the Author 7
CONTENTS

3. INVESTMENT
REVENUEREVENUE
INVESTMENT
INVESTMENT
INVESTMENT
FINANCE
FINANCE
FINANCE
FINAANCE
FINANCE
WEALTH
MARKET
MARKET
MATKET
CAPITAL
CAPITALCAPITAL
CARGO CAPITAL
ECONOMICS
ECONOMICS
BANKING
As technology solution providers aspire to move up the vendor
value chain in an effort to get out of the self-limiting cost-arbitrage
approach, it is important for them to understand the underlying
dynamics of the advisor space. The ability to translate the
seemingly one-off request for functionality and relate it to the larger
problem space can act as a key differentiator.
Market volatility, changing regulatory requirements, increased
service demands, advancement in technology and increased
competition are posing challenges to build innovative solutions for
interoperable and cohesive systems.
This whitepaper
• defines the role of an advisor portal
• reveals the challenges faced by the advisors, with particular focus
on those providing services to High Net Worth Individuals
(HNWI)
• explains the underlying complexitie s faced by the advisor
community
• lists the business processes used by advisors
Executive Summary
The world economy today is going through an exceptionall y
uncertain phase. After almost a decade of healthy economic
growth through the 1990’s, we have been hit by a combination of
economic downturn of 2000 – 2001 followed by a financial
meltdown of 2008 – 2009. With the 2012 Eurozone sovereign debt
crisis, the uncertainty shows no signs of abating.
In such difficult economic conditions, wealth management, which
is traditionally considered the domain of High Net Worth individuals
(HNWI), has become a top priority not only for HNWIs but also for
the burgeoning middle class. Middle class has grown in numbers
The Economic Context
In United States, the Securities and Exchange Commission (SEC),
in recognition of the critical role advisors played in the nation’s
economy, established a formal framework governing the registration
and regulation of Investment Advisors. The Investment Advisors
Act of 1940 defines an “Investment Adviser” (IA) as someone
who, for compensation, engages in the business of advising others,
either directly or through publications or writings, in, purchasing, or
selling securities, and as part of a regular business, analyses or
reports concerning securities. A professional investment advisor is
under a legal contract with the consumer to provide the best
possible advice for managing financial assets. According to the
Investment Adviser Registration Depository (“IARD”) as of May 3,
2010 more than 11,000 advisers registered with the SEC managed
more than US$ 38 trillion for more than 14 million clients.
Different flavors of advice/who is
an advisor?
3
by benefitting from the steady economic growth in the 1990s and
their survival critically depends on successfully saving for their
future expenses/major life events. Further, due to the widespread
impact of the credit crisis, HNWI have seen a large part of their
assets disappear in the sudden market downturn.
According to a study by Forbes & Société Générale Private
Banking in 2011, the number of billionaires (Ultra High Net Worth
Individuals [UHNWI]) in eastern economies of China, India and
Russia have outstripped those in Western Europe, even as US has
managed to retain its position of a country with largest HNWIs.
A HWNI is typically defined as an individual with combined
investable assets of US$ 1 million or more. The United States
Securities and Exchange Commission (SEC) definition includes
all assets including primary residence, art collection and even
assets held jointly with the spouse. Similarly, UHNWI is defined as
an individual with investable assets of US$ 30 million or more.

4. In emerging markets like India, where regulation has not reached the
level of sophistication as in US, initiatives are already under way. For
example, in India, the Securities and Exchange Board of India
(SEBI) drafted the Investment Advisers Regulations in the year
2007. This was along the same lines as US SEC’s Investment
Advisors Act of 1940. In December 2011, SEBI has proposed new
rules for investment advisors that will require them to be registered
with a Self-Regulatory Organization (SRO) before undertaking the
role. The proposed framework intends to regulate investment
advisory services in various forms including independent financial
advisors, banks, distributors and fund managers. It also seeks to
remove ambiguity in the role and responsibility of IAs as well as
provide a legal framework for enforcing fiduciary responsibility.
The role of an advisor is quite challenging. However, in tough
economic times comes a period of heightened awareness among
the customers. With free advice on how to allow right information
to flow freely in press, online and traditional print media, advisors
are under huge pressure to prove their worth, especially to HNW
customers.
Managing the investment portfolio of a HNWI is no mean task. An
Advisor has to typically address the following areas:
1. While HNWIs is a huge market, the biggest challenge for an IA
is to gain trust and subsequently the business of customers.
The Capgemini and Merill Lynch Wealth Management
“WORLD WEALTH REPORT 2011”, reveals there are 10.9
million HNWI worldwide, out of which around 3.4 million are in
North America. This corresponds to a combined wealth totaling
US$ 42.7 trillion, out of which US$ 11.6 trillion is concentrated
in US. In this environment, most IAs gain clients by
recommendation s from existing clients or references from
common contacts like Banker Managers.
IAs defines more than US$ 25 million as the entry level criteria for
on boarding and providing high quality services to HNWs.
Clients that lie between US$ 500,000 to US$ 25 million have to
rely on a smorgasbord of service providers to maintain their
portfolios without getting the benefit of holistic professional
advice from IAs.
2. An Advisor is expected to manage the entire net worth of their
clients which includes immovable property, securities, charities, etc.
4
Challenges Faced by Investment
Advisors
In the fast changing economic climate, it is a challenge to
perform different levels of analysis for each client. An advisor
not only performs financial but also technical analysis of
individual holdings. They need to process vast amount of
information in order to make a buy/hold/sell decision while trying
to maintain the investment objectives of balancing the asset
class mix.
IAs can protect customers from volatile/risk prone areas of the
market well before the downturn hit. In most cases clients place
specific instructions of not investing their wealth in sin-stocks
like tobacco, alcohol, or environmentally insensitive stocks. This
is sometimes also referred to as Ethical Investing or Socially
Responsible Investments (SRIs).
3. One more challenge is managing Held-away assets not directly
managed by advisors.
The quality of advice offered by an IA directly impacts the 360
degree asset knowledge owned by the clients. E.g. IA would not
advise investment in real estate if the client already has an
exposure to the real estate market. From the client’s
perspective , compiling a quarterly statement of all IAs and
self-management of investments proves to be a nightmare. In
such circumstances an IA offering 360 degree knowledge tends
to win more business/clients due to the high quality of advice
provided to the existing client base.
Compiling Held-away assets is a non-trivial exercise and several
companies (account/data aggregators; e.g. ByAllAccounts)
specialize in providing such services. The challenge of providing
reliable Reference Data for such assets plays a key role.
4. Separately Managed Accounts (SMA) space has led to
innovations like Unified Managed Account (UMA), which was
instituted around 2005. The primary difference between the two,
as defined by Investopedia , is if an investor wants a
well-diversified portfolio of stocks, bonds and mutual funds,
he/she should open three separate accounts in SMA. UMA
removes the need to have more than one account and
combines all assets into one account with single registration. It
is backed by US industry heavyweights like Depository Trust
and Clearing Corporation (DTCC) in collaboration with Money
Management Institute (MMI).
DTCC has provided the required technology infrastructure in the
form of Model Management Exchange (MMX) - a product offering
from DTCC Solutions LLC, a wholly-owned subsidiary of DTCC.

5. In a study conducted by Dover Financial Research, focusing on
top 20 model managers, UMA have doubled the assets of
investors between 2009 and 2011 to US$ 139 billion by Q2 2011
while the overall market in Q4 2010 was estimated to be around
US$ 2.1 trillion.
Prior to this solution, sponsors (i.e. Broker/Dealers) and
investment managers had to rely on disparate systems and
ad-hoc processes to manage their model distribution , resulting in
significant inefficiencies and risk within the model/ UMA
marketplace. The success of this initiative can be gauged from
the fact that Morgan Stanley Smith Barney, the market’s largest
SMA sponsor with US$ 157 billion in assets, signed up for the
service in early 2011.
5. Compliance with ever-increasing stricter regulations places
additional burden and restrictions on advisors. Some of the
regulations are
• Investment adviser disclosures: This requires the investment
advisers registered with SEC to provide new and prospective
clients with a brochure and its supplements written in English.
These amendments are designed to provide new and
prospective advisory clients with clearly written and meaningful
current disclosure of the business practices, conflicts of interest
and background of the investment adviser and its advisory
personnel. Advisers must file their brochures with SEC
electronically, which in turn will make them available to the
public through the SEC website.
• Custody of advisory client assets: The amendments are
designed to provide additional safeguards under the Advisers
Act. In this act a registered adviser has custody of client funds
or securities and the adviser is required:
- to undergo an annual surprise examination by an
independent public accountant to verify client assets
5
- to have a qualified custodian that can maintain clients’ funds
and send securities account statements directly to the
advisory clients
- to verify client assets maintained by an independent
custodian (i.e. a custodian who is not an adviser or a related
person)
- to obtain or receive a report safeguarding the custody of the
client’s assets. The report - prepared by an independent
public accountant registered and inspected by the Public
Company Accounting Oversight Board - must describe the
controls that are in place to protect the assets
- to provide better information about the custodial practices of
registered investment advisers to the commission and the
public
• Political contributions by certain investment advisers: This
regulation prohibits an investment adviser from
- providing advisory services to a government client for two
years after the adviser or his executives/ employees make a
contribution to certain elected officials or candidates
- providing or agreeing to provide payment, directly or
indirectly, to any third party for solicitation of advisory
business from any government entity on the adviser’s behalf,
unless the third party is registered broker-dealers or
registered investment adviser, subject to pay to play
restrictions
- soliciting from others, or coordinating contributions to certain
elected officials or candidates where the adviser is providing
or seeking to provide advisory services

6. 6. According to the Capgemini and Merill Lynch Wealth
Management “WORLD WEALTH REPORT 2011”, in these
uncertain times there has been a shift in the mindset of the
HNWI community towards preserving capital and expecting
their financial strategies to help achieve life goals instead of just
meeting some arbitrary investment benchmarks.
In recent times there has been a considerable shift in the advisor
business model where advisors are switching from Assets
Under Management (AUM) compensation model to a flat-fee
or retainer model. During a downturn, if AUM drops due to
market conditions, the AUM model reduces the percentage of
advisor’s fees. Conversely in a market upswing, AUM increases
the percentage of advisor’s fees. Both situations are unfair to the
client since the Advisor has done nothing to address the market
conditions. In the retainer model the fees charged is based on
the services provided. For example, the fee charged can be
based on the number of client calls handled and the suite of
services provided like portfolio rebalancing, financial planning
advice etc. While this approach may yield lower revenues in the
short term, it aligns closely with the client’s objective of meeting
life-goals that are not necessarily linked to AUM performance.
This in turn can lead to higher number of referrals from satisfied
clients; thus increasing business in the long run.
7. With social media seamlessly connecting people, an Advisor
could be inundated with questions or challenged decisions by
active (“hands on”) clients. IA’s are having a tough time staying
ahead of HNWIs who have gathered collective intelligence
through social media. This can potentially become a major
relationship issue due to the fact that the most precious
commodity for an IA is time. IAs consolidates their position to
better serve their key clients in an industry based primarily on
reputation and trust.
6
Advisors ability is closely linked to the business model and their
ability to maintain and grow businesses. There is no single,
integrated solution available in the market that meets all the needs
of the advisors. Each Advisor has to either buy or customize a
solution based on the needs of the client. Most of the advisors uses
excel spreadsheets as make-shift integration points.
A typical IA has to deal with a Customer Relationship
Management (CRM) system, a financial system of record, a
Can technology help?Can technology help?
In today’s competitive environment there is a need for the advisors
to adopt the latest technology in order to deliver high levels of
customer service. Advisor portals are powerful technology solutions
that deliver immediate Return on Investment (ROI) and provide
advisors with an efficient and flexible platform to communicate with
the clients, and publish and store important documents. IA drives
operational efficiency and enhances firms’ profitability by using
advisor portals.
ConclusionConclusion
1. http://www.forbes.com/forbesinsights/driving_global_wealth/in d
ex.html
2. http://www.ml.com/media/114235.pdf
3. http://en.wikipedia.org/wiki/Investment_Advisor
4. http://www.dtcc.com/news/newsletters/dtcc/2011/aug/model _
management_exchange.php
5. http://www.byallaccounts.com/
6. http://www.sec.gov/rules/final/2009/ia-2968.pdf
7. http://www.sec.gov/investor/alerts/paytoplay.htm
ReferencesReferences
Broker/Dealer portal, a source of market intelligence/analysis like
Bloomberg or Morning Star. The IA also has to consolidate and
report on the net worth of their clients and prepare a portfolio
performance and tax guidance. Generating proposals for new client
on-boarding is also a significant time consuming activity. An ideal
Advisor Portal would cater to the needs of IA and will enable them to
share management reports and simple what-if analysis scenarios
with the clients.
Brokers/Dealers have taken the lead in enabling technology centric
solutions. Most of them have developed solutions that enable an
investor to buy/sell stocks, bonds, mutual funds, currencies and
derivatives. They also provide sophisticated modeling tools and free
education on trading strategies. The solutions can either by installed
from a DVD or delivered via a Web Portal.
Organizations using the web deployment model need to ensure all
the data (reference and real-time) and computation algorithms
required are available in a timely fashion. These systems lack the
personal touch of an IA. They are also unable to diversify their
portfolio of life goals such as contributing to the community via
charities. To bridge this gap brokers/dealers closely align
themselves with IAs who has gained the trust of HNWIs.

7. Sandeep Dhar is Technical Architect within the Banking and Financial Services practice at NIIT
Technologies Ltd. He has over 16 years of experience and his expertise spans a wide variety of
solutions focused on capital markets, especially personal trust and private banking.
About the Author
D_27_120413
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